[Congressional Record Volume 147, Number 65 (Monday, May 14, 2001)]
[Senate]
[Pages S4884-S4885]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                THE SMALL BUSINESS LIABILITY REFORM ACT

  Mr. McCONNELL. Mr. President, last Thursday, Senator Lieberman and I 
introduced S. 865, the ``Small Business Liability Reform Act,'' which 
aims to restore common sense to the way our civil litigation system 
treats small businesses. In our legal system, small businesses, which 
form the backbone of America's economy, are often forced to defend 
themselves in court for actions that they did not commit and to pay 
damages to remedy harms they did not cause. These businesses also 
frequently find themselves faced with extraordinarily high punitive 
damages awards. These unfortunate realities threaten the very existence 
of many small businesses, and when American small businesses go under, 
our economy is harmed as new products are not developed, produced, or 
sold, and employers cannot retain employees or hire new ones.
  Small businesses, those with 25 or fewer full-time employees, employ 
almost 60 percent of the American workforce. Because the majority of 
small business owners earn less than $50,000 a year, they often lack 
the resources to fight unfair lawsuits which could put them out of 
business. When faced with such a lawsuit, many of these entrepreneurs 
must either risk a lengthy battle in court, in which they may be 
subjected to large damage awards, or settle the dispute out of court 
for a significant amount even though they did not cause the harm in the 
first place. Either way, our current system jeopardizes the livelihood 
and futures of small business owners and their employees.
  The Small Business Liability Reform Act remedies these ills with 
three common-sense solutions, all of which protect our nation's 
entrepreneurs from unfair lawsuits and excessive damage awards. First, 
it would award punitive damages against small business only upon clear 
and convincing evidence, rather than upon a simple preponderance of 
evidence, and would set reasonable limits, three times the total of all 
damages or $250,000, whichever is less, on the amount of punitive 
damages that can be awarded.
  Second, our bill would restore basic fairness to the law by 
eliminating joint and several liability for small businesses for non-
economic damages, such as pain and suffering, so a small defendant is 
not forced to pay for harm he did not cause. Under the current joint 
and several liability, small businesses, when found liable with other 
defendants, may be forced to pay a disproportionate amount of the 
damages if they are found to have ``deep pockets'' relative to the 
other responsible parties. For example, a small business who was found 
responsible for only 10 percent of the harm may have to pay half, two-
thirds, or even all of the damages if his co-defendants cannot pay. 
Again, without altering a small business's joint and several liability 
for economic damages, such as medical expenses, the Small Business 
Liability Reform Act provides that small businesses are responsible for 
only the portion of the non-economics damages they caused. Thus, the 
bill partially relieves a situation where a small business is left 
holding the bag with respect to injuries it did not inflict.
  Third and finally, our bill addresses some of the iniquities facing 
non-manufacturing product sellers. Currently, a person who had nothing 
to do with a defective and harmful product other than selling it can be 
sued along with the manufacturer. Under the reforms in the Small 
Business Liability Reform Act, a product seller can only be held

[[Page S4885]]

liable for harms caused by his own negligence, intentional wrongdoing, 
or breach of his own warranty.
  This bill provides much needed protection and relief to both small 
business owners and consumers. By making our legal system reasonable 
and fair to small businesses, we will remove one of the greatest 
barriers to the market, the threat of crippling, excessive lawsuits, 
that prevent entrepreneurs from starting a small business. That means 
increased competition, better goods, and more jobs at a time when the 
health of America's economy and job market appear uncertain. And by 
injecting common sense into these laws, we will remove the excessive 
litigation costs that drive up the cost of goods and services for all 
Americans. The Small Business Liability Reform Act is a win for 
America's entrepreneurs, consumers, and workers, and it is my hope that 
the Senate will enact this bi-partisan bill. Finally, I would ask 
unanimous consent that letters in support of this bill from the 
National Federation of Independent Business and the Small Business 
Legal Reform Coalition be placed in the Record.
                                                    Small Business


                                       Legal Reform Coalition,

                                                     May 10, 2001.
     Hon. Mitch McConnell,
     U.S. Senate,
     Washington, DC.
       Dear Senator McConnell: On behalf of the Small Business 
     Legal Reform Coalition, we are writing to applaud your 
     sponsorship of the Small Business Liability Reform Act of 
     2001 and express our strong support for its passage. We 
     commend you for your efforts to restore common sense to our 
     civil justice system--one that takes a particularly heavy 
     toll on the smallest of America's businesses.
       The frequency and high cost of litigation is a matter of 
     growing concern to small businesses across the country. 
     Today's civil justice system presents a significant 
     disincentive to business start-ups and continued operations. 
     If sued, business owners know they have to choose between a 
     long and costly trial or an expensive settlement. Business 
     owners across the nation risk losing their livelihood, their 
     employees and their future every time they are confronted 
     with an unnecessary lawsuit.
       This legislation would make two reforms that have topped 
     the small business community's agenda for years: cap punitive 
     damages and abolish joint liability for non-economic damages 
     for those with fewer than 25 employees. These reforms have 
     been among the recommendations of the White House Conference 
     on Small Business since the early 1980s--and the time has 
     come to protect the smallest of small businesses from 
     excessive damage awards and frivolous suits.
       This bill would also hold non-manufacturing product sellers 
     liable in product liability cases when their own wrongful 
     conduct is responsible for the harm and thus reduce the 
     exposure of innocent product sellers, lessors and renters to 
     lawsuits when they are simply present in a product's chain of 
     distribution or solely due to product ownership. Should the 
     manufacturer be judgment-proof, the product seller would be 
     responsible for any damage award, ensuring that deserving 
     claimants recover fully for their injuries.
       In the end, we believe that enactment of the Small Business 
     Liability Reform Act will inject more fairness into the legal 
     system and reduce unnecessary litigation and legal costs. We 
     also believe that it protects the rights of those with 
     legitimate claims. We thank you again for your support of 
     these common sense reforms and look forward to working with 
     you to ensure the success of this important legislation.
         American Automotive Leasing Association, American Care 
           Rental Association, American Consulting Engineers, 
           Council, American Insurance Association, American 
           Machine Tool Distributors Association, Associated 
           Builders and Contractors, Associated Equipment 
           Distributors, Automotive Parts and Service Alliance, 
           American Rental Association, Coalition for Uniform 
           Product Liability Law, Citizens for Civil Justice 
           Reform, Equipment Leasing Association, Independent 
           Insurance Agents of America, International Mass Retail 
           Association, International Housewares Association, 
           Motorcycle Industry Council, National Association of 
           Convenience Stores, National Association of 
           Manufacturers, National Association of Plumbing-
           Heating-Cooling Contractors, National Association of 
           Wholesaler-Distributors, National Federation of 
           Independent Business, National Grocers Association, 
           National Restaurant Association, National Retail 
           Federation, National Small Business United, NPES--
           Association for Suppliers of Printing, Publishing & 
           Converting Technologies, Painting and Decorating 
           Contractors of America, Plumbing-heating-Cooling 
           Contractors--National Association, Small Business 
           Legislative Council, Society of Independent Gasoline 
           Marketers of America, Specialty Equipment Market 
           Association, Steel Service Center Institute, Trunk 
           Renting and Leasing Association, and U.S. Chamber of 
           Commerce.
                                  ____

                                            National Federation of


                                         Independent Business,

                                      Washington DC, May 11, 2001.
     Hon. Mitch McConnell,
     U.S. Senate,
     Washington, DC.
       Dear Senator McConnell: On behalf of the 600,000 members of 
     the National Federation of Independent Business (NFIB), I 
     would like to thank you for your sponsorship of the Small 
     Business Liability Reform Act of 2001 and express our strong 
     support for its passage. I commend you for your efforts to 
     restore common sense to our civil justice system--one that 
     takes a particularly heavy toll on the smallest of America's 
     businesses.
       The frequency and high cost of litigation is a matter of 
     growing concern to small businesses across the country. 
     Today's civil justice system presents a significant 
     disincentive to business start-ups and continued operations. 
     If sued, business owners know they have to choose between a 
     long and costly trial or an expensive settlement. Business 
     owners across the nation risk losing their livelihood, their 
     employees and their future every time they are confronted 
     with an unnecessary lawsuit.
       This legislation would make two reforms that have topped 
     the small business community's agenda for years: cap punitive 
     damages and abolish joint liability for non-economic damages 
     for those with fewer than 25 employees. These reforms have 
     been among the recommendations of the White House Conference 
     on Small Business since the early 1980s--and the time has 
     come to protect the smallest of small businesses from 
     excessive damage awards and frivolous suits.
       This bill would also hold non-manufacturing product sellers 
     liable in product liability cases when their own wrongful 
     conduct is responsible for the harm and thus reduce the 
     exposure of innocent product sellers, lessors and renters to 
     lawsuits when they are simply present in a product's chain of 
     distribution or solely due to product ownership. Should the 
     manufacturer be judgment-proof the product seller would be 
     responsible for any damage award, ensuring that deserving 
     claimants recover fully for their injuries.
       In the end, we believe that enactment of the Small Business 
     Liability Reform Act will inject more fairness into the legal 
     system and reduce unnecessary litigation and legal costs. We 
     also believe that it protects the rights of those with 
     legitimate claims. We thank you again for your support of 
     these common sense reforms and look forward to working with 
     you to ensure the success of this important legislation.
           Sincerely,

                                                   Dan Danner,

                                            Senior Vice President,
     Federal Public Policy.

                          ____________________