[Congressional Record Volume 142, Number 35 (Thursday, March 14, 1996)]
[House]
[Pages H2238-H2247]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




  CONFERENCE REPORT ON H.R. 956, COMMON SENSE PRODUCT LIABILITY LEGAL 
                           REFORM ACT OF 1996

  Mr. HYDE submitted the following conference report and statement on 
the bill (H.R. 956) to establish legal standards and procedures for 
product liability litigation, and for other purposes:

                  Conference Report (H. Rept. 104-481)

       The committee of conference on the disagreeing votes of the 
     two Houses on the amendment of the Senate to the bill (H.R. 
     956), to establish legal standards and procedures for product 
     liability litigation, and for

[[Page H2239]]

     other purposes, having met, after full and free conference, 
     have agreed to recommend and do recommend to their respective 
     Houses as follows:
       That the House recede from its disagreement to the 
     amendment of the Senate and agree to the same with an 
     amendment as follows:
       In lieu of the matter proposed to be inserted by the Senate 
     amendment, insert the following:

     SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Common 
     Sense Product Liability Legal Reform Act of 1996''.
       (b) Table of Contents.--The table of contents is as 
     follows:

Sec. 1. Short title and table of contents.
Sec. 2. Findings and purposes.

                   TITLE I--PRODUCT LIABILITY REFORM

Sec. 101. Definitions.
Sec. 102. Applicability; preemption.
Sec. 103. Liability rules applicable to product sellers, renters, and 
              lessors.
Sec. 104. Defense based on claimant's use of intoxicating alcohol or 
              drugs.
Sec. 105. Misuse or alteration.
Sec. 106. Uniform time limitations on liability.
Sec. 107. Alternative dispute resolution procedures.
Sec. 108. Uniform standards for award of punitive damages.
Sec. 109. Liability for certain claims relating to death.
Sec. 110. Several liability for noneconomic loss.
Sec. 111. Workers' compensation subrogation.

                TITLE II--BIOMATERIALS ACCESS ASSURANCE

Sec. 201. Short title.
Sec. 202. Findings.
Sec. 203. Definitions.
Sec. 204. General requirements; applicability; preemption.
Sec. 205. Liability of biomaterials suppliers.
Sec. 206. Procedures for dismissal of civil actions against 
              biomaterials suppliers.

        TITLE III--LIMITATIONS ON APPLICABILITY; EFFECTIVE DATE

Sec. 301. Effect of court of appeals decisions.
Sec. 302. Federal cause of action precluded.
Sec. 303. Effective date.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--The Congress finds that--
       (1) our Nation is overly litigious, the civil justice 
     system is overcrowded, sluggish, and excessively costly and 
     the costs of lawsuits, both direct and indirect, are 
     inflicting serious and unnecessary injury on the national 
     economy;
       (2) excessive, unpredictable, and often arbitrary damage 
     awards and unfair allocations of liability have a direct and 
     undesirable effect on interstate commerce by increasing the 
     cost and decreasing the availability of goods and services;
       (3) the rules of law governing product liability actions, 
     damage awards, and allocations of liability have evolved 
     inconsistently within and among the States, resulting in a 
     complex, contradictory, and uncertain regime that is 
     inequitable to both plaintiffs and defendants and unduly 
     burdens interstate commerce;
       (4) as a result of excessive, unpredictable, and often 
     arbitrary damage awards and unfair allocations of liability, 
     consumers have been adversely affected through the withdrawal 
     of products, producers, services, and service providers from 
     the marketplace, and from excessive liability costs passed on 
     to them through higher prices;
       (5) excessive, unpredictable, and often arbitrary damage 
     awards and unfair allocations of liability jeopardize the 
     financial well-being of many individuals as well as entire 
     industries, particularly the Nation's small businesses and 
     adversely affects government and taxpayers;
       (6) the excessive costs of the civil justice system 
     undermine the ability of American companies to compete 
     internationally, and serve to decrease the number of jobs and 
     the amount of productive capital in the national economy;
       (7) the unpredictability of damage awards is inequitable to 
     both plaintiffs and defendants and has added considerably to 
     the high cost of liability insurance, making it difficult for 
     producers, consumers, volunteers, and nonprofit organizations 
     to protect themselves from liability with any degree of 
     confidence and at a reasonable cost;
       (8) because of the national scope of the problems created 
     by the defects in the civil justice system, it is not 
     possible for the States to enact laws that fully and 
     effectively respond to those problems;
       (9) it is the constitutional role of the national 
     government to remove barriers to interstate commerce and to 
     protect due process rights; and
       (10) there is a need to restore rationality, certainty, and 
     fairness to the civil justice system in order to protect 
     against excessive, arbitrary, and uncertain damage awards and 
     to reduce the volume, costs, and delay of litigation.
       (b) Purposes.--Based upon the powers contained in Article 
     I, Section 8, Clause 3 and the Fourteenth Amendment of the 
     United States Constitution, the purposes of this Act are to 
     promote the free flow of goods and services and to lessen 
     burdens on interstate commerce and to uphold constitutionally 
     protected due process rights by--
       (1) establishing certain uniform legal principles of 
     product liability which provide a fair balance among the 
     interests of product users, manufacturers, and product 
     sellers;
       (2) placing reasonable limits on damages over and above the 
     actual damages suffered by a claimant;
       (3) ensuring the fair allocation of liability in civil 
     actions;
       (4) reducing the unacceptable costs and delays of our civil 
     justice system caused by excessive litigation which harm both 
     plaintiffs and defendants; and
       (5) establishing greater fairness, rationality, and 
     predictability in the civil justice system.
                   TITLE I--PRODUCT LIABILITY REFORM

     SEC. 101. DEFINITIONS.

       For purposes of this title--
       (1) Actual malice.--The term ``actual malice'' means 
     specific intent to cause serious physical injury, illness, 
     disease, death, or damage to property.
       (2) Claimant.--The term ``claimant'' means any person who 
     brings an action covered by this title and any person on 
     whose behalf such an action is brought. If such an action is 
     brought through or on behalf of an estate, the term includes 
     the claimant's decedent. If such an action is brought through 
     or on behalf of a minor or incompetent, the term includes the 
     claimant's legal guardian.
       (3) Claimant's benefits.--The term ``claimant's benefits'' 
     means the amount paid to an employee as workers' compensation 
     benefits.
       (4) Clear and convincing evidence.--The term ``clear and 
     convincing evidence'' is 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 is more than that required under preponderance of 
     the evidence, but less than that required for proof beyond a 
     reasonable doubt.
       (5) Commercial loss.--The term ``commercial loss'' means 
     any loss or damage solely to a product itself, loss relating 
     to a dispute over its value, or consequential economic loss, 
     the recovery of which is governed by the Uniform Commercial 
     Code or analogous State commercial or contract law.
       (6) Compensatory damages.--The term ``compensatory 
     damages'' means damages awarded for economic and non-economic 
     loss.
       (7) Durable good.--The term ``durable good'' means any 
     product, or any component of any such product, which has a 
     normal life expectancy of 3 or more years, or is of a 
     character subject to allowance for depreciation under the 
     Internal Revenue Code of 1986 and which is--
       (A) used in a trade or business;
       (B) held for the production of income; or
       (C) sold or donated to a governmental or private entity for 
     the production of goods, training, demonstration, or any 
     other similar purpose.
       (8) Economic loss.--The term ``economic loss'' means any 
     pecuniary loss resulting from harm (including the loss of 
     earnings or other benefits related to employment, medical 
     expense loss, replacement services loss, loss due to death, 
     burial costs, and loss of business or employment 
     opportunities) to the extent recovery for such loss is 
     allowed under applicable State law.
       (9) Harm.--The term ``harm'' means any physical injury, 
     illness, disease, or death or damage to property caused by a 
     product. The term does not include commercial loss.
       (10) Insurer.--The term ``insurer'' means the employer of a 
     claimant if the employer is self-insured or if the employer 
     is not self-insured, the workers' compensation insurer of the 
     employer.
       (11) Manufacturer.--The term ``manufacturer'' means--
       (A) any person who is engaged in a business to produce, 
     create, make, or construct any product (or component part of 
     a product) and who (i) designs or formulates the product (or 
     component part of the product), or (ii) has engaged another 
     person to design or formulate the product (or component part 
     of the product);
       (B) a product seller, but only with respect to those 
     aspects of a product (or component part of a product) which 
     are created or affected when, before placing the product in 
     the stream of commerce, the product seller produces, creates, 
     makes or constructs and designs, or formulates, or has 
     engaged another person to design or formulate, an aspect of 
     the product (or component part of the product) made by 
     another person; or
       (C) any product seller not described in subparagraph (B) 
     which holds itself out as a manufacturer to the user of the 
     product.
       (12) Noneconomic loss.--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.
       (13) Person.--The term ``person'' means any individual, 
     corporation, company, association, firm, partnership, 
     society, joint stock company, or any other entity (including 
     any governmental entity).
       (14) Product.--
       (A) In general.--The term ``product'' means any object, 
     substance, mixture, or raw material in a gaseous, liquid, or 
     solid state which--
       (i) is capable of delivery itself or as an assembled whole, 
     in a mixed or combined state, or as a component part or 
     ingredient;
       (ii) is produced for introduction into trade or commerce;
       (iii) has intrinsic economic value; and
       (iv) is intended for sale or lease to persons for 
     commercial or personal use.
       (B) Exclusion.--The term does not include--
       (i) tissue, organs, blood, and blood products used for 
     therapeutic or medical purposes, except to the extent that 
     such tissue, organs, blood, and blood products (or the 
     provision thereof) are subject, under applicable State law, 
     to a standard of liability other than negligence; or
       (ii) electricity, water delivered by a utility, natural 
     gas, or steam except to the extent that electricity, water 
     delivered by a utility, natural gas, or steam, is subject, 
     under applicable State law, to a standard of liability other 
     than negligence.
       (15) Product liability action.--The term ``product 
     liability action'' means a civil action

[[Page H2240]]

     brought on any theory for harm caused by a product.
       (16) Product seller.--
       (A) In general.--The term ``product seller'' means a person 
     who in the course of a business conducted for that purpose--
       (i) sells, distributes, rents, leases, prepares, blends, 
     packages, labels, or otherwise is involved in placing a 
     product in the stream of commerce; or
       (ii) installs, repairs, refurbishes, reconditions, or 
     maintains the harm-causing aspect of the product.
       (B) Exclusion.--The term ``product seller'' does not 
     include--
       (i) a seller or lessor of real property;
       (ii) a provider of professional services in any case in 
     which the sale or use of a product is incidental to the 
     transaction and the essence of the transaction is the 
     furnishing of judgment, skill, or services; or
       (iii) any person who--

       (I) acts in only a financial capacity with respect to the 
     sale of a product; or
       (II) leases a product under a lease arrangement in which 
     the lessor does not initially select the leased product and 
     does not during the lease term ordinarily control the daily 
     operations and maintenance of the product.

       (17) Punitive damages.--The term ``punitive damages'' means 
     damages awarded against any person or entity to punish or 
     deter such person or entity, or others, from engaging in 
     similar behavior in the future.
       (18) State.--The term ``State'' means any State of the 
     United States, the District of Columbia, 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.

     SEC. 102. APPLICABILITY; PREEMPTION.

       (a) Preemption.--
       (1) In general.--This Act governs any product liability 
     action brought in any State or Federal court on any theory 
     for harm caused by a product.
       (2) Actions excluded.--A civil action brought for 
     commercial loss shall be governed only by applicable 
     commercial or contract law.
       (b) Relationship to State Law.--This title supersedes State 
     law only to the extent that State law applies to an issue 
     covered by this title. Any issue that is not governed by this 
     title, including any standard of liability applicable to a 
     manufacturer, shall be governed by otherwise applicable State 
     or Federal law.
       (c) Effect on Other Law.--Nothing in this Act shall be 
     construed to--
       (1) waive or affect any defense of sovereign immunity 
     asserted by any State under any law;
       (2) supersede or alter any Federal law;
       (3) waive or affect any defense of sovereign immunity 
     asserted by the United States;
       (4) affect the applicability of any provision of chapter 97 
     of title 28, United States Code;
       (5) preempt State choice-of-law rules with respect to 
     claims brought by a foreign nation or a citizen of a foreign 
     nation;
       (6) 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; or
       (7) supersede or modify any statutory or common law, 
     including any law providing for an action to abate a 
     nuisance, that authorizes a person to institute an action for 
     civil damages or civil penalties, cleanup costs, injunctions, 
     restitution, cost recovery, punitive damages, or any other 
     form of relief for remediation of the environment (as defined 
     in section 101(8) of the Comprehensive Environmental 
     Response, Compensation, and Liability Act of 1980 (42 U.S.C. 
     9601(8)).

     SEC. 103. LIABILITY RULES APPLICABLE TO PRODUCT SELLERS, 
                   RENTERS, AND LESSORS.

       (a) General Rule.--
       (1) In general.--In any product liability action, a product 
     seller other than a manufacturer shall be liable to a 
     claimant only if the claimant establishes--
       (A) that--
       (i) the product that allegedly caused the harm that is the 
     subject of the complaint was sold, rented, or leased by the 
     product seller;
       (ii) the product seller failed to exercise reasonable care 
     with respect to the product; and
       (iii) the failure to exercise reasonable care was a 
     proximate cause of harm to the claimant;
       (B) that--
       (i) the product seller made an express warranty applicable 
     to the product that allegedly caused the harm that is the 
     subject of the complaint, independent of any express warranty 
     made by a manufacturer as to the same product;
       (ii) the product failed to conform to the warranty; and
       (iii) the failure of the product to conform to the warranty 
     caused harm to the claimant; or
       (C) that--
       (i) the product seller engaged in intentional wrongdoing, 
     as determined under applicable State law; and
       (ii) such intentional wrongdoing was a proximate cause of 
     the harm that is the subject of the complaint.
       (2) Reasonable opportunity for inspection.--For purposes of 
     paragraph (1)(A)(ii), a product seller shall not be 
     considered to have failed to exercise reasonable care with 
     respect to a product based upon an alleged failure to inspect 
     the product--
       (A) if the failure occurred because there was no reasonable 
     opportunity to inspect the product; or
       (B) if the inspection, in the exercise of reasonable care, 
     would not have revealed the aspect of the product which 
     allegedly caused the claimant's harm.
       (b) Special Rule.--
       (1) In general.--A product seller shall be deemed to be 
     liable as a manufacturer of a product for harm caused by the 
     product if--
       (A) the manufacturer is not subject to service of process 
     under the laws of any State in which the action may be 
     brought; or
       (B) the court determines that the claimant would be unable 
     to enforce a judgment against the manufacturer.
       (2) Statute of limitations.--For purposes of this 
     subsection only, the statute of limitations applicable to 
     claims asserting liability of a product seller as a 
     manufacturer shall be tolled from the date of the filing of a 
     complaint against the manufacturer to the date that judgment 
     is entered against the manufacturer.
       (c) Rented or Leased Products.--
       (1) Notwithstanding any other provision of law, any person 
     engaged in the business of renting or leasing a product 
     (other than a person excluded from the definition of product 
     seller under section 101(16)(B)) shall be subject to 
     liability in a product liability action under subsection (a), 
     but any person engaged in the business of renting or leasing 
     a product shall not be liable to a claimant for the tortious 
     act of another solely by reason of ownership of such product.
       (2) For purposes of paragraph (1), and for determining the 
     applicability of this title to any person subject to 
     paragraph (1), the term ``product liability action'' means a 
     civil action brought on any theory for harm caused by a 
     product or product use.
       (d) Actions for Negligent Entrustment.--A civil action for 
     negligent entrustment shall not be subject to the provisions 
     of this section, but shall be subject to any applicable State 
     law.

     SEC. 104. DEFENSE BASED ON CLAIMANT'S USE OF INTOXICATING 
                   ALCOHOL OR DRUGS.

       (a) General Rule.--In any product liability action, it 
     shall be a complete defense to such action if--
       (1) the claimant was intoxicated or was under the influence 
     of intoxicating alcohol or any drug when the accident or 
     other event which resulted in such claimant's harm occurred; 
     and
       (2) the claimant, as a result of the influence of the 
     alcohol or drug, was more than 50 percent responsible for 
     such accident or other event.
       (b) Construction.--For purposes of subsection (a)--
       (1) the determination of whether a person was intoxicated 
     or was under the influence of intoxicating alcohol or any 
     drug shall be made pursuant to applicable State law; and
       (2) the term ``drug'' means any controlled substance as 
     defined in the Controlled Substances Act (21 U.S.C. 802(6)) 
     that was not legally prescribed for use by the claimant or 
     that was taken by the claimant other than in accordance with 
     the terms of a lawfully issued prescription.

     SEC. 105. MISUSE OR ALTERATION.

       (a) General Rule.--
       (1) In general.--In a product liability action, the damages 
     for which a defendant is otherwise liable under Federal or 
     State law shall be reduced by the percentage of 
     responsibility for the claimant's harm attributable to misuse 
     or alteration of a product by any person if the defendant 
     establishes that such percentage of the claimant's harm was 
     proximately caused by a use or alteration of a product--
       (A) in violation of, or contrary to, a defendant's express 
     warnings or instructions if the warnings or instructions are 
     adequate as determined pursuant to applicable State law; or
       (B) involving a risk of harm which was known or should have 
     been known by the ordinary person who uses or consumes the 
     product with the knowledge common to the class of persons who 
     used or would be reasonably anticipated to use the product.
       (2) Use intended by a manufacturer is not misuse or 
     alteration.--For the purposes of this Act, a use of a product 
     that is intended by the manufacturer of the product does not 
     constitute a misuse or alteration of the product.
       (b) Workplace Injury.--Notwithstanding subsection (a), and 
     except as otherwise provided in section 111, the damages for 
     which a defendant is otherwise liable under State law shall 
     not be reduced by the percentage of responsibility for the 
     claimant's harm attributable to misuse or alteration of the 
     product by the claimant's employer or any coemployee who is 
     immune from suit by the claimant pursuant to the State law 
     applicable to workplace injuries.

     SEC. 106. UNIFORM TIME LIMITATIONS ON LIABILITY.

       (a) Statute of Limitations.--
       (1) In general.--Except as provided in paragraph (2) and 
     subsection (b), a product liability action may be filed not 
     later than 2 years after the date on which the claimant 
     discovered or, in the exercise of reasonable care, should 
     have discovered--
       (A) the harm that is the subject of the action; and
       (B) the cause of the harm.
       (2) Exception.--A person with a legal disability (as 
     determined under applicable law) may file a product liability 
     action not later than 2 years after the date on which the 
     person ceases to have the legal disability.
       (b) Statute of Repose.--
       (1) In general.--Subject to paragraphs (2) and (3), no 
     product liability action that is subject to this Act 
     concerning a product, that is a durable good, alleged to have 
     caused harm (other than toxic harm) may be filed after the 
     15-year period beginning at the time of delivery of the 
     product to the first purchaser or lessee.
       (2) State law.--Notwithstanding paragraph (1), if pursuant 
     to an applicable State law, an action described in such 
     paragraph is required to be filed during a period that is 
     shorter than the 15-year period specified in such paragraph, 
     the State law shall apply with respect to such period.
       (3) Exceptions.--
       (A) A motor vehicle, vessel, aircraft, or train, that is 
     used primarily to transport passengers for hire, shall not be 
     subject to this subsection.

[[Page H2241]]

       (B) Paragraph (1) does not bar a product liability action 
     against a defendant who made an express warranty in writing 
     as to the safety or life expectancy of the specific product 
     involved which was longer than 15 years, but it will apply at 
     the expiration of that warranty.
       (C) Paragraph (1) does not affect the limitations period 
     established by the General Aviation Revitalization Act of 
     1994 (49 U.S.C. 40101 note).
       (c) Transitional Provision Relating to Extension of Period 
     for Bringing Certain Actions.--If any provision of subsection 
     (a) or (b) shortens the period during which a product 
     liability action could be otherwise brought pursuant to 
     another provision of law, the claimant may, notwithstanding 
     subsections (a) and (b), bring the product liability action 
     not later than 1 year after the date of enactment of this 
     Act.

     SEC. 107. ALTERNATIVE DISPUTE RESOLUTION PROCEDURES.

       (a) Service of Offer.--A claimant or a defendant in a 
     product liability action may, not later than 60 days after 
     the service of--
       (1) the initial complaint; or
       (2) the applicable deadline for a responsive pleading;

     whichever is later, serve upon an adverse party an offer to 
     proceed pursuant to any voluntary, nonbinding alternative 
     dispute resolution procedure established or recognized under 
     the law of the State in which the product liability action is 
     brought or under the rules of the court in which such action 
     is maintained.
       (b) Written Notice of Acceptance or Rejection.--Except as 
     provided in subsection (c), not later than 10 days after the 
     service of an offer to proceed under subsection (a), an 
     offeree shall file a written notice of acceptance or 
     rejection of the offer.
       (c) Extension.--The court may, upon motion by an offeree 
     made prior to the expiration of the 10-day period specified 
     in subsection (b), extend the period for filling a written 
     notice under such subsection for a period of not more than 60 
     days after the date of expiration of the period specified in 
     subsection (b). Discovery may be permitted during such 
     period.

     SEC. 108. UNIFORM STANDARDS FOR AWARD OF PUNITIVE DAMAGES.

       (a) General Rule.--Punitive damages may, to the extent 
     permitted by applicable State law, be awarded against a 
     defendant if the claimant establishes by clear and convincing 
     evidence that conduct carried out by the defendant with a 
     conscious, flagrant indifference to the rights or safety of 
     others was the proximate cause of the harm that is the 
     subject of the action in any product liability action.
       (b) Limitation on Amount.--
       (1) In general.--The amount of punitive damages that may be 
     awarded in an action described in subsection (a) may not 
     exceed the greater of--
       (A) 2 times the sum of the amount awarded to the claimant 
     for economic loss and noneconomic loss; or
       (B) $250,000.
       (2) Special rule.--Notwithstanding paragraph (1), in any 
     action described in subsection (a) against an individual 
     whose net worth does not exceed $500,000 or against an owner 
     of an unincorporated business, or any partnership, 
     corporation, association, unit of local government, or 
     organization which has fewer that 25 full-time employees, the 
     punitive damages shall not exceed the lesser of--
       (A) 2 times the sum of the amount awarded to the claimant 
     for economic loss and noneconomic loss; or
       (B) $250,000.
     For the purpose of determining the applicability of this 
     paragraph to a corporation, the number of employees of a 
     subsidiary or wholly-owned corporation shall include all 
     employees of a parent or sister corporation.
       (3) Exception for insufficient award in cases of egregious 
     conduct.--
       (A) Determination by court.--If the court makes a 
     determination, after considering each of the factors in 
     subparagraph (B), that the application of paragraph (1) would 
     result in an award of punitive damages that is insufficient 
     to punish the egregious conduct of the defendant against whom 
     the punitive damages are to be awarded or to deter such 
     conduct in the future, the court shall determine the 
     additional amount of punitive damages (referred to in this 
     paragraph as the ``additional amount'') in excess of the 
     amount determined in accordance with paragraph (1) to be 
     awarded against the defendant in a separate proceeding in 
     accordance with this paragraph.
       (B) Factors for consideration.--In any proceeding under 
     paragraph (A), the court shall consider--
       (i) the extent to which the defendant acted with actual 
     malice;
       (ii) the likelihood that serious harm would arise from the 
     conduct of the defendant;
       (iii) the degree of the awareness of the defendant of that 
     likelihood;
       (iv) the profitability of the misconduct to the defendant;
       (v) the duration of the misconduct and any concurrent or 
     subsequent concealment of the conduct by the defendant;
       (vi) the attitude and conduct of the defendant upon the 
     discovery of the misconduct and whether the misconduct has 
     terminated;
       (vii) the financial condition of the defendant; and
       (viii) the cumulative deterrent effect of other losses, 
     damages, and punishment suffered by the defendant as a result 
     of the misconduct, reducing the amount of punitive damages on 
     the basis of the economic impact and severity of all measures 
     to which the defendant has been or may be subjected, 
     including--

       (I) compensatory and punitive damage awards to similarly 
     situated claimants;
       (II) the adverse economic effect of stigma or loss of 
     reputation;
       (III) civil fines and criminal and administrative 
     penalties; and
       (IV) stop sale, cease and desist, and other remedial or 
     enforcement orders.

       (C) Requirements for awarding additional amount.---If the 
     court awards an additional amount pursuant to this 
     subsection, the court shall state its reasons for setting the 
     amount of the additional amount in findings of fact and 
     conclusions of law.
       (D) Preemption.--This section does not create a cause of 
     action for punitive damages and does not preempt or supersede 
     any State or Federal law to the extent that such law would 
     further limit the award of punitive damages. Nothing in this 
     subsection shall modify or reduce the ability of courts to 
     order remittiturs.
       (4) Application by court.--This subsection shall be applied 
     by the court and application of this subsection shall not be 
     disclosed to the jury. Nothing in this subsection shall 
     authorize the court to enter an award of punitive damages in 
     excess of the jury's initial award of punitive damages.
       (c) Bifurcation at Request of Any Party.--
       (1) In general.--At the request of any party the trier of 
     fact in any action that is subject to this section shall 
     consider in a separate proceeding, held subsequent to the 
     determination of the amount of compensatory damages, whether 
     punitive damages are to be awarded for the harm that is the 
     subject of the action and the amount of the award.
       (2) Inadmissibility of evidence relative only to a claim of 
     punitive damages in a proceeding concerning compensatory 
     damages.--If any party requests a separate proceeding under 
     paragraph (1), in a proceeding to determine whether the 
     claimant may be awarded compensatory damages, any evidence, 
     argument, or contention that is relevant only to the claim of 
     punitive damages, as determined by applicable State law, 
     shall be inadmissible.

     SEC. 109. LIABILITY FOR CERTAIN CLAIMS RELATING TO DEATH.

       In any civil action in which the alleged harm to the 
     claimant is death and, as of the effective date of this Act, 
     the applicable State law provides, or has been construed to 
     provide, for damages only punitive in nature, a defendant may 
     be liable for any such damages without regard to section 108, 
     but only during such time as the State law so provides. This 
     section shall cease to be effective September 1, 1996.

     SEC. 110. SEVERAL LIABILITY FOR NONECONOMIC LOSS.

       (a) General Rule.--In a product liability action, the 
     liability of each defendant for noneconomic loss shall be 
     several only and shall not be joint.
       (b) Amount of Liability.--
       (1) In general.--Each defendant shall be liable only for 
     the amount of noneconomic loss allocated to the defendant in 
     direct proportion to the percentage of responsibility of the 
     defendant (determined in accordance with paragraph (2)) for 
     the harm to the claimant with respect to which the defendant 
     is liable. The court shall render a separate judgment against 
     each defendant in an amount determined pursuant to the 
     preceding sentence.
       (2) Percentage of responsibility.--For purposes of 
     determining the amount of noneconomic loss allocated to a 
     defendant under this section, the trier of fact shall 
     determine the percentage of responsibility of each person 
     responsible for the claimant's harm, whether or not such 
     person is a party to the action.

     SEC. 111. WORKERS' COMPENSATION SUBROGATION.

       (a) General Rule.--
       (1) Right of subrogation.--
       (A) In general.--An insurer shall have a right of 
     subrogation against a manufacturer or product seller to 
     recover any claimant's benefits relating to harm that is the 
     subject of a product liability action that is subject to this 
     Act.
       (B) Written notification.--To assert a right of subrogation 
     under subparagraph (A), the insurer shall provide written 
     notice to the court in which the product liability action is 
     brought.
       (C) Insurer not required to be a party.--An insurer shall 
     not be required to be a necessary and proper party in a 
     product liability action covered under subparagraph (A).
       (2) Settlements and other legal proceedings.--
       (A) In general.--In any proceeding relating to harm or 
     settlement with the manufacturer or product seller by a 
     claimant who files a product liability action that is subject 
     to this Act, an insurer may participate to assert a right of 
     subrogation for claimant's benefits with respect to any 
     payment made by the manufacturer or product seller by reason 
     of such harm, without regard to whether the payment is made--
       (i) as part of a settlement;
       (ii) in satisfaction of judgment;
       (iii) as consideration for a covenant not to sue; or
       (iv) in another manner.
       (B) Written notification.--Except as provided in 
     subparagraph (C), an employee shall not make any settlement 
     with or accept any payment from the manufacturer or product 
     seller without written notification to the insurer.
       (C) Exemption.--Subparagraph (B) shall not apply in any 
     case in which the insurer has been compensated for the full 
     amount of the claimant's benefits.
       (3) Harm resulting from action of employer or coemployee.--
       (A) In general.--If, with respect to a product liability 
     action that is subject to this Act, the manufacturer or 
     product seller attempts to persuade the trier of fact that 
     the harm to the claimant was caused by the fault of the 
     employer of the claimant or any coemployee of the claimant, 
     the issue of that fault shall be submitted to the trier of 
     fact, but only after the manufacturer or product seller has 
     provided timely written notice to the insurer.

[[Page H2242]]

       (B) Rights of insurer.--
       (i) In general.--Notwithstanding any other provision of 
     law, with respect to an issue of fault submitted to a trier 
     of fact pursuant to subparagraph (A), an insurer shall, in 
     the same manner as any party in the action (even if the 
     insurer is not a named party in the action), have the right 
     to--

       (I) appear;
       (II) be represented;
       (III) introduce evidence;
       (IV) cross-examine adverse witnesses; and
       (V) present arguments to the trier of fact.

       (ii) Last issue.--The issue of harm resulting from an 
     action of an employer or coemployee shall be the last issue 
     that is submitted to the trier of fact.
       (C) Reduction of damages.--If the trier of fact finds by 
     clear and convincing evidence that the harm to the claimant 
     that is the subject of the product liability action was 
     caused by the fault of the employer or a coemployee of the 
     claimant--
       (i) the court shall reduce by the amount of the claimant's 
     benefits--

       (I) the damages awarded against the manufacturer or product 
     seller; and
       (II) any corresponding insurer's subrogation lien; and

       (ii) the manufacturer or product seller shall have no 
     further right by way of contribution or otherwise against the 
     employer.
       (D) Certain rights of subrogation not affected.--
     Notwithstanding a finding by the trier of fact described in 
     subparagraph (C), the insurer shall not lose any right of 
     subrogation related to any--
       (i) intentional tort committed against the claimant by a 
     coemployee; or
       (ii) act committed by a coemployee outside the scope of 
     normal work practices.
       (b) Attorney's Fees.--If, in a product liability action 
     that is subject to this section, the court finds that harm to 
     a claimant was not caused by the fault of the employer or a 
     coemployee of the claimant, the manufacturer or product 
     seller shall reimburse the insurer for reasonable attorney's 
     fees and court costs incurred by the insurer in the action, 
     as determined by the court.
                TITLE II--BIOMATERIALS ACCESS ASSURANCE

     SEC. 201. SHORT TITLE.

       This title may be cited as the ``Biomaterials Access 
     Assurance Act of 1996''.

     SEC. 202. FINDINGS.

       Congress finds that--
       (1) each year millions of citizens of the United States 
     depend on the availability of lifesaving or life enhancing 
     medical devices, many of which are permanently implantable 
     within the human body;
       (2) a continued supply of raw materials and component parts 
     is necessary for the invention, development, improvement, and 
     maintenance of the supply of the devices;
       (3) most of the medical devices are made with raw materials 
     and component parts that--
       (A) are not designed or manufactured specifically for use 
     in medical devices; and
       (B) come in contact with internal human tissue;
       (4) the raw materials and component parts also are used in 
     a variety of nonmedical products;
       (5) because small quantities of the raw materials and 
     component parts are used for medical devices, sales of raw 
     materials and component parts for medical devices constitute 
     an extremely small portion of the overall market for the raw 
     materials and medical devices;
       (6) under the Federal Food, Drug, and Cosmetic Act (21 
     U.S.C. 301 et seq.), manufacturers of medical devices are 
     required to demonstrate that the medical devices are safe and 
     effective, including demonstrating that the products are 
     properly designed and have adequate warnings or instructions;
       (7) notwithstanding the fact that raw materials and 
     component parts suppliers do not design, produce, or test a 
     final medical device, the suppliers have been the subject of 
     actions alleging inadequate--
       (A) design and testing of medical devices manufactured with 
     materials or parts supplied by the suppliers; or
       (B) warnings related to the use of such medical devices;
       (8) even though suppliers of raw materials and component 
     parts have very rarely been held liable in such actions, such 
     suppliers have ceased supplying certain raw materials and 
     component parts for use in medical devices because the costs 
     associated with litigation in order to ensure a favorable 
     judgment for the suppliers far exceeds the total potential 
     sales revenues from sales by such suppliers to the medical 
     device industry;
       (9) unless alternate sources of supply can be found, the 
     unavailability of raw materials and component parts for 
     medical devices will lead to unavailability of lifesaving and 
     life-enhancing medical devices;
       (10) because other suppliers of the raw materials and 
     component parts in foreign nations are refusing to sell raw 
     materials or component parts for use in manufacturing certain 
     medical devices in the United States, the prospects for 
     development of new sources of supply for the full range of 
     threatened raw materials and component parts for medical 
     devices are remote;
       (11) it is unlikely that the small market for such raw 
     materials and component parts in the United States could 
     support the large investment needed to develop new suppliers 
     of such raw materials and component parts;
       (12) attempts to develop such new suppliers would raise the 
     cost of medical devices;
       (13) courts that have considered the duties of the 
     suppliers of the raw materials and component parts have 
     generally found that the suppliers do not have a duty--
       (A) to evaluate the safety and efficacy of the use of a raw 
     material or component part in a medical device; and
       (B) to warn consumers concerning the safety and 
     effectiveness of a medical device;
       (14) attempts to impose the duties referred to in 
     subparagraphs (A) and (B) of paragraph (13) on suppliers of 
     the raw materials and component parts would cause more harm 
     than good by driving the suppliers to cease supplying 
     manufacturers of medical devices; and
       (15) in order to safeguard the availability of a wide 
     variety of lifesaving and life-enhancing medical devices, 
     immediate action is needed--
       (A) to clarify the permissible bases of liability for 
     suppliers of raw materials and component parts for medical 
     devices; and
       (B) to provide expeditious procedures to dispose of 
     unwarranted suits against the suppliers in such manner as to 
     minimize litigation costs.

     SEC. 203. DEFINITIONS.

       As used in this title:
       (1) Biomaterials supplier.--
       (A) In general.--The term ``biomaterials supplier'' means 
     an entity that directly or indirectly supplies a component 
     part or raw material for use in the manufacture of an 
     implant.
       (B) Persons included.--Such term includes any person who--
       (i) has submitted master files to the Secretary for 
     purposes of premarket approval of a medical device; or
       (ii) licenses a biomaterials supplier to produce component 
     parts or raw materials.
       (2) Claimant.--
       (A) In general.--The term ``claimant'' means any person who 
     brings a civil action, or on whose behalf a civil action is 
     brought, arising from harm allegedly caused directly or 
     indirectly by an implant, including a person other than the 
     individual into whose body, or in contact with whose blood or 
     tissue, the implant is placed, who claims to have suffered 
     harm as a result of the implant.
       (B) Action brought on behalf of an estate.--With respect to 
     an action brought on behalf of or through the estate of an 
     individual into whose body, or in contact with whose blood or 
     tissue the implant is placed, such term includes the decedent 
     that is the subject of the action.
       (C) Action brought on behalf of a minor or incompetent.--
     With respect to an action brought on behalf of or through a 
     minor or incompetent, such term includes the parent or 
     guardian of the minor or incompetent.
       (D) Exclusions.--Such term does not include--
       (i) a provider of professional health care services, in any 
     case in which--

       (I) the sale or use of an implant is incidental to the 
     transaction; and
       (II) the essence of the transaction is the furnishing of 
     judgment, skill, or services; or

       (ii) a person acting in the capacity of a manufacturer, 
     seller, or biomaterials supplier.
       (3) Component part.--
       (A) In general.--The term ``component part'' means a 
     manufactured piece of an implant.
       (B) Certain components.--Such term includes a manufactured 
     piece of an implant that--
       (i) has significant non-implant applications; and
       (ii) alone, has no implant value or purpose, but when 
     combined with other component parts and materials, 
     constitutes an implant.
       (4) Harm.--
       (A) In general.--The term ``harm'' means--
       (i) any injury to or damage suffered by an individual;
       (ii) any illness, disease, or death of that individual 
     resulting from that injury or damage; and
       (iii) any loss to that individual or any other individual 
     resulting from that injury or damage.
       (B) Exclusion.--The term does not include any commercial 
     loss or loss of or damage to an implant.
       (5) Implant.--The term ``implant'' means--
       (A) a medical device that is intended by the manufacturer 
     of the device--
       (i) to be placed into a surgically or naturally formed or 
     existing cavity of the body for a period of at least 30 days; 
     or
       (ii) to remain in contact with bodily fluids or internal 
     human tissue through a surgically produced opening for a 
     period of less than 30 days; and
       (B) suture materials used in implant procedures.
       (6) Manufacturer.--The term ``manufacturer'' means any 
     person who, with respect to an implant--
       (A) is engaged in the manufacture, preparation, 
     propagation, compounding, or processing (as defined in 
     section 510(a)(1)) of the Federal Food, Drug, and Cosmetic 
     Act (21 U.S.C. 360(a)(1)) of the implant; and
       (B) is required--
       (i) to register with the Secretary pursuant to section 510 
     of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 360) 
     and the regulations issued under such section; and
       (ii) to include the implant on a list of devices filed with 
     the Secretary pursuant to section 510(j) of such Act (21 
     U.S.C. 360(j)) and the regulations issued under such section.
       (7) Medical device.--The term ``medical device'' means a 
     device, as defined in section 201(h) of the Federal Food, 
     Drug, and Cosmetic Act (21 U.S.C. 321(h)) and includes any 
     device component of any combination product as that term is 
     used in section 503(g) of such Act (21 U.S.C. 353(g)).
       (8) Raw material.--The term ``raw material'' means a 
     substance or product that--
       (A) has a generic use; and
       (B) may be used in an application other than an implant.
       (9) Secretary.--The term ``Secretary'' means the Secretary 
     of Health and Human Services.

[[Page H2243]]

       (10) Seller.--
       (A) In general.--The term ``seller'' means a person who, in 
     the course of a business conducted for that purpose, sells, 
     distributes, leases, packages, labels, or otherwise places an 
     implant in the stream of commerce.
       (B) Exclusions.--The term does not include--
       (i) a seller or lessor of real property;
       (ii) a provider of professional services, in any case in 
     which the sale or use of an implant is incidental to the 
     transaction and the essence of the transaction is the 
     furnishing of judgment, skill, or services; or
       (iii) any person who acts in only a financial capacity with 
     respect to the sale of an implant.

     SEC. 204. GENERAL REQUIREMENTS; APPLICABILITY; PREEMPTION.

       (a) General Requirements.--
       (1) In general.--In any civil action covered by this title, 
     a biomaterials supplier may raise any defense set forth in 
     section 205.
       (2) Procedures.--Notwithstanding any other provision of 
     law, the Federal or State court in which a civil action 
     covered by this title is pending shall, in connection with a 
     motion for dismissal or judgment based on a defense described 
     in paragraph (1), use the procedures set forth in section 
     206.
       (b) Applicability.--
       (1) In general.--Except as provided in paragraph (2), 
     notwithstanding any other provision of law, this title 
     applies to any civil action brought by a claimant, whether in 
     a Federal or State court, against a manufacturer, seller, or 
     biomaterials supplier, on the basis of any legal theory, for 
     harm allegedly caused by an implant.
       (2) Exclusion.--A civil action brought by a purchaser of a 
     medical device for use in providing professional services 
     against a manufacturer, seller, or biomaterials supplier for 
     loss or damage to an implant or for commercial loss to the 
     purchaser--
       (A) shall not be considered an action that is subject to 
     this title; and
       (B) shall be governed by applicable commercial or contract 
     law.
       (c) Scope of Preemption.--
       (1) In general.--This title supersedes any State law 
     regarding recovery for harm caused by an implant and any rule 
     of procedure applicable to a civil action to recover damages 
     for such harm only to the extent that this title establishes 
     a rule of law applicable to the recovery of such damages.
       (2) Applicability of other laws.--Any issue that arises 
     under this title and that is not governed by a rule of law 
     applicable to the recovery of damages described in paragraph 
     (1) shall be governed by applicable Federal or State law.
       (d) Statutory Construction.--Nothing in this title may be 
     construed--
       (1) to affect any defense available to a defendant under 
     any other provisions of Federal or State law in an action 
     alleging harm caused by an implant; or
       (2) to create a cause of action or Federal court 
     jurisdiction pursuant to section 1331 or 1337 of title 28, 
     United States Code, that otherwise would not exist under 
     applicable Federal or State law.

     SEC. 205. LIABILITY OF BIOMATERIALS SUPPLIERS.

       (a) In General.--
       (1) Exclusion from liability.--Except as provided in 
     paragraph (2), a biomaterials supplier shall not be liable 
     for harm to a claimant caused by an implant.
       (2) Liability.--A biomaterials supplier that--
       (A) is a manufacturer may be liable for harm to a claimant 
     described in subsection (b);
       (B) is a seller may be liable for harm to a claimant 
     described in subsection (c); and
       (C) furnishes raw materials or component parts that fail to 
     meet applicable contractual requirements or specifications 
     may be liable for a harm to a claimant described in 
     subsection (d).
       (b) Liability as Manufacturer.--
       (1) In general.--A biomaterials supplier may, to the extent 
     required and permitted by any other applicable law, be liable 
     for harm to a claimant caused by an implant if the 
     biomaterials supplier is the manufacturer of the implant.
       (2) Grounds for liability.--The biomaterials supplier may 
     be considered the manufacturer of the implant that allegedly 
     caused harm to a claimant only if the biomaterials supplier--
       (A)(i) has registered with the Secretary pursuant to 
     section 510 of the Federal Food, Drug, and Cosmetic Act (21 
     U.S.C. 360) and the regulations issued under such section; 
     and
       (ii) included the implant on a list of devices filed with 
     the Secretary pursuant to section 510(j) of such Act (21 
     U.S.C. 360(j)) and the regulations issued under such section;
       (B) is the subject of a declaration issued by the Secretary 
     pursuant to paragraph (3) that states that the supplier, with 
     respect to the implant that allegedly caused harm to the 
     claimant, was required to--
       (i) register with the Secretary under section 510 of such 
     Act (21 U.S.C. 360), and the regulations issued under such 
     section, but failed to do so; or
       (ii) include the implant on a list of devices filed with 
     the Secretary pursuant to section 510(j) of such Act (21 
     U.S.C. 360(j)) and the regulations issued under such section, 
     but failed to do so; or
       (C) is related by common ownership or control to a person 
     meeting all the requirements described in subparagraph (A) or 
     (B), if the court deciding a motion to dismiss in accordance 
     with section 206(c)(3)(B)(i) finds, on the basis of 
     affidavits submitted in accordance with section 206, that it 
     is necessary to impose liability on the biomaterials supplier 
     as a manufacturer because the related manufacturer meeting 
     the requirements of subparagraph (A) or (B) lacks sufficient 
     financial resources to satisfy any judgment that the court 
     feels it is likely to enter should the claimant prevail.
       (3) Administrative procedures.--
       (A) In general.--The Secretary may issue a declaration 
     described in paragraph (2)(B) on the motion of the Secretary 
     or on petition by any person, after providing--
       (i) notice to the affected persons; and
       (ii) an opportunity for an informal hearing.
       (B) Docketing and final decision.--Immediately upon receipt 
     of a petition filed pursuant to this paragraph, the Secretary 
     shall docket the petition. Not later than 180 days after the 
     petition is filed, the Secretary shall issue a final decision 
     on the petition.
       (C) Applicability of statute of limitations.--Any 
     applicable statute of limitations shall toll during the 
     period during which a claimant has filed a petition with the 
     Secretary under this paragraph.
       (c) Liability as Seller.--A biomaterials supplier may, to 
     the extent required and permitted by any other applicable 
     law, be liable as a seller for harm to a claimant caused by 
     an implant if--
       (1) the biomaterials supplier--
       (A) held title to the implant that allegedly caused harm to 
     the claimant as a result of purchasing the implant after--
       (i) the manufacture of the implant; and
       (ii) the entrance of the implant in the stream of commerce; 
     and
     (B) subsequently resold the implant; or
       (2) the biomaterials supplier is related by common 
     ownership or control to a person meeting all the requirements 
     described in paragraph (1), if a court deciding a motion to 
     dismiss in accordance with section 206(c)(3)(B)(ii) finds, on 
     the basis of affidavits submitted in accordance with section 
     206, that it is necessary to impose liability on the 
     biomaterials supplier as a seller because the related seller 
     meeting the requirements of paragraph (1) lacks sufficient 
     financial resources to satisfy any judgment that the court 
     feels it is likely to enter should the claimant prevail.
       (d) Liability for Violating Contractual Requirements or 
     Specifications.--A biomaterials supplier may, to the extent 
     required and permitted by any other applicable law, be liable 
     for harm to a claimant caused by an implant, if the claimant 
     in an action shows, by a preponderance of the evidence, 
     that--
       (1) the raw materials or component parts delivered by the 
     biomaterials supplier either--
       (A) did not constitute the product described in the 
     contract between the biomaterials supplier and the person who 
     contracted for delivery of the product; or
       (B) failed to meet any specifications that were--
       (i) provided to the biomaterials supplier and not expressly 
     repudiated by the biomaterials supplier prior to acceptance 
     of delivery of the raw materials or component parts;
       (ii)(I) published by the biomaterials supplier;
       (II) provided to the manufacturer by the biomaterials 
     supplier; or
       (III) contained in a master file that was submitted by the 
     biomaterials supplier to the Secretary and that is currently 
     maintained by the biomaterials supplier for purposes of 
     premarket approval of medical devices; or
       (iii) included in the submissions for purposes of premarket 
     approval or review by the Secretary under section 510, 513, 
     515, or 520 of the Federal Food, Drug, and Cosmetic Act (21 
     U.S.C. 360, 360c, 360e, or 360j), and received clearance from 
     the Secretary if such specifications were provided by the 
     manufacturer to the biomaterials supplier and were not 
     expressly repudiated by the biomaterials supplier prior to 
     the acceptance by the manufacturer of delivery of the raw 
     materials or component parts; and
       (2) such conduct was an actual and proximate cause of the 
     harm to the claimant.

     SEC. 206. PROCEDURES FOR DISMISSAL OF CIVIL ACTIONS AGAINST 
                   BIOMATERIALS SUPPLIERS.

       (a) Motion To Dismiss.--In any action that is subject to 
     this title, a biomaterials supplier who is a defendant in 
     such action may, at any time during which a motion to dismiss 
     may be filed under an applicable law, move to dismiss the 
     action against it on the grounds that--
       (1) the defendant is a biomaterials supplier; and
       (2)(A) the defendant should not, for the purposes of--
       (i) section 205(b), be considered to be a manufacturer of 
     the implant that is subject to such section; or
       (ii) section 205(c), be considered to be a seller of the 
     implant that allegedly caused harm to the claimant; or
       (B)(i) the claimant has failed to establish, pursuant to 
     section 205(d), that the supplier furnished raw materials or 
     component parts in violation of contractual requirements or 
     specifications; or
       (ii) the claimant has failed to comply with the procedural 
     requirements of subsection (b).
       (b) Manufacturer of Implant Shall Be Named a Party.--The 
     claimant shall be required to name the manufacturer of the 
     implant as a party to the action, unless--
       (1) the manufacturer is subject to service of process 
     solely in a jurisdiction in which the biomaterials supplier 
     is not domiciled or subject to a service of process; or
       (2) an action against the manufacturer is barred by 
     applicable law.
       (c) Proceeding on Motion To Dismiss.--The following rules 
     shall apply to any proceeding on a motion to dismiss filed 
     under this section:
       (1) Affidavits relating to listing and declarations.--
       (A) In general.--The defendant in the action may submit an 
     affidavit demonstrating that defendant has not included the 
     implant on a list, if any, filed with the Secretary pursuant 
     to section 510(j) of the Federal Food, Drug, and Cosmetic Act 
     (21 U.S.C. 360(j)).

[[Page H2244]]

       (B) Response to motion to dismiss.--In response to the 
     motion to dismiss, the claimant may submit an affidavit 
     demonstrating that--
       (i) the Secretary has, with respect to the defendant and 
     the implant that allegedly caused harm to the claimant, 
     issued a declaration pursuant to section 205(b)(2)(B); or
       (ii) the defendant who filed the motion to dismiss is a 
     seller of the implant who is liable under section 205(c).
       (2) Effect of motion to dismiss on discovery.--
       (A) In general.--If a defendant files a motion to dismiss 
     under paragraph (1) or (2) of subsection (a), no discovery 
     shall be permitted in connection to the action that is the 
     subject of the motion, other than discovery necessary to 
     determine a motion to dismiss for lack of jurisdiction, until 
     such time as the court rules on the motion to dismiss in 
     accordance with the affidavits submitted by the parties in 
     accordance with this section.
       (B) Discovery.--If a defendant files a motion to dismiss 
     under subsection (a)(2)(B)(i) on the grounds that the 
     biomaterials supplier did not furnish raw materials or 
     component parts in violation of contractual requirements or 
     specifications, the court may permit discovery, as ordered by 
     the court. The discovery conducted pursuant to this 
     subparagraph shall be limited to issues that are directly 
     relevant to--
       (i) the pending motion to dismiss; or
       (ii) the jurisdiction of the court.
       (3) Affidavits relating status of defendant.--
       (A) In general.--Except as provided in clauses (i) and (ii) 
     of subparagraph (B), the court shall consider a defendant to 
     be a biomaterials supplier who is not subject to an action 
     for harm to a claimant caused by an implant, other than an 
     action relating to liability for a violation of contractual 
     requirements or specifications described in subsection (d).
       (B) Responses to motion to dismiss.--The court shall grant 
     a motion to dismiss any action that asserts liability of the 
     defendant under subsection (b) or (c) of section 205 on the 
     grounds that the defendant is not a manufacturer subject to 
     such section 205(b) or seller subject to section 205(c), 
     unless the claimant submits a valid affidavit that 
     demonstrates that--
       (i) with respect to a motion to dismiss contending the 
     defendant is not a manufacturer, the defendant meets the 
     applicable requirements for liability as a manufacturer under 
     section 205(b); or
       (ii) with respect to a motion to dismiss contending that 
     the defendant is not a seller, the defendant meets the 
     applicable requirements for liability as a seller under 
     section 205(c).
       (4) Basis of ruling on motion to dismiss.--
       (A) In general.--The court shall rule on a motion to 
     dismiss filed under subsection (a) solely on the basis of the 
     pleadings of the parties made pursuant to this section and 
     any affidavits submitted by the parties pursuant to this 
     section.
       (B) Motion for summary judgment.--Notwithstanding any other 
     provision of law, if the court determines that the pleadings 
     and affidavits made by parties pursuant to this section raise 
     genuine issues as concerning material facts with respect to a 
     motion concerning contractual requirements and 
     specifications, the court may deem the motion to dismiss to 
     be a motion for summary judgment made pursuant to subsection 
     (d).
       (d) Summary Judgment.--
       (1) In general.--
       (A) Basis for entry of judgment.--A biomaterials supplier 
     shall be entitled to entry of judgment without trial if the 
     court finds there is no genuine issue as concerning any 
     material fact for each applicable element set forth in 
     paragraphs (1) and (2) of section 205(d).
       (B) Issues of material fact.--With respect to a finding 
     made under subparagraph (A), the court shall consider a 
     genuine issue of material fact to exist only if the evidence 
     submitted by claimant would be sufficient to allow a 
     reasonable jury to reach a verdict for the claimant if the 
     jury found the evidence to be credible.
       (2) Discovery made prior to a ruling on a motion for 
     summary judgment.--If, under applicable rules, the court 
     permits discovery prior to a ruling on a motion for summary 
     judgment made pursuant to this subsection, such discovery 
     shall be limited solely to establishing whether a genuine 
     issue of material fact exists as to the applicable elements 
     set forth in paragraphs (1) and (2) of section 205(d).
       (3) Discovery with respect to a biomaterials supplier.--A 
     biomaterials supplier shall be subject to discovery in 
     connection with a motion seeking dismissal or summary 
     judgment on the basis of the inapplicability of section 
     205(d) or the failure to establish the applicable elements of 
     section 205(d) solely to the extent permitted by the 
     applicable Federal or State rules for discovery against 
     nonparties.
       (e) Stay Pending Petition for Declaration.--If a claimant 
     has filed a petition for a declaration pursuant to section 
     205(b)(3)(A) with respect to a defendant, and the Secretary 
     has not issued a final decision on the petition, the court 
     shall stay all proceedings with respect to that defendant 
     until such time as the Secretary has issued a final decision 
     on the petition.
       (f) Manufacturer Conduct of Proceeding.--The manufacturer 
     of an implant that is the subject of an action covered under 
     this title shall be permitted to file and conduct a 
     proceeding on any motion for summary judgment or dismissal 
     filed by a biomaterials supplier who is a defendant under 
     this section if the manufacturer and any other defendant in 
     such action enter into a valid and applicable contractual 
     agreement under which the manufacturer agrees to bear the 
     cost of such proceeding or to conduct such proceeding.
       (g) Attorney Fees.--The court shall require the claimant to 
     compensate the biomaterials supplier (or a manufacturer 
     appearing in lieu of a supplier pursuant to subsection (f)) 
     for attorney fees and costs, if--
       (1) the claimant named or joined the biomaterials supplier; 
     and
       (2) the court found the claim against the biomaterials 
     supplier to be without merit and frivolous.
        TITLE III--LIMITATIONS ON APPLICABILITY; EFFECTIVE DATE

     SEC. 301. EFFECT OF COURT OF APPEALS DECISIONS.

       A decision by a Federal circuit court of appeals 
     interpreting a provision of this Act (except to the extent 
     that the decision is overruled or otherwise modified by the 
     Supreme Court) shall be considered a controlling precedent 
     with respect to any subsequent decision made concerning the 
     interpretation of such provision by any Federal or State 
     court within the geographical boundaries of the area under 
     the jurisdiction of the circuit court of appeals.

     SEC. 302. FEDERAL CAUSE OF ACTION PRECLUDED.

       The district courts of the United States shall not have 
     jurisdiction pursuant to this Act based on section 1331 or 
     1337 of title 28, United States Code.

     SEC. 303. EFFECTIVE DATE.

       This Act shall apply with respect to any action commenced 
     on or after the date of the enactment of this Act without 
     regard to whether the harm that is the subject of the action 
     or the conduct that caused the harm occurred before such date 
     of enactment.

       And the Senate agree to the same.

     From the Committee on the Judiciary, for consideration of the 
     House bill, and the Senate amendment, and modifications 
     committed to conference:
     Henry Hyde,
     James Sensenbrenner, Jr.,
     George W. Gekas,
     Bob Inglis,
     Ed Bryant,
     From the Committee on Commerce, for consideration of the 
     House bill, and the Senate amendment, and modifications 
     committed to conference:
     Tom Bliley,
     Michael Oxley,
     Christopher Cox,
                                Managers on the Part of the House.

     Larry Pressler,
     Slade Gorton,
     Trent Lott,
     Ted Stevens,
     Olympia Snowe,
     John Ashcroft,
     J.J. Exon,
     John D. Rockefeller,
                               Managers on the Part of the Senate.

       JOINT EXPLANATORY STATEMENT OF THE COMMITTE OF CONFERENCE

       The managers on the part of the House and the Senate at the 
     conference on the disagreeing votes of the two Houses on the 
     amendment of the Senate to the bill (H.R. 956), to establish 
     legal standards and procedures for product liability 
     litigation, and for other purposes, submit the following 
     joint statement to the House and the Senate in explanation of 
     the effect of the action agreed upon by the managers and 
     recommended in the accompanying conference report:
       The Senate amendment struck all of the House bill after the 
     enacting clause and inserted a substitute text.
       The House recedes from its disagreement to the amendment of 
     the Senate with an amendment that is a substitute for the 
     House bill and the Senate amendment. The differences between 
     the House bill, the Senate amendment, and the substitute 
     agreed to in conference are noted below, except for clerical 
     corrections, conforming changes made necessary by agreements 
     reached by the conferees, and minor drafting and clerical 
     changes.
       The conferees incorporate by reference in this Statement of 
     Managers the legislative history reflected in both House 
     Report 104-64, Part 1 and Senate Report 104-69. To the extent 
     not otherwise inconsistent with the conference agreement, 
     those reports give expression to the intent of the conferees. 
     (The conferees also take note of House Report 104-63, Part 1, 
     which contains supplementary legislative history on a related 
     bill.)

                   Short Title and Table of Contents

       The conferees, in section 1(a), modified the short title of 
     the House bill to reflect the terms of the conference 
     agreement. The conferees also decided that a table of 
     contents would be helpful and therefore incorporated in 
     section 1(b) the headings of the separate titles and sections 
     of this legislation.

                         Findings and Purposes

       H.R. 956--but not the Senate amendment--included findings 
     and purposes. The conferees decided it was important--in the 
     legislation itself--to delineate the factual basis for 
     congressional action and explain what Congress seeks to 
     accomplish. The language adopted, contained in section 2, 
     generally follows the House-passed bill with some 
     modifications.
       Paragraph (1) of the findings in H.R. 956 was not included 
     in the conference agreement because the conferees decided 
     that describing misuses of the civil justice system in very 
     broad terms was unnecessary. That paragraph had been written 
     at a level of generality exceeding other findings. The 
     omission of the paragraph should not be interpreted as 
     reflecting adversely on its accuracy.

[[Page H2245]]

       Section 2(a)(9) of the conference agreement refers to two 
     constitutional roles of the national government that are 
     directly relevant to this legislation--``to remove barriers 
     to interstate commerce and to protect due process rights.'' 
     Although the latter was not included in H.R. 956's findings, 
     legislative history clearly conveyed the House's recognition 
     of the Federal government's due process related role. The 
     report of the Committee on the Judiciary (House Report 104-
     64, Part 1) noted: ``Section 5 of the Fourteenth Amendment 
     provides an independent constitutional ground for 
     Congressional legislation limiting awards for punitive 
     damages. Congress is given the authority, under section 5, 
     `to enforce, by appropriate legislation' the provisions of 
     the Fourteenth Amendment--which include a proscription on 
     state deprivations of `life, liberty, or property, without 
     due process of law.' '' [p. 8]
       Including explicit reference to due process rights in the 
     findings is appropriate if the findings are to more fully 
     reflect our understanding of the constitutional underpinnings 
     for this legislation.
        The purposes of this legislation, as delineated in section 
     2(b), are ``to promote the free flow of goods and services 
     and to lessen burdens on interstate commerce and to uphold 
     constitutionally protected due process rights. . . .'' 
     Upholding due process rights was an important objective the 
     House sought to advance even though explicit reference to it 
     did not appear in H.R. 956's statement of purposes. The 
     Committee on the Judiciary's report (House Report 104-64, 
     Part 1) on H.R. 956 stated: ``The Committee acted to reform 
     punitive damages not only to ameliorate adverse effects on 
     interstate and foreign commerce but also to protect due 
     process rights.'' [page 9] Adding the phrase ``uphold 
     constitutionally protected due process rights'' to the 
     purposes provides a more complete statement of congressional 
     objectives.

                              Definitions

       Section 101 defines 18 terms for purposes of Title I. One 
     of these terms--compensatory damages--is not defined in 
     either H.R. 956 or the Senate amendment.

                       Applicability; Preemption

       Section 102 addresses preemption, relationship to State 
     law, and effect on other law.

  Liability Rules Applicable to Product Sellers, Renters, and Lessors

       Both the House bill and Senate amendment included liability 
     rules applicable to product sellers. Section 103 of the 
     conference agreement is designed to reduce consumer costs and 
     provide fair treatment for product sellers--defined to 
     include those who sell, rent, or lease a product in the 
     course of a business conducted for that purpose. To more 
     fully reflect the application of this section's remedial 
     provisions beyond sellers in the narrow sense of the word, 
     the conference agreement refers to renters and lessors in 
     section 103's title.
       As a general rule, liability of product sellers can be 
     predicated on harm resulting from a product seller's (1) 
     failure to exercise reasonable care, (2) breach of its own 
     express warranty, or (3) intentional wrong-doing. The failure 
     to exercise reasonable care requirement for potential 
     liability applies not only to products sold by the product 
     seller--as stated in H.R. 956--but also to products rented or 
     leased by the product seller--as stated in the Senate 
     amendment. The conferees recognize that the unfairness of 
     imputing manufacturer conduct to others applies regardless of 
     whether a product is sold, rented, or leased--and for that 
     reason adopt the Senate language. That language is consistent 
     with the intent of the House to make protections available in 
     a sale situation also available in a rental or lease 
     situation.
       Both H.R. 956 and the Senate amendment set forth those 
     limited circumstances in which a product seller can be 
     treated as a manufacturer of a product. One covered situation 
     involves a court determination that ``the claimant would be 
     unable to enforce a judgment against the manufacturer.'' In 
     response to concerns raised after House consideration of the 
     bill that claimants might not learn about such a judicial 
     determination within the period of the statute of 
     limitations--and therefore would be barred unfairly from 
     proceeding against the seller--the Senate included a 
     provision tolling the statute of limitations for limited 
     purposes ``from the date of the filing of a complaint against 
     the manufacturer to the date that judgment is entered against 
     the manufacturer.'' The conferees accept this provision 
     because it safeguards a protection for claimants given 
     expression in both bills. Since the conference agreement 
     incorporates a uniform statute of limitations in section 106, 
     the inclusion of this safeguard relating to the time bar is 
     particularly appropriate.
       The conference agreement clarifies that State law, rather 
     than the provisions of section 103, govern actions for 
     negligent entrustment. State law, for example, will continue 
     to apply to lawsuits predicated on the alleged negligence 
     involved in giving a loaded gun to a young child or allowing 
     an unlicensed and unqualified minor below driving age to 
     operate an automobile. Similarly, the potential liability of 
     a service station that sells gasoline to an obviously drunk 
     driver will be determined under State law. Section 103(d) 
     gives expression to the interest of each State in setting 
     standards for determining whether conduct within its borders 
     constitutes negligent entrustment.

            Defenses Involving Intoxicating Alcohol or Drugs

       Both H.R. 956 and the Senate amendment provide a complete 
     defense to a product liability action in situations in which 
     a claimant, under the influence of alcohol or drugs, is more 
     than fifty percent responsible--as a result of such 
     influence--for the accident or event resulting in the harm he 
     or she sustains. A society that seeks to discourage alcohol 
     and drug abuse should not allow individuals to collect 
     damages when their disregard of such an important societal 
     norm is the primary cause of accidents or events.
       The conference committee generally accepts the House 
     formulation in section 104. The conferees did not incorporate 
     the Senate reference to the defendant proving alcohol or drug 
     related facts because the issue of who has the burden of 
     proof on these issues is best left to State law. A 
     requirement for the availability of the defense related to 
     alcohol or drug use, under the Senate amendment, is that the 
     claimant was ``under the influence.'' The House language, 
     which was adopted, is more broadly worded and refers to the 
     claimant being ``intoxicated or . . . under the influence.'' 
     The House provision was accepted because the conferees want 
     to ensure the availability of the defense relating to alcohol 
     or drugs in cases in which State law may consider an 
     individual to be ``intoxicated'' but not necessarily ``under 
     the influence''--perhaps because the latter term does not 
     have legal significance in a particular jurisdiction.
       The conferees specifically incorporate the Controlled 
     Substances Act definition of controlled substance in the 
     conference agreement's delineation of what the term ``drug'' 
     means--following the House version in that respect. The 
     Senate amendment was silent in this regard. The reference to 
     the Controlled Substances Act will foster uniformity in 
     decisions by State courts on whether particular substances 
     constitute drugs. A substance that is taken by a claimant in 
     accordance with the terms of a lawfully issued prescription, 
     however, is not considered a drug for purposes of this 
     section. The policy fostered is the denial of recovery to 
     those whose accidents are primarily caused by the abuse of 
     drugs.
       Although the use of controlled substances in accordance 
     with the terms of lawfully issued prescriptions can lead to 
     accidents--in circumstances, for example, where one's ability 
     to drive may be impaired--the conferees leave to individual 
     States the responsibility of resolving whether potential 
     recovery is defeated by such conduct. The conference 
     agreement focuses on the most egregious conduct implicating 
     Federal interests--noting the national market for illegal 
     drugs and the transportation of illegal drugs across State 
     lines and in international commerce.
       The Senate provision's reference to a drug that ``was not 
     prescribed by a physician for use by the claimant'' does not 
     cover situations in which the terms of a lawfully issued 
     prescription are disregarded--perhaps by consuming excessive 
     quantities. The conferees conclude, however, that individuals 
     who abuse prescription drugs lack sufficient equities to 
     recover for accidents primarily caused by their drug use--and 
     for that reason refer to any controlled substance ``taken by 
     the claimant other than in accordance with the terms of a 
     lawfully issued prescription'', thus opting for the broader 
     House formulation.
       Finally, the House version of this section is modified to 
     cover controlled substances ``not legally prescribed for use 
     by the claimant'' in addition to controlled substances 
     ``taken by the claimant other than in accordance with the 
     terms of a lawfully issued prescription.'' The phrase ``not 
     legally prescribed for use by the claimant'' makes 
     unambiguous the requirement that the prescription be for the 
     claimant's own use. A claimant cannot cause an accident after 
     using someone else's prescription, even in accordance with 
     its terms, and recover damages.
       The phrase ``legally prescribed'' is a variation on the 
     Senate provision's reference to ``prescribed by a 
     physician.'' The change takes into account the fact that the 
     right to prescribe medication is not limited to physicians in 
     every jurisdiction. The potential applicability of defenses 
     involving drugs should not depend on whether a legally issued 
     prescription comes from a physician or non-physician--
     particularly in view of the fact that physicians may not be 
     available or accessible in some areas of the country.

                          Misuse or Alteration

       Both H.R. 956 and the Senate amendment include an important 
     reform--incorporated in section 105 of the conference 
     agreement--designed to assure manufacturers and sellers that 
     they can develop and sell products without undue concern 
     about unknowable and unpredictable liability attributable to 
     claims resulting from the misuse or alteration of their 
     products.
       Subsection (a)(1) of section 105 generally follows the 
     House language. Damages will be reduced because of misuse or 
     alteration, however, not only in cases of liability arising 
     under State law--as H.R. 956 provides--but also in possible 
     cases of liability arising under Federal law. Damages are 
     reduced if the defendant establishes the requisite link 
     between a certain percentage of the claimant's harm and 
     specified conduct.
       Although the ``preponderance of the evidence'' standard 
     will apply--as the House version explicitly states--the 
     conference agreement deletes reference to this evidentiary 
     standard in section 105(a) in order

[[Page H2246]]

     to avoid any possible negative inference from the fact that 
     the legislation does not refer to ``preponderance of the 
     evidence'' in other sections. Preponderance of the evidence 
     is the usual standard in civil cases--including product 
     liability cases. The conferees' intent is that courts apply 
     the usual standard in all situations covered by this 
     legislation except where another standard is explicitly 
     mandated.
       Subsection (a)(2) follows Senate language. Although this 
     provision appears to state a self-evident proposition--that a 
     use intended by the manufacturer does not constitute a misuse 
     or alteration--it is included to alleviate concerns that some 
     courts might reach a different result.
       Subsection (b) follows House language and states the 
     general rule that a claimant's damages will not be reduced 
     because of misuse or alteration by others in the workplace 
     who are immune from suit by the claimant. The rationale is 
     that Federal law should not mandate a reduction in damages 
     for a claimant who cannot collect from an employer or co-
     employee for misuse or alteration. The conference agreement, 
     however, carves an exception to the general prohibition 
     against such reductions by specifying that damages will not 
     be reduced ``except as otherwise provided in section 111'' of 
     the conference agreement dealing with workers' compensation 
     subrogation.
       The conferees intend that, consistent with normal 
     principles of law, this section shall supersede State law 
     concerning misuse or alteration of a product only to the 
     extent that State law is inconsistent with this section. The 
     deletion of language in the Senate amendment on this point 
     was intended merely to avoid any possible inference that it 
     is not intended to be the case in other sections of the 
     legislation.

                         Statute of Limitations

       The fact that consumers generally do not live in the States 
     in which the products they purchase and use are manufactured 
     creates confusion and uncertainty for manufacturers when the 
     law allows determinations of whether product liability 
     actions are barred by a statute of limitations to vary from 
     jurisdiction to jurisdiction. This uncertainty and 
     unpredictability ultimately means higher prices for 
     consumers. In addition, it is unfair to deny the potential 
     for a remedy to an injured party living in one State that may 
     be available to an injured party using the same product in 
     another State. The conferees conclude that uniformity is 
     needed and agree that two years is a reasonable limitation on 
     the period of time for the filing of a lawsuit by an injured 
     individual--regardless of where he or she may reside. This 
     decision is reflected in the language contained in section 
     106(a).
       The conferees expect that in most cases legal actions will 
     be brought within two years of the accident or injury, 
     because generally individuals have knowledge--or can be 
     charged with knowledge--of the resulting harm and its cause 
     at the time of an injury. An inflexible rule linking the 
     running of the statute of limitations to the time of injury, 
     however, would be unfair to those few injured parties who 
     could not--despite the exercise of reasonable care--discover 
     the harm and its cause. To address the exigencies of those 
     situations, the conferees adopted the language of the Senate 
     amendment referencing the date ``on which the claimant 
     discovered or, in the exercise of reasonable care, should 
     have discovered'' the harm and its cause.

                           Statute of Repose

       Both the House bill and Senate amendment included 
     provisions to protect manufacturers against stale claims that 
     arise many years after a product's first intended use. A 
     statute of repose would allow U.S. manufacturers to compete 
     with foreign companies that have entered the American 
     marketplace in recent years and face no liability exposure 
     for very old products. Section 106(b) advances U.S. 
     competitiveness, preserves and expands employment 
     opportunities here at home, and protects American consumers 
     from the higher prices for goods and services that result 
     from excessive litigation related expenses, inflated 
     settlement offers, and increased liability insurance rates.
       The statute of repose contained in the conference agreement 
     will, for durable goods, generally bar product liability 
     actions that are not filed within 15 years of a product's 
     delivery. The time of delivery refers to the date that the 
     product reaches its first purchaser or lessee who was not 
     engaged in the business of selling or leasing the product or 
     of using the product as a component in the manufacture of 
     another product. The only exceptions to the statute of repose 
     that courts appropriately can recognize are those explicitly 
     provided for in section 106(b)(3) itself. The 15 year time 
     period is taken from the House bill.
       Section 106(b) adopts Senate language making the time bar 
     applicable only to durable goods. Section 106(b)(2) is also 
     language from the Senate amendment. It provides for deferring 
     to State law time bars--on actions covered by this 
     legislation--that are shorter than 15 years. The conferees 
     believe that States should remain free to impose time limits 
     of less than 15 years--a concept given expression in section 
     106(b)(2). Such State limitations are not inconsistent with 
     the objectives of section 106(b)--including fostering a more 
     conducive environment for U.S. companies to compete in the 
     global marketplace. Furthermore, nothing in the conference 
     agreement is to be interpreted to preempt state statutes of 
     repose which may apply to goods other than durable goods as 
     defined in this agreement.
       Section 106(c) is a transition provision that permits 
     product liability actions to be brought within one year of 
     the date of enactment in situations in which the application 
     of the statute of repose (or statute of limitations) shortens 
     the period otherwise available under State law. The provision 
     protects potential claimants by affording them a fair and 
     reasonable opportunity to adjust to time limitations 
     contained in section 106.

                     Alternative Dispute Resolution

       Section 107 incorporates a provision of the Senate 
     amendment dealing with alternative dispute resolution.

                            Punitive Damages

       The requirement of ``conscious, flagrant indifference to 
     the rights or safety of others'' in section 108(a) makes it 
     clear that punitive damages may be awarded only in the most 
     serious cases. Punitive damages are not intended as 
     compensation for injured parties. Rather, they are intended 
     to punish and to deter wrongful conduct.
       The conferees understand that punitive damages can be 
     awarded in cases of intentional harm. For this reason, it was 
     not felt necessary to express the concept explicitly. Thus, 
     the conference agreement does not retain the language 
     contained in the House passed bill regarding conduct 
     ``specifically intended to cause harm.''
       Section 108(b) imposes a limitation on punitive damages--
     with a special rule applicable to individuals of limited net 
     worth and businesses or entities with small numbers of 
     employees. The limitation on punitive damages cannot be 
     disclosed to the jury. A punitive damage award may be 
     appealed even if it falls within the limitation. Nothing in 
     the bill prevents a trial court (and each reviewing court) 
     from reviewing punitive damage awards individually and 
     determining whether the award is appropriate under the 
     particular circumstances of that case.
       Although the conferees establish a mechanism for awarding 
     additional punitive damages in limited circumstances 
     (``egregious conduct'' on the part of the defendant and a 
     punitive damages jury verdict insufficient to punish such 
     egregious conduct, or to deter the defendant), it is 
     anticipated that occasions for additional awards will be very 
     limited indeed. Findings of fact and conclusions of law 
     relating to the award of additional punitive damages are 
     designed both to ensure that judges carefully consider such 
     decisions and to facilitate appellate review. The court may 
     not enter an award of punitive damages in excess of the 
     amount of punitive damages originally assessed by the jury. 
     The additional award provisions do not apply in cases covered 
     by section 108(b)(2)--actions against an individual whose net 
     worth does not exceed $500,000 or against entities that have 
     fewer than 25 full-time employees.
       Section 108(c)(1) clarifies that a separate proceeding on 
     punitive damages--pursuant to a bifurcation request of any 
     party--shall be held subsequent to the determination of the 
     amount of compensatory damages. This order of proceedings, 
     consistent with the intent of both the House and Senate, is 
     being made explicit to avoid any possible confusion. A 
     determination of punitive damages first can adversely and 
     unfairly influence financial markets and result in 
     inappropriate pressure on defendants to settle. Punitive 
     damages expressed as a multiple of compensatory damages to be 
     determined later may not result in any liability if a 
     different jury considering compensatory damages decides in 
     favor of the defendant. This potential verdict for a 
     defendant, however, may come too late because of the 
     realities of the business world.
       The conferees clarify in section 108(c)(2) that it is 
     improper not only to offer evidence--but also to raise 
     arguments or contentions--relevant only to a claim of 
     punitive damages in the compensatory damages proceeding, 
     because of the potential prejudicial effects. The conferees' 
     objective is to avoid infecting determinations of liability--
     or the amount of compensatory damages--with such irrelevant 
     information.

                  Liability for Claims Involving Death

       Section 109 incorporates a provision of the Senate 
     amendment designed to address a situation unique to one 
     State.

                 Several Liability for Noneconomic Loss

       The language of section 110 on several liability for 
     noneconomic loss in product liability cases substantially 
     follows the Senate amendment. The rule of several liability 
     for noneconomic loss applies to all product liability actions 
     nationwide.
       The conference agreement, based on the Senate amendment, 
     clearly states that in allocating noneconomic damages to a 
     defendant, ``the trier of fact shall determine the percentage 
     of responsibility of each person responsible for the 
     claimant's harm, whether or not such person is a party to the 
     action.'' [Emphasis added] The Senate formulation reflected 
     here is fully consistent with the intent of the House as 
     expressed in Report Number 104-64, Part 1: ``[T]he trier of 
     fact will determine the proportion of responsibility of each 
     person responsible for the claimant's harm, without regard to 
     whether or not such person is a party to the action.'' pp. 
     13-14. Persons who may be responsible for the claimant's harm 
     include, but are not necessarily limited to, defendants, 
     third-party defendants, settled parties, nonparties, and 
     persons or entities that cannot be tried (e.g., bankrupt 
     persons, employers and other immune entities).

[[Page H2247]]

       The House passed version specified that the section ``does 
     not preempt or supersede any State or Federal law to the 
     extent that such law would further limit the application of 
     the theory of joint liability to any kind of damages.'' The 
     conferees have not included this language in the conference 
     report itself because it is superfluous and self-evident. 
     Reference is made to it in the statement of managers, 
     however, to rebut any possible negative inference from its 
     omission. The quoted language itself reflects the conference 
     agreement's intent.

                   Workers' Compensation Subrogation

       Section 111(a)(1)(A) provides that, in any product 
     liability action involving a workplace injury, an insurer 
     shall have a right of subrogation. Section 111(a)(1)(B) 
     provides that, to assert a right of subrogation, an insurer 
     must provide the court with written notice that it is 
     asserting a right of subrogation. Section 111(a)(1)(C) states 
     that the insurer need not be a necessary party to the product 
     liability action. Thus, an employee can pursue a product 
     liability action against a manufacturer without regard to the 
     insurer's participation in the action. This section focuses 
     on eliminating unsafe workplaces and is, therefore, 
     applicable in all actions where employer or coemployee fault 
     for a claimant's harm is at issue. Conversely, section 111 
     does not apply in cases where the product liability defendant 
     chooses not to raise employer or coemployer fault as a 
     defense.
       Section 111(a)(2)(A) preserves the right of an insurer to 
     assert a right of subrogation against payment made by a 
     product liability defendant, without regard to whether the 
     payment is made as part of a settlement, in satisfaction of a 
     judgment, as consideration for a covenant not to sue, or for 
     any other reason. ``Claimant's benefits'' is defined in 
     section 101(3) and is a broad term which includes the total 
     workers' compensation award, including compensation 
     representing lost wages, payments made by way of an annuity, 
     health care expenses, and all other payments made by the 
     insurer for the benefit of the employee to compensate for a 
     workplace injury.
       Section 111(a)(3) provides the mechanism for increased 
     workplace safety. Under section 111(a)(3)(A), a product 
     liability defendant may attempt to prove to the trier of fact 
     that the claimant's injury was caused by the fault of the 
     claimant's employer or a coemployee. The term ``employer 
     fault'' means that the conduct of the employer or a 
     coemployee was a substantial cause of the claimant's harm or 
     contributed to the claimant's harm in a meaningful way; it is 
     more than a de minimus level of fault. Section 
     111(a)(3)(C)(i) provides that, if the trier of fact finds by 
     clear and convincing evidence that the claimant's injury was 
     caused by the fault of the claimant's employer or a 
     coemployee, the product liability damages award and, 
     correspondingly, the insurer's subrogation lien shall be 
     reduced by the amount of the claimant's benefits. In no case 
     shall the employee's third-party damage award reduction 
     exceed the amount of the subrogation lien. Thus, the amount 
     the injured employee would receive remains totally 
     unaffected. The Act merely provides that the insurer will not 
     be able to recover workers' compensation benefits it paid to 
     the employee if it is found by clear and convincing evidence 
     that the claimant's harm was caused by the fault of the 
     employer or a coemployee.

                              Biomaterials

       Title II of the conference agreement contains the 
     ``Biomaterials Access Assurance Act of 1996.'' A similar 
     title passed both as a part of the House bill and the Senate 
     amendment. Title II is intended to provide a defense to 
     suppliers of materials or parts which are used to manufacture 
     implantable medical devices. The definition of ``medical 
     device'' in existing law, which is incorporated by reference 
     into Title II, would limit this defense to a device which 
     does not ``achieve any of its principal intended purposes 
     through chemical action within or on the body of man * * *'' 
     , in short, devices which do not contain drugs.
        Newly patented devices, and others now in development, are 
     manufactured from ``parts'' intended to be covered by Title 
     II, but also contain an active ingredient or drug. The 
     purpose of such devices is long term (up to one year) release 
     of such materials into the body. Such devices can introduce 
     medications affecting numerous bodily functions, previously 
     only available by regular injections or oral dosages.
       The conferees adopted a new definition which brings the 
     ``parts,'' but not the active ingredients, used in such 
     ``combination products'' (as that term is used in section 
     503(g) of the Act) within the purview of this section. This 
     will ensure that the development and availability of such 
     devices will not be impaired because of the same liability 
     concerns affecting the availability of materials for other 
     types of implants.

                       Court of Appeal Decisions

       Section 301 describes the precedential effect of certain 
     Federal appellate decisions. It is based on a provision of 
     the Senate amendment.

                        Federal Cause of Action

       Both H.R. 956 and the Senate amendment include provisions 
     on preclusion. Section 302 incorporates the language of the 
     House bill.

                             Effective Date

       The effective date provision of H.R. 956 references actions 
     commenced ``after'' the enactment date. Corresponding Senate 
     provisions refer to actions ``on or after'' the date of 
     enactment and clarify that the effective date is without 
     regard to whether the relevant harm or conduct occurred 
     before the enactment date. The conferees, in section 303, 
     accept the ``on or after'' formulation and the clarifying 
     clause from the Senate amendment.

     From the Committee on the Judiciary, for consideration of the 
     House bill, and the Senate amendment, and modifications 
     committed to conference:
     Henry Hyde,
     James Sensenbrenner, Jr.,
     George W. Gekas,
     Bob Inglis,
     Ed Bryant,
     From the Committee on Commerce, for consideration of the 
     House bill, and the Senate amendment, and modifications 
     committed to conference:
     Tom Bliley,
     Michael Oxley,
     Christopher Cox,
                                Managers on the Part of the House.

     Larry Pressler,
     Slade Gorton,
     Trent Lott,
     Ted Stevens,
     Olympia Snowe,
     John Asheroft,
     J.J. Exon,
     John D. Rockefeller,
     Managers on the Part of the Senate.

                          ____________________