[Congressional Record Volume 144, Number 90 (Thursday, July 9, 1998)]
[Senate]
[Pages S7713-S7717]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        PRODUCT LIABILITY REFORM

  Mr. McCAIN. Mr. President, this nation needs legal reform. This bill 
before us--if passed into law--will deliver exactly that. While this 
legislation is not perfect, it does a great deal for small businesses 
across this nation. And for that reason, it should be supported and I 
hope it will become law.
  Before I discuss this matter further, I want to thank Senator Gorton 
for his tireless pursuit of legal reform in the area of product 
liability. Senator Gorton has worked hard on this important legislation 
for many years. I also want to thank Senator Rockefeller for all his 
efforts.
  Mr. President, I do have concerns regarding this bill. My primary 
concern with this measure is the narrow nature of the reforms it would 
institute. I had

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hoped we could pass a broader bill that would do more. But again, I 
want to repeat, the proposal has important features that would improve 
some imperfections in our legal landscape.
  I am especially encouraged that the bill before the Senate includes, 
as Title II, legislation that I introduced with Senator Lieberman to 
ensure the continued access to biomaterials. Biomaterials are used to 
produce implantable medical devices that both enhance and extend the 
lives of so many Americans.
  I am also pleased with other provisions taken from the bill as 
reported by the Commerce Committee. Those provisions include valuable 
revisions to the liability rules applicable to product sellers, 
renters, and lessors; a limitation on the amount of punitive damages 
that may be awarded against small businesses; and a provision to 
provide for the reduction of damages when a product has been misused or 
altered.
  My concern is not so much with what is in this compromise but in what 
it does not contain. The bill reported by the Commerce Committee has 
been significantly narrowed to appease the Administration. For example, 
the compromise would not provide a statute of repose applicable to all 
products, it would not reform joint and several liability, and it would 
not limit the amount of punitive damages that may be awarded certain 
sized business enterprise.
  The compromise proposal would provide limited reforms in the area of 
product liability. Those reforms, although limited, may be valuable and 
worth doing but they do not constitute comprehensive reform of product 
liability.
  I know that comprehensive product liability reform is not politically 
possible in this Congress due to the Administration's opposition. That, 
however, does not change the fact that comprehensive product liability 
reform is essential for America's consumers and for our businesses both 
large and small. Comprehensive product liability reform would make a 
larger array of products available to consumers at a lower price. 
Comprehensive product liability reform would create more jobs for 
American workers and make American businesses more competitive in 
international markets.
  General aviation is the best example of the benefits of legal reform. 
The general aviation industry was nearly dead in the United States. 
Production of new airplanes was declining steeply, and new technology 
was not being incorporated into the planes that were being built. As a 
result jobs were lost and consumers were deprived of better and safer 
airplanes. The General Aviation Revitalization Act rescued this 
industry by instituting a very narrow statute of repose. Due to this 
reform, thousands of new jobs have been created and more advanced 
airplanes are now available to the flying public.
  To best bring the advantages of legal reform to all consumers and 
industries, the country desperately needs product liability reform. 
Comprehensive reform would include common sense revisions to joint and 
several liability, limitations on punitive damages, and a statute of 
repose applicable to all products. All of these reforms were contained 
in the bill as reported by the Senate Commerce Committee.
  My deepest concern about the compromise proposal that Senator Gorton 
has negotiated is a fear that once Congress has acted on this 
compromise, the public will assume it is comprehensive legislation and 
the drive for additional necessary reforms will be hampered. I fear 
that a narrow product liability bill that makes incremental 
improvements will be used by the powerful interests that oppose any 
legal reform to claim that the narrow bill was supposed to solve all 
the problems and thereby condemn any further reform.
  But that fact withstanding, I still strongly support the bill before 
us. Obviously, a narrow bill cannot solve all of the numerous problems 
in our current system. I believe a narrow bill can make significant 
headway on some of those problems. As I began, this bill will help 
reform the legal system and will greatly benefit small business. I hope 
that its passage of this bill is the first step in a process of reform, 
not the beginning of the end. This measure deserves our support and I 
hope we will act quickly to pass it and send the bill to the President 
for his signature.
  Mr. LEAHY. Mr. President, I rise today in opposition to the Product 
Liability Reform Act of 1998. I understand the concerns raised by a few 
well-publicized cases of outsized punitive damages awards in product 
liability cases. In seeking to address those concerns, however, this 
bill simply goes too far. It overly restricts an injured person's right 
to seek legal redress from the makers and sellers of dangerous 
products, and tramples on states' rights in the process.
  In fact, this legislation could leave consumers with a more dangerous 
marketplace. The bill caps punitive damages at the lesser of $250,000 
or twice an individual's loss for smaller businesses. This cap will 
allow a company to calculate with a much greater degree of certainty 
the economic cost of placing a dangerous product into the market. If 
that cost is less than the cost of the design or manufacturing changes 
necessary to make the product safe, companies may choose to sell the 
dangerous product and rely on the damages cap in this legislation to 
limit their losses when people are hurt and file claims.
  I am at a loss to understand the need for such drastic reform. The 
Senate just concluded debate on a tobacco bill that would not have 
occurred but for an individual's ability in the current civil justice 
system to recover punitive damages against the maker, in this case, of 
a killer product. Individual states have recovered billions of dollars 
in damages from the tobacco industry in the same system. Despite all of 
the high-minded rhetoric of the tobacco industry, the threat of 
punitive damages was a key factor in bringing the companies to the 
table.
  Mr. President, the civil justice system works. The threat of punitive 
damages should be preserved as a powerful deterrent to manufacturing 
dangerous products. Damage awards should not be a calculable, fixed 
business expense to be coldly measured against the consumer's welfare.
  If the concern is frivolous lawsuits, we do not need federal 
legislation. Federal and state court judges already have the power to 
dismiss such actions under Rules 12 and 56 of the Federal Rules of 
Civil Procedure and similar state procedural rules. The Supreme Court's 
Daubert decision has established rigorous standards for the 
admissibility of expert testimony in product liability cases.
  In addition, many states already have enacted comprehensive tort 
reform laws of their own that include product liability provisions. If 
the Vermont State Legislature wants to enact restrictions on product 
liability lawsuits or caps on punitive damages, then they are free to 
do so. And the Vermont State Legislature is free to not change 
Vermont's civil justice system.
  And that's as it should be. The law of torts has always been the 
province of the states. This bill, though, would inject a federal 
standard into every state's negligence law and into every state's 
punitive damages proof threshold. The federal government should not 
dictate state tort law standards in any event, and particularly in this 
case, as states already have taken many steps to reform their own 
product liability laws.
  Why do we now want to pass a Federal law to override these State laws 
that have addressed product liability reforms? Do we in the United 
States Senate now know better than our state legislatures? What 
happened to state's rights?
  I do not believe the false threat of frivolous lawsuits justifies 
this bill. Instead, this bill is a solution in search of a problem. 
There is no product liability litigation crisis in Vermont or the rest 
of the country. In fact, less than one percent of new case filings in 
state courts are brought by injured consumers in products liability 
lawsuits.
  And while the bill restricts consumers' rights and imposes tort 
standards on states, the legislation will not apply to lawsuits 
involving commercial interests--what hypocrisy! While consumers may 
have their hands tied, businesses will be free to pursue their claims 
without any limitations. Because almost half of all civil litigation is 
commercial in nature, almost half of all civil litigation will be 
completely unaffected by this bill. If the problems in product 
liability litigation truly are

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serious enough to warrant handcuffing consumers and dictating tort law 
to the states, then businesses should be bound by this bill's 
restrictions as well.
  In what appears to be the height of corporate welfare, a new 
paragraph has been slipped into this bill that grants immunity from 
products liability lawsuits for a Mississippi medical products company, 
Baxter International, Inc. This new paragraph would exempt from 
products liability lawsuits any manufacturers who make the raw 
materials used in intravenous bags, which just happens to benefit 
Baxter International, Inc.
  Mr. President, the civil justice system is not perfect, but it works. 
This legislation would not improve the system. Rather, it will make it 
more difficult for consumers to fight against unsafe or dangerous 
products, and may result in a more dangerous marketplace overall. I 
urge my colleagues to reject this bill.
  Mr. FAIRCLOTH. Mr. President, I am appalled that the special 
interests and their Senate retainers triumphed again in their efforts 
to extend the ``trial lawyer tax'' imposed on the American people. The 
ultimate Washington special interest--the trial lawyers--will continue 
to line their pockets at the expense of American consumers and small 
businesses.
  As you know, I continue to advocate broad civil justice reform, and 
this was just a start. I want to recount a recent case that underscores 
the need for greater reform than the bill that we considered earlier 
today. A group of trial lawyers filed a class action lawsuit against 
the Bank of Boston over credits for mortgage escrow balances. This 
case, however, exposes the outrageous greed that motivates these trial 
lawyers eager to don the cloaks of the ``consumer advocate.'' The 
715,000 depositors each received $2.19 in back interest from the 
lawsuit, but the current mortgage holders footed the bill for the 
lawyers to the tune of $91.33 each. That's right, Mr. President, they 
received $2.19 but their accounts were debited $91.33 for lawyers fees.
  I also read a 1995 gasoline price-fixing case in which 19 lawyers who 
won a $1 judgment were actually awarded more than $2 million in 
lawyers' fees in an Alabama federal court. This is outrageous!
  Therefore, Mr. President, I remain committed to broad and 
comprehensive civil justice reform. This was a modest bill, too modest 
in my opinion, but it was a first step. However, as the Majority Leader 
said, the trial lawyers control the modern Democratic Party. There is 
no other explanation for the stalwart liberal opposition to the most 
modest reforms to help American consumers and small businesses. The 
trial lawyers are the most powerful and feared special interest in 
Washington.
  Can you imagine Senators voting against this bill for any other 
reason? This was the essence of modest reform.
  This bill would have prevented litigation against retailers and 
wholesalers unless they altered products. It would have barred damage 
awards if the product was misused or altered by the consumer or if the 
user was influenced by drugs or alcohol. It would have limited punitive 
damages, but its limits on punitive damages would apply only to small 
businesses, which it defined as companies with fewer than 25 employees 
or with annual revenues of less than $5 million. It would have allowed 
punitive damages only where there was evidence of ``conscious, flagrant 
disregard" for safety by the manufacturer and set limits at $250,000 or 
twice the actual damages a person suffered.
  Not exactly radical legislation, Mr. President, just common sense 
reform of a system run amok.
  We need to repeal, not just cut, the ``trial lawyer tax.'' The tort 
system that costs American consumers more than $132 billion per year. 
This is a 125% increase over the past 10 years. In fact, between 1930 
and 1994, tort costs grew four times faster than the growth rate of the 
economy.
  Mr. President, this tort tax costs the average American consumer $616 
per year, and it establishes the trial lawyers as tax collectors. These 
trial lawyers often sue under a contingent fee arrangement, an 
arrangement that remains illegal in England due to its dubious ethical 
basis, so the trial lawyers are bounty hunters.
  I am just increduous that we are unable to relieve the ``trial lawyer 
tax'' and to let the American people keep more of what they earn, 
because it is their money, not the trial lawyers' money! The trial 
lawyers are the most powerful special interest in Washington and I, for 
one, will continue to fight for the American people. I stand with the 
average American, Mr. President, not the well-heeled trial lawyer 
lobbyists and their big campaign checks.
  Mr. LIEBERMAN. Mr. President, I rise today to offer my strong support 
for the pending amendment and for the substitute Product Liability 
Reform Act of 1998, S. 2236. This is a good bill, and I am proud to be 
one of its original co-sponsors. It is the product of incredibly hard 
work and tremendous dedication by Senator Rockefeller and Senator 
Gorton, and I want to congratulate--and thank--them and their staffs 
for what they have been able to achieve. I also want to thank the 
President for his willingness to work with us to come up with a package 
that now has his full support.
  I, frankly, would have liked a stronger bill, like the one we passed 
last Congress, but the President vetoed that bill. That is something 
that I think all those of us who support reform have to keep in mind as 
we move forward with this bill. Because even if it doesn't incorporate 
everything we wanted, this bill does offer much--together with the 
promise of the President's signature.
  The President's promise is important not just to those of us who have 
long supported legal reform. It also should be important to my 
colleagues who have not. I hope it prompts them to take a serious look 
at this bill--to put aside preconceived notions they may have of 
product liability reform, and to take a fresh look at what we have 
done. Many of the provisions they have complained about in the past are 
gone--the bill does nothing to limit joint and several liability, for 
example, and it does not impose any caps on punitive damages for any 
but the smallest of businesses.


                     PROBLEMS WITH THE LEGAL SYSTEM

  But it does, Mr. President, offer some small, incremental steps 
towards legal reform--towards fixing a tort system that is not working 
as it should be. That system is supposed to be a place where people 
involved in accidents can go to get a fair and impartial judgment as to 
who should, in the words of a great lawyer and judge from Connecticut, 
bear the cost of accidents. The tort system is supposed to act fairly--
to make sure that companies or individuals at fault who wrongly cause 
an injury bear the responsibility for the harm they have done, but also 
to make sure that no one--whether it be an individual or a company --be 
held accountable or forced to pay for something that was not their 
fault.
  Unfortunately, a system that is intended to fairly determine fault 
and to efficiently provide for those deserving of compensation has, in 
many cases, been converted into something quite different. Instead of 
reflecting that bedrock American value of fair and neutral justice, we 
now have a system that too often arbitrarily imposes costs on innocent 
individuals and businesses, just because they may have deep pockets 
with some money in them.
  Whenever someone is injured, it seems, a lawsuit gets filed against 
everyone in sight, without regard to whether there really is 
justification for that suit. And, unfortunately, the tort rules in 
place in many cases make it so costly for many to defend against those 
suits that many companies just choose to pay costly settlements to get 
rid of a case. Other times, otherwise legitimate suits yield damages 
awards--particularly punitive damage awards--that are far greater than 
necessary to compensate the plaintiff and that are wildly out of 
proportion to any wrong done by the defendant.
  This has costs for us all. By imposing high insurance costs and legal 
fees on businesses, it drives up their costs, which means that all of 
us pay more for the products we buy. It stifles innovation by making 
companies unwilling to bring new products to the market, which means we 
don't have products we should have. And by diminishing the value our 
nation places on taking responsibility for our own actions and not 
seeking to profit unfairly at the expense of others, it has a demeaning 
and degrading effect on the moral fiber of our society.
  These are points that my constituents continually drive home to me as 
I

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travel around my home state of Connecticut. Small businesspeople--the 
bedrock of the American economy--tell me about the constant fear they 
have of lawsuits, and the truly harmful effects those fears have--in 
stifling innovation, in increasing a company's cost of doing business, 
in increasing the cost of products.
  Mr. President, this bill is a balanced and fair response to those 
problems. It offers meaningful and fair reform of our legal system to 
redress these abuses while at the same time protecting consumers' 
rights. It makes sure that those deserving of compensation get it, but 
it also makes some changes--small changes--aimed at bringing fairness 
back into the system. My colleagues Senators Gorton and Rockefeller 
already have gone over the bill's main provisions, but let me touch on 
a couple of its highlights.


                            PUNITIVE DAMAGES

  One of the most important provisions offers a uniform standard for 
awarding punitive damages, requiring anyone trying to get punitive 
damages in a product liability lawsuit to prove by clear and convincing 
evidence that the defendant acted with a conscious, flagrant 
indifference to the rights or safety of others. That provision applies 
to all defendants. The bill also limits punitive damages against small 
businesses--those with annual revenues of less than $5 million and 
fewer than 25 employees.
  Now, I have heard some say that this is unfair--that these provisions 
limit the ability of plaintiffs to be made whole. But, Mr. President, 
punitive damages have nothing to do with making plaintiffs whole--that 
is what we have compensatory damages for, and this bill allows full 
recovery of those damages. What punitive damages are for is to punish--
to say that a particular defendant's conduct is so wrong, so outrageous 
and beyond acceptability that the defendant not only should have to 
compensate a plaintiff, but should also be punished as well.
  Unfortunately, Mr. President, in many places, punitive damages no 
longer are reserved for that purpose. Instead, plaintiffs claim them 
willy-nilly, knowing that putting a claim for punitive damages in a 
complaint--offering the threat of an enormous punitive verdict that 
could put a company out of business--is enough to force companies into 
settlements regardless of whether those settlements--or the amounts of 
them--are deserved. By making clear that punitive damages should be 
assessed only when a defendant truly has acted in a manner deserving of 
punishment, this bill will make sure that punitive damages are awarded 
only when they should be. At the same time, it also makes sure that the 
threat of punitive damages remains available to deter companies from 
engaging in behavior deserving of punishment.


                              BIOMATERIALS

  The bill also contains the provisions of the Biomaterials Access 
Assurance Act--a bill that I am proud to co-sponsor with Senator 
McCain. The Biomaterials bill is the response to a crisis affecting 
more than 7 million Americans annually who rely on implantable life-
saving or life-enhancing medical devices--things like pacemakers, heart 
valves, artificial blood vessels, hydrocephalic shunts, and hip and 
knee joints. They are at risk of losing access to the devices because 
many companies that supply the raw materials and component parts that 
go into the devices are refusing to sell them to device manufacturers. 
Why? Because suppliers no longer want to risk having to pay enormous 
legal fees to defend against product liability suits when those legal 
fees far exceed any profit they make from supplying the raw materials 
for use in implantable devices.

  Let me emphasize that I am speaking here about--and the bill 
addresses--the suppliers of raw materials and component parts--not 
about the companies that make the medical devices themselves. The 
materials these suppliers sell--things like resins and yarns--are 
basically generic materials that they sell for a variety of uses in 
many, many different products. Their sales to device manufacturers 
usually make up only a very small part of their markets--often less 
than one percent. As a result--and because of the small amount of the 
materials that go into the implants--these suppliers make very little 
money from supplying implant manufacturers. Just as importantly, these 
suppliers generally have nothing to do with the design, manufacture or 
sale of the product.
  But despite the fact that they generally have nothing to do with 
making the product, because of the common practice of suing everyone 
involved in any way with a product when something goes wrong, these 
suppliers often get brought into lawsuits claiming problems with the 
implants. One company, for example, was hauled into to 651 lawsuits 
involving 1,605 implant recipients based on a total of 5 cents worth of 
that company's product in each implant. In other words, in exchange for 
selling less than $100 of its product, this supplier received a bill 
for perhaps millions of dollars of legal fees it spent in its 
ultimately successful effort to defend against these lawsuits.
  The results from such experiences should not surprise anyone. Even 
though not a single biomaterials supplier has ultimately been held 
liable so far--let me say that again: Not a single biomaterials 
supplier has ultimately been held liable so far--the message 
nevertheless is clear for any rational business. Why would any business 
stay in a market that yields them little profit, but exposes them to 
huge legal costs? An April 1997 study of this issue found that 75 
percent of suppliers surveyed were not willing to sell their raw 
materials to implant manufacturers under current conditions. That study 
predicts that unless this trend is reversed, patients whose lives 
depend on implantable devices may no longer have access to them.
  What's at stake here, let me be clear, is not protecting suppliers 
from liability and not even just making raw materials available to the 
manufacturers of medical devices. Those things in and of themselves 
might not be enough to bring me here. What's at stake is the health and 
lives of millions of Americans who depend on medical devices for their 
every day survival. What's at stake are the lives of children with 
hydrocephalus who rely on brain shunts to keep fluid from accumulating 
around their brains. What's at stake are the lives of adults whose 
hearts would stop beating without implanted automatic defibrillators. 
What's at stake are the lives of seniors who need pacemakers because 
their hearts no longer generate enough of an electrical pulse to get 
their heart to beat. Without implants, none of these individuals could 
survive.
  We must do something soon to deal with this problem. We simply cannot 
allow the current situation to continue to put at risk the millions of 
Americans who owe their health to medical devices.
  Senator McCain and I have crafted what we think is a reasonable 
response to this problem. The Biomaterials provisions of this bill 
would do two things. First, with an important exception I'll talk about 
in a minute, the bill would immunize suppliers of raw materials and 
component parts from product liability suits, unless the supplier falls 
into one of three categories: (1) the supplier also manufactured the 
implant alleged to have caused harm; (2) the supplier sold the implant 
alleged to have caused harm; or (3) the supplier furnished raw 
materials or component parts that failed to meet applicable contractual 
requirements or specifications.
  Second, the bill would provide suppliers with a mechanism for making 
that immunity meaningful by obtaining early dismissal from lawsuits. By 
guaranteeing suppliers in advance that they will not face needless 
litigation costs, this bill should spur suppliers to remain in or come 
back to the biomaterial market, and so ensure that people who need 
implantable medical devices will still have access to them.
  Now, it is important to emphasize that in granting suppliers 
immunity, we would not be depriving anyone injured by a defective 
implantable medical device of the right to compensation for their 
injuries. Injured parties will still have their full rights against 
anyone involved in the design, manufacture or sale of an implant, and 
they can sue implant manufacturers, or any other allegedly responsible 
party, and collect for their injuries from them if that party is at 
fault.
  We also have added a new provision to this version of the bill, one 
that resulted from lengthy negotiations with representatives of the 
implant manufacturers, the American Trial Lawyers

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Association--ATLA--the White House and others. This provision responds 
to concerns that the previous version of the bill would have left 
injured implant recipients without a means of seeking compensation if 
the manufacturer or other responsible party is bankrupt or otherwise 
judgment-proof. As now drafted, the bill provides that in such cases, a 
plaintiff may bring the raw materials supplier back into a lawsuit 
after judgment if a court concludes that evidence exists to warrant 
holding the supplier liable.
  Finally, let me add that the bill does not cover lawsuits involving 
silicone gel breast implants.
  In short, Mr. President, the Biomaterials provisions of this bill 
are--and I am not engaging in hyperbole when I say this--potentially a 
matter of life and death for the millions of Americans who rely on 
implantable medical devices to survive. This bill would make sure that 
implant manufacturers still have access to the raw materials they need 
for their products, while at the same time ensuring that those injured 
by implants are able to get compensation for injuries caused by 
defective implants.
  In closing, let me once again congratulate Senator Rockefeller, 
Senator Gorton and the President for their success in forging this 
compromise bill. I urge my colleagues to support it.

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