[Congressional Record Volume 142, Number 135 (Thursday, September 26, 1996)]
[Senate]
[Pages S11363-S11365]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             CIVIL JUSTICE REFORM: STILL DESPERATELY NEEDED

  Mr. HATCH. Mr. President, I rise today to speak about civil justice 
reform. Many of us had high hopes for tort reform in the 104th 
Congress, which has been desperately needed for so many years. 
Unfortunately, President Clinton has blocked our litigation reform 
efforts with his stubborn defense of the status quo.
  I was deeply disappointed with President Clinton's decisions to veto 
the securities litigation reform bill and then the product liability 
reform bill. Fortunately, Congress was able to override the securities 
veto and those important reforms became law over the President's 
tenacious opposition.
  That was not the case with product liability reform. Despite over 15 
years of bipartisan work in the Congress and despite the tireless 
efforts of Democrats like Senators Rockefeller and Lieberman, along 
with Republicans like Senators Gorton and Pressler, we have not been 
able to make one iota of progress in addressing the product liability 
crisis facing Americans.
  Unfortunately, we have learned that President Clinton is unalterably 
opposed to tort reform and other litigation reform measures, no matter 
how badly needed they may be and no matter how much litigation is 
costing American consumers.
  We should all be very clear about what happens here: Each time 
President Clinton sides with America's extremely powerful trial 
lawyers, America's consumers lose. And once again, President Clinton's 
rhetoric dismally fails to match his actions.
  Litigation reforms are no less needed now than at the start of the 
104th Congress. We simply have got to take some steps forward to 
alleviate the litigation tax that burdens American consumers, workers, 
small businesses, and others who ultimately pay the price imposed by 
high-cost lawsuits.
  Litigation reform continues to be supported by the overwhelming 
majority of Americans. They have indicated their frustration over crazy 
lawsuits, outrageous punitive damage awards, and abusive litigation. 
They want change from a status quo that has been unfair and that has 
encouraged irresponsible litigation in this country. But because of the 
President's actions, they will not get the meaningful litigation relief 
they need from this Congress.
  The costs of lawsuits in this country are extreme and are eating up 
valuable resources. These costs are passed along to consumers in the 
form of higher prices and higher insurance premiums. They are passed 
along to workers in the form of fewer job opportunities, and fewer and 
lesser pay and benefit increases. They are passed along to shareholders 
in the form of lesser dividends. These costs stifle the development of 
new products. Everyone in America pays a steep price for President 
Clinton's stubborn defense of a

[[Page S11364]]

small but powerful group of trial lawyers.

  When the product liability bill was on the floor last spring, we 
heard that 20 percent of the price of a ladder goes to pay for 
litigation and liability insurance, that one-half of the price of a 
football helmet goes to liability insurance, that needed medical 
devices are not on the market because of liability concerns and on and 
on. We heard about millions of dollars for spilled coffee and millions 
for a refinished paint job on a BMW.
  I can go on and on about ridiculous liability cases that Americans 
are sick and tired of. I have spoken at length about such cases on the 
floor before.
  What is frustrating to me is that little has changed. We pass 
legislation to deal with this abuse of our legal system, but the 
President vetoes it.
  And it is not surprising that those who benefit from this litigation 
explosion--the trial lawyers--think they have found a safe harbor at 
1600 Pennsylvania Avenue. They think they can get away with business as 
usual because President Clinton will veto any attempt to stop them.
  They obviously don't get it.
  Let me just mention a few examples of developments in the case law 
following the President's May 10 veto of product liability reform.
  In June, a Pennsylvania appellate court upheld an absolutely 
outrageous punitive damage award. In the case, a former Kmart worker in 
Pennsylvania won $1.5 million in damages from Kmart after being fired 
for allegedly eating a bag of the store's potato chips without paying 
for them.
  The plaintiff had sued for defamation of character based on her 
employer's telling her coworkers that she had eaten the potato chips 
without paying for them--which constituted stealing in violation of 
company policy. She was awarded $90,000 in compensatory damages, and an 
astonishing $1.4 million in punitive damages. That is absolutely 
outrageous and unjustified.
  Even if the employer had said anything wrongfully about her and the 
potato chips--and I say even if, because I do not think it is clear 
that the employer did anything wrong--I submit that there is simply no 
way to justify an award of $1.5 million for saying that you thought 
someone ate a bag of potato chips without paying for it. That is just 
crazy.
  On appeal, the court upheld the award. The dissenting judge, Judge 
Popovich, called the punitive damages award ``patently unreasonable 
given the facts before us.''
  Judge Popovich got right to the heart of it when he wrote, ``I do not 
understand how appellant's act of informing appellee's co-workers that 
she was dismissed for misappropriating a bag of potato chips was 
sufficiently outrageous conduct to warrant a punitive damages award of 
$1.4 million.'' That judge is absolutely correct.
  I wish that was it, but there are more cases.
  In a case in Alabama in June, the Liberty National Life Insurance Co. 
was held liable in a case in which the plaintiff claimed that the 
company failed to pay her $20,000 in death benefits following her 
husband's death.
  The company claimed that it was not liable to pay the $20,000 in 
benefits because the couple had not disclosed the husband's health 
problems when they obtained the life insurance policy about a year 
before the husband died.

  The jury found the insurer liable and awarded the plaintiff $330,000 
in compensatory damages, including emotional distress. There may be an 
argument that this may be a bit high on its own, but what happened in 
terms of punitive damages is truly astonishing.
  The jury went on to award the plaintiff a mind-boggling $17.2 million 
in punitive damages.
  Now, the insurance company in this case may have been right or it may 
have been wrong. My point is that even if the company was wrong and 
even if the company should have paid out the $20,000 in death benefits, 
an award of $17.2 million in punitive damages--17.2 million dollars--on 
the basis of these facts is outrageous and simply cannot be justified.
  And people wonder why their insurance premiums are so high. 
Personally, I find it hard to swallow that even one dime of an 
individual's insurance premium is subsidizing court ordered windfalls 
like this one.
  Take another case. This one came down in August.
  A jury awarded a plaintiff $7 million in punitive damages on a claim 
that the defendant had sold the plaintiff unnecessary insurance on a 
mobile home; compensatory damages were $100,000.
  Seven million dollars for selling unnecessary insurance and causing 
at most--at most--$100,000 worth of harm? How can that be?
  In another highly publicized and widely criticized case, which also 
came down following the President's veto of product liability reform 
legislation, the largest damages verdict ever rendered against General 
Motors was handed down by an Alabama jury.
  In that case, the plaintiff was seriously injured when he had an 
accident in his Chevy Blazer.
  I do not dispute that the plaintiff's injuries were severe or that 
his accident was a tragedy.
  However, there was evidence that the plaintiff had been drinking 
before the accident and was not wearing a seatbelt. The plaintiff told 
the first person on the scene and others that he had fallen asleep at 
the wheel. The plaintiff's lawyers' principal argument to the jury was 
that, even though the plaintiff was not wearing a seatbelt, the 
plaintiff was thrown out of the car because the door latch allegedly 
failed.
  However, there was evidence that the door latch worked fine after the 
accident and that the plaintiff was actually thrown out through the car 
window. This is also a vehicle that had passed federal safety 
standards.
  But let's say there was some sort of problem with the plaintiff's 
particular door latch. I am even willing to assume that. My problem is 
with the shocking amount of punitive damages that were awarded.
  The jury awarded not only $50 million in compensatory damages, but 
went on to award $100 million--you heard it correctly--$100 million in 
punitive damages.
  Punitive damages are designed to punish egregious conduct, and I just 
don't see the showing of egregious conduct here. The very equivocal 
evidence in that case just cannot warrant such a shocking amount of 
punitive damages. Where is the egregious conduct here?
  I just don't see it. Instead, I see one more example of a punitive 
damage system that is out-of-control. And there are more examples like 
these, many of them in the past few months.

  The sobering fact is that this problem isn't going away. Instead, it 
is snowballing out-of-control.
  I know that it is too late during this Congress to do anything more 
about the litigation crisis. And, it is too futile given the 
President's commitment to vetoing civil justice reform.
  But I implore my colleagues to come back next Congress committed to 
addressing the problem of out-of-control punitive damages and other 
abuses in our civil justice system.
  Our large and small businesses and our consumers and workers are 
being overwhelmed with litigation abuse. The vice president of the Otis 
Elevator Corp. provided us with information indicating that his company 
is sued on the average of once a day. Once a day.
  We cannot address these problems comprehensively without a uniform, 
nationwide solution to put a ceiling on at least the most abusive 
litigation tactics.
  We need to protect citizens of some States from the litigation costs 
imposed on them by other States' legal systems.
  In May, in the BMW versus Gore case, the U.S. Supreme Court 
recognized that excessive punitive damages ``implicate the Federal 
interest in preventing individual States from imposing undue burdens on 
interstate commerce.''
  While that decision for the first time recognized some outside limits 
on punitive damage awards, legislative reforms are desperately needed 
to set up the appropriate boundaries.
  The Supreme Court's decision in the BMW versus Gore case leaves ample 
room for legislative action. That case acknowledged that there are 
constitutional bounds beyond which extreme punitive damage awards will 
violate due process; at the same time, the decision reinforces the 
legitimacy and primacy of legislative decisionmaking in regulating the 
civil justice system.
  The BMW versus Gore case was brought by a doctor who had purchased a 
BMW automobile for $40,000 and later discovered that the car had been 
partially refinished prior to sale. He sued

[[Page S11365]]

the manufacturer in Alabama State court on a theory of fraud, seeking 
compensatory and punitive damages.
  The jury found BMW liable for $4,000 in compensatory damages and an 
astonishing $4 million in punitive damages. On appeal, the Alabama 
Supreme Court reduced the punitive damages award to $2 million.
  The Supreme Court held, in a 5 to 4 decision, that the $2 million 
punitive damages award was grossly excessive and therefore violated the 
due process clause of the 14th amendment. The Court remanded the case. 
The majority opinion set out three guideposts for assessing the 
excessiveness of a punitive damages award: the reprehensibility of the 
conduct being punished; the ratio between compensatory and punitive 
damages; and the difference between the punitive award and criminal or 
civil sanctions that could be imposed for comparable conduct.
  Justice Breyer, in a concurring opinion joined by Justices O'Connor 
and Souter, emphasized that, although constitutional due process 
protections generally cover purely procedural protections, the narrow 
circumstances of this case justify added protections to ensure that 
legal standards providing for discretion are adequately enforced so as 
to provide for the ``application of law, rather than a decisionmaker's 
caprice.''
  Congress has a similar responsibility to ensure fairness in the 
litigation system and the application of law in that system. Notably, 
Justice Ginsburg's separate dissent, joined by the Chief Justice, 
argued not that the amount of punitive damages awarded in the case was 
proper, but suggested instead that the majority had intruded upon 
matters best left to State courts and legislatures.
  Clearly, it is high time for Congress to provide specific guidance to 
courts on the appropriate level of damage awards and to address other 
issues in the civil litigation system.
  We need to encourage common sense, responsible and fair litigation by 
reforming the system that leads to sky-high punitive damages in cases 
of little actual loss and by introducing fairness into the system.
  These lawsuits-for-profit demean the lofty ideals of our judicial 
system. There are people out there with legitimate grievances that 
deserve the time and attention of judges and juries, but the courts are 
clogged up with these ridiculous cases and claims. That isn't fair.
  The American people should know that we have been unable to enact 
meaningful civil justice reform because the President chooses to stand 
with this Nation's trial lawyers. His action is permitting litigation 
abuses and excesses to go on.
  When the American people can't buy new products, can't get needed 
medical devices, lose jobs they might have had if companies were 
permitted to grow, or can't afford their insurance costs, they should 
know that the President chose to do nothing about the litigation 
explosion in this country.
  Let me just close with an example of litigation reform that worked--
and one that should have been a model this Congress. That example is 
the statute of repose for piston-driven aircraft.
  In August 1994, Congress passed an 18-year statute of repose for 
small, general aviation aircraft. At that time, around 90 percent of 
employment in the piston-driven aircraft industry was gone; around 90 
percent of production had disappeared due to product liability 
lawsuits.
  Today, a striking recovery is already underway in that industry. 
Aircraft manufacturers are planning and constructing new plants, and 
production and employment have grown tremendously. Cessna alone has 
created about 3,000 new jobs due to the enactment of that one statue of 
repose.
  When the American people consider the President's vetoes, they should 
ask themselves: How many new plants and factories will never open? How 
many new jobs has the President squandered? How many medical 
innovations won't we see? How much are insurance premiums going to go 
up?
  The bottom line is that I just don't think we can take much more of 
the present system. I hope we won't have to. I expect litigation reform 
to be an important part of the agenda of the next Congress, and I want 
to repeat my commitment to work toward that end.

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