[Congressional Record Volume 148, Number 81 (Tuesday, June 18, 2002)]
[Senate]
[Pages S5656-S5659]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
TERRORISM RISK INSURANCE ACT OF 2002--Continued
Amendment No. 3862
Mr. SPECTER. Mr. President, I call up amendment No. 3862.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:
The Senator from Pennsylvania [Mr. Specter] proposes an
amendment numbered 3862.
Mr. SPECTER. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The amendment is as follows:
(Purpose: To provide for procedures for civil actions, and for other
purposes)
On page 29, strike line 1 and all that follows through page
30, line 17, and insert the following:
SEC. 10. PROCEDURES FOR CIVIL ACTIONS.
(a) Federal Cause of Action.--
(1) In general.--There shall exist a Federal cause of
action for claims arising out of or resulting from an act of
terrorism, which shall be the exclusive cause of action and
remedy for such claims, except as provided in subsection (f).
(2) Preemption of state actions.--All State causes of
action of any kind for claims arising out of or resulting
from an act of terrorism that are otherwise available under
State law, are hereby preempted, except as provided in
subsection (f).
(b) Governing Law.--The substantive law for decision in an
action described in subsection (a)(1) shall be derived from
the law, including applicable choice of law principles, of
the State in which the act of terrorism giving rise to the
action occurred, except to the extent that--
(1) the law, including choice of law principles, of another
State is determined to be applicable to the action by the
district court hearing the action; or
(2) otherwise applicable State law (including that
determined under paragraph (1), is inconsistent with or
otherwise preempted by Federal law.
(c) Federal Jurisdiction.--
(1) In general.--Notwithstanding any other provision of
law, not later than 90 days after the date of the occurrence
of an act of terrorism, the Judicial Panel on Multidistrict
Litigation shall assign a single Federal district court to
conduct pretrial and trial proceedings in all pending and
future civil actions for claims arising out of or resulting
from that act of terrorism.
(2) Selection criteria.--The Judicial Panel on
Multidistrict Litigation shall select and assign the district
court under paragraph (1) based on the convenience of the
parties and the just and efficient conduct of the
proceedings.
(3) Jurisdiction.--The district court assigned by the
Judicial Panel on Multidistrict Litigation shall have
original and exclusive jurisdiction over all actions under
paragraph (1). For purposes of personal jurisdiction, the
district court assigned by the Judicial Panel on
Multidistrict Litigation shall be deemed to sit in all
judicial districts in the United States.
(4) Transfer of cases filed in other federal courts.--Any
civil action for claims arising out of or resulting from an
act of terrorism that is filed in a Federal district court
other than the Federal district court assigned by the
Judicial Panel on Multidistrict Litigation under paragraph
(1) shall be transferred to the Federal district court so
assigned.
(5) Removal of cases filed in state courts.--Any civil
action for claims arising out of or resulting from an act of
terrorism that is filed in a State court shall be removable
to the Federal district court assigned by the Judicial Panel
on Multidistrict Litigation under paragraph (1).
(d) Approval of Settlements.--Any settlement between the
parties of a civil action described in this section for
claims arising out of or resulting from an act of terrorism
shall be subject to prior approval by the Secretary after
consultation by the Secretary with the Attorney General.
(e) Limitation on Damages.--
(1) In general.--Punitive or exemplary damages shall not be
available for any losses in any action described in
subsection (a)(1), including any settlement described in
subsection (d), except where--
(A) punitive or exemplary damages are permitted by
applicable State law; and
(B) the harm to the plaintiff was caused by a criminal act
or course of conduct for which the defendant was convicted
under Federal or State criminal law, including a conviction
based on a guilty pea or plea of nolo contendere.
Conviction under subparagraph (B) shall establish liability
for punitive or exemplary damages resulting from the harm
referred to in subparagraph (B) and the assessment of such
damages shall be determined in a civil lawsuit.
(2) Protection of taxpayer funds.--Any amounts awarded in,
or granted in settlement of, an action described in
subsection (a)(1) that are attributable to punitive or
exemplary damages allowable under paragraph (1) of this
subsection shall not count as insured losses for purposes of
this Act.
(f) Claims Against Terrorists.--Nothing in this section
shall in any way be construed to limit the ability of any
plaintiff to seek any form of recovery from any person,
government, or other entity that was a participant in, or
aider and abettor of, any act of terrorism.
(g) Effective Period.--This section shall apply only to
actions described in subsection (a)(1) arising out of or
resulting from acts of terrorism that occur during the
effective period of the Program, including any applicable
extension period.
[[Page S5657]]
SEC. 11. CRIMINAL OFFENSE FOR AIDING OR FACILITATING A
TERRORIST INCIDENT.
(a) In General.--Chapter 113B of title 18, United States
Code, is amended by adding at the end the following:
``Sec. 2339C. Aiding and facilitating a terrorist incident
``(a) Offense.--Whoever, acting with willful and malicious
disregard for the life or safety of others, by such action
leads to, aggravates, or is a cause of property damage,
personal injury, or death resulting from an act of terrorism
as defined in section 3 of the Terrorism Risk Insurance Act
of 2002 shall be subject to a fine not more than $10,000,000
or imprisoned not more than 15 years, or both.
``(b) Private Right of Action.--Any person may request the
Attorney General to initiate a criminal prosecution pursuant
to subsection (a). In the event the Attorney General refuses,
or fails to initiate such a criminal prosecution within 90
days after receiving a request, upon petition by any person,
the appropriate United States District Court shall appoint an
Assistant United States attorney pro tempore to prosecute an
offense described in subsection (a) if the court finds that
the Attorney General abused his or her discretion by failing
to prosecute.''.
(b) Chapter Analysis.--The chapter analysis for chapter
113B of title 18, United States Code, is amended by adding at
the end the following:
``2399C. Aiding and facilitating a terrorist incident.'.
Mr. SPECTER. Mr. President, last week I voted against tabling the
McConnell amendment which would have conditioned punitive damages for
private parties arising out of a terrorist attack to situations where
there had been a criminal conviction establishing malicious conduct.
Had the McConnell amendment not been tabled, I intended to offer a
second-degree amendment which I am now discussing. Since the McConnell
amendment was tabled, I am now calling my amendment up as a first-
degree amendment.
This amendment establishes a crime for anyone acting with willful and
malicious disregard for the life or safety of others, and by such
action leads to, aggravates, or is a cause of, property damage,
personal injury, or death resulting from an act of terrorism.
This amendment further provides for a private right of action as
follows: Any person may request the Attorney General to initiate a
criminal prosecution of the criminal offense I just described. In the
event the Attorney General refuses or fails to initiate such a criminal
prosecution within 90 days, upon petition by any person, the
appropriate U.S. district court shall appoint an Assistant United
States Attorney pro tempore to prosecute the criminal offense if the
court finds that the Attorney General abused his or her discretion by
refusing or failing to prosecute.
In considering legislation to provide for Federal Government
assumption of some of the losses resulting from terrorist attacks in
order to provide insurance coverage, there has been considerable
sentiment to curtail punitive damages. Understandably, the bill
precludes punitive damages against the Federal Government.
In one sense, there is no more reason to preclude punitive damages
against private defendants in this situation than in any other. For
example, if a building owner chain-locked emergency exits, why should
he or she be exempted from punitive damages because people are injured
or killed by terrorist attack instead of by fire? Perhaps this is just
another chapter in the continuing effort to reduce civil remedies for
tortious conduct.
There is another sense that everyone should make some concessions in
dealing with terrorists. In any event, this situation presents an
opportunity to deal in a more meaningful way with malicious conduct
causing injury or death.
It is my judgment that punitive damages have not been an effective
deterrent for malicious conduct. Punitive damages are consistently
reversed or reduced. Cases involving automobiles such as the Ford Pinto
and the Chevrolet Malibu illustrate the practice of knowingly
subjecting consumers to the risk of death or grievous bodily injury
because it is cheaper to pay civil damages than to fix the deadly
defect.
In the case of ``Grimshaw v. Ford Motor Company,'' 119 Cal. App. 3d
757, the driver died and a passenger suffered permanently disfiguring
burns on his face and entire body when the Pinto's gas tank exploded in
a rear-end collision. When attorneys got into Ford's records, it was
disclosed that the gas tank had not been relocated to a safe place
because the correction would cost $11 per car while the calculation for
damages from civil suits was only $4.50.
So it is a dollars and cents calculation.
In the celebrated case ``Anderson v. General Motors,'' 1999 WL
1466627, a Chevrolet Malibu fuel tank ruptured in a rear-end collision
causing six people to sustain serious burns. The design defect of the
gas tank was not corrected because a cost-benefit analysis showed it
would have cost General Motors $8.59 to fix the fuel system compared to
$2.40 to pay the civil damages. The Pinto case resulted in a punitive
damage award in the amount of $125 million, frequently cited as an
excessive punitive damage award. Very infrequently is it noted that the
trial court later reduced the award to $3.5 million.
Similarly, the Malibu verdict of $4.8 billion in punitive damages was
reduced by the trial judge, with an appeal slashing it even more.
Punitive damage awards have resulted in virtually endless delays. In
one of the most celebrated punitive damage cases, ``In re the Exxon
Valdez,'' 270 F.3d 1215, started in 1989, the Ninth Circuit vacated
some 12 years later the previously decided, largest-in-history $5
billion punitive damage award.
I ask unanimous consent that the text of a memorandum be printed in
the Record at the conclusion of my presentation. This memorandum
details punitive damage awards which were reversed and the lengthy
period of time, demonstrating what I am submitting is the
ineffectiveness of punitive damages in deterring malicious conduct.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. SPECTER. The principal problem with punitive damages or a
principal problem with punitive damages, in addition to the long delays
and the fact that the awards are reduced, is that if, at the end of the
long litigation process punitive damages are collected, they come from
the shareholders of the company. They come from General Motors. They
come from Ford, or they come from some major corporation. That is why
it has been my view that an effective deterrent would be to hold the
individuals liable for their malicious conduct. And malicious conduct,
as defined in this bill, is conduct which has a wanton disregard for
the life or safety of another person.
From my experience as district attorney of Philadelphia, I know that
people are very concerned about going to jail, much more concerned than
if at the end of a long litigation process there may be the requirement
for a corporation to pay punitive damages, especially in the context
where we know from records from Ford Motor Company in the Pinto case
that they made a calculated decision that it was cheaper to pay the
damages.
Here you have an official locating a gas tank in the rear end of the
car resulting in death, resulting in serious bodily injury again and
again, and no deterrence, right back at it again and again.
A similar case, ``White v. Ford Motor Company,'' CV-N-95-279-DWH
(PHA), involved a 3-year-old child who was run over, backed over by a
Ford truck with a defective brake. Here, again, in ``White v. Ford
Motor Company,'' the calculation was made that it is cheaper to pay the
damages than it is to correct the defect.
That case resulted in a verdict of punitive damages of $150 million
in a case tried in Reno, NV, and later reduced to $69 million. Years
have passed and the matter is still under appeal.
The effective way of dealing with this kind of malicious conduct is
to provide a criminal penalty. A criminal penalty was provided in a
case involving Firestone tires, which were mounted on Ford vehicles
which had disclosed numerous problems in 1998 and 1999. Some 88 deaths
resulted when these tires gave way, the vehicles rolled over. Eighty-
eight people were killed, hundreds were injured, and there was a
calculation on the part of Ford and Firestone not to make that
disclosure, not to file it with the appropriate Federal officials.
An internal Ford memorandum on March 12, 1999, considered whether
governmental officials in the United States ought to be notified and a
decision was made not to notify Federal officials, so they could keep
on selling
[[Page S5658]]
the Firestone tires on the Ford cars. It is one of the really great
tragedies. I had introduced legislation to make that conduct a crime.
With some modifications that provision was incorporated in Public Law
106-414 on November 1, 2000, creating a 15-year sentence for officials
where they withhold information on defective products from governmental
regulators.
Mr. President, in offering the amendment which I am currently
discussing, the effort is being made to substitute an effective remedy
which would hold corporate officials liable for the damages which they
cause as a result of malicious conduct.
The provisions which were offered by Senator McConnell in the
amendment which was tabled last week required that a criminal
conviction be established before someone would be liable for punitive
damages, and that provision has been carried over to the amendment
which I am offering today.
I have added to that amendment a provision for a private right of
action. It is very difficult on some occasions to persuade the
prosecuting attorney to initiate a criminal prosecution. That is a
matter which is customarily viewed as discretionary.
The prosecutor--and I have had a lot of experience with this myself
has many cases he has to try and may choose not to initiate the
prosecution. So, in order to activate the provision for punitive
damages, where someone is convicted of a crime with the requisite
malicious conduct, my amendment provides that any person can ask the
Attorney General of the United States to initiate a prosecution. If the
Attorney General refuses to initiate the prosecution within 90 days,
then the individual may petition the court for leave to be appointed as
an Assistant United States Attorney pro tempore. In other words, on a
private prosecution there would have to be a showing that the
prosecuting attorney had abused his or her discretion in failing or
refusing to initiate the prosecution. Such private actions are
commonplace in U.S. courts.
New York has such a procedure, Minnesota, North Dakota, Florida,
Arkansas, Iowa, Montana, Ohio, and Oklahoma. I ask unanimous consent
that a memorandum be printed in the Record at the conclusion of my oral
presentation which summarizes the specifics of where private
prosecutions have been initiated.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 2.)
Mr. SPECTER. Mr. President, I think it is worthy of note that this
was a subject of considerable interest to this Senator during my law
school days. I wrote a comment which appears at Yale Law Journal,
volume 65, page 209, ``Private Prosecution: A Remedy for Unwarranted
District Attorneys' Inaction.''
As this package was put together, I think it offers some guidance for
a way where there might be some relief from punitive damages; although,
to repeat, I think they have resulted in very little by way of
liability, for the reasons I have cited and the authorities I have
cited.
I believe it is true the punitive damage possibility is a factor on
leveraging settlement, but there have been enormous objections to
punitive damages, and they have created quite a lot of public furor, as
one can see in the $5 billion punitive damage award I discussed
earlier. The public thinks it is being paid with real money; whereas,
in fact, when we trace them down, the funds are not paid.
I think we need a comprehensive analysis. There is none to my
knowledge as to what has resulted when punitive damages are sought,
where punitive damages are obtained on a verdict, and what happens, how
many of them are actually collected. It would be a good deal more
difficult to quantify the effect of punitive damages as leverage on
settlements, but I think that, too, would be worthy of study.
Most importantly, the justice system ought to be able to reach people
who are malicious. Wanton disregard for the safety of another
constitutes malice and supports a prosecution for murder in the second
degree, which can carry a term up to 20 years. This bill carries a
penalty up to 15 years because in the Federal system, that is the
equivalent of a life sentence. Following the precedent of the Ford-
Firestone matter, the 15-year penalty was provided.
I know this amendment is subject to being stricken as being non-
germane. When the cloture motion was offered this morning, I voted in
support of it, and it was agreed to. Sixty-five Senators voted in favor
of it; 31 Senators voted against it. Voting in favor of the cloture
motion, I was well aware that were it to pass, this amendment would be
precluded, but I considered it much more important to get this bill
moving to a conference so that we can have the Government standing
behind certain insurance policies so we can move ahead with very
important commercial transactions in this country which are now being
held up.
It may be that this format will be useful in the conference committee
where I believe the House has stricken punitive damages.
This may be an accommodation where punitive damages would still be
available, but there would first have to be a criminal conviction. A
more important part of the provision would be that those who are
malicious and cause death or injury to other people would be held for a
very serious criminal sanction.
Exhibit 1
The prototype case for the proposition that punitive
damages litigation is ``virtually endless'' is In re the
Exxon Valdez, the latest iteration of which is found at 270
F.3d 1215, (9th Cir. 2001). In the 2001 decision, the 9th
Circuit vacated a previously-decided, largest-in-history, $5
billion punitive damages award, and remanded the case to the
District Court to determine a lower award under standards
specified in BMW of North America, Inc. v. Gore, 517 U.S. 559
(1996)(substantive due process review of punitive damage
awards under the three ``guideposts'' of defendant
reprehensibility, ratio analysis, and criminal penalties
comparability), and Cooper Industries, Inc. v. Leatherman
Tool Group, Inc., 532 U.S. 424 (2001)(requiring de novo
review on appeal). Thus, litigation stemming from a March
1989 accident/oil spill continues into its 11th year--and,
essentially, is back to ``square one'' on the issue of
punitive damages. See also Pacific Mutual Life Ins. Co. v.
Haslip, 499 U.S. 1 (1991)(ten-year litigation stemming from
insurance agent's 1981 misappropriation of insurance premium
payments).
The key cases cited in Exxon Valdez, BMW of North America,
Inc. and Cooper Industries, Inc. themselves had lengthy
procedural histories--the BMW case running from 1990-1997,
and Cooper running from 1995 to the present. See also 2660
Woodley Road Joint Venture v. ITT, 2002 U.S. Dist. LEXIS 439
(D.Del., January 10, 2002)(granting motion for new trial on
the issue of the size of punitive damages awarded in a 1997
commercial contract breach case); Dallas v. Goldberg, 2002
U.S. Dist. LEXIS 8829 (SDNY, May 20, 2002)(ruling on the
admissibility of evidence in computing the amount of punitive
damages in ongoing Sec. 1983 action stemming from a 1994
police incident); Silivanch v. Celebrity Cruise Inc., 2000
U.S. Dist. LEXIS 12155 (August 23, 2000)(a procedural ruling
on allocation of punitive damages stemming from a 1994 cruise
exposure to ``Legionnaires' Disease''). State court cases are
at least as striking. See, e.g., Torres v. Automobile Club of
Southern Cal., 937 P.2d 290 (Cal. 1997)(remanding for a new
trial on all issues; litigation initially filed in 1986);
Moeller, et. al. v. American Guarantee Insurance Co., 707 So.
2d 1062 (Miss. 1996)(final decision in 1996 on case filed in
1982); Abramczyk, et. al. v. City of Southgate, 2000 Mich.
App. LEXIS 530 (2000)(reversing award of punitive damages and
remanding for new trial; litigation filed in 1996); Dixie
Insurance Company v. Mooneyhan, 684 So. 2d 574 (Miss. 1996)
(remanding for a new trial on the issue of punitive damages;
litigation filed in 1987).
To summarize, then, litigation on the issue of punitive
damage can--and does--stretch out over a period of years
(numerous appellate cases show a pattern of at least 4-6
years and longer, as in the case of Exxon Valdez and Cooper
Industries). Recent trends have caused one commentator to
state as follows: ``The Supreme Court's . . . decision [in
Cooper], with its mandate of de novo appellate review of
punitive damages jury verdicts in all cases, may consign
state and federal courts to an endless round of institutional
second-guessing . . . .''
Cabraser, E.J. Engle v. R.J. Reynolds Tobacco Co.: Lessons
in State Class Actions, Punitive Damages, and Jury Decision-
Making Unfinished Business: Reaching the Due Process Limits
of Puntive Damages in Tobacco Litigation Through Unitary
Classwide Adjudication, 36 Wake Forest L. Rev. 979, 986
(2001)(emphasis added). Thus, the ``endless'' nature of
punitive damages litigation will--at least according to this
commentator (a tobacco litigation plaintiffs' attorney)--only
get worse.
Exhibit 2
There are several states that through statute or care
precedent allow a court to appoint a special prosecutor in
the event that the district attorney is unable or unwilling
to prosecute a case. The following is a summary of the
applicable statute or case law in several states authorizing
the replacement of prosecutors.
[[Page S5659]]
statute
New York--NY CLS County Sec. 701 provides that when a
district attorney cannot attend in a court in which he or she
is required by law to attend or is disqualified from acting
in a particular case, the criminal court may appoint another
attorney to act as special district attorney ``during the
absence, inability or disqualification of the district
attorney.''
Pennsylvania--71 P.S. Sec. 732-205 provides that the
Attorney General shall have the power to prosecute in any
county criminal court upon the request of a district attorney
who lacks the resources to conduct an adequate investigation
or prosecution or if there is actual or apparent conflict of
interest. Also, the Attorney General may petition the court
to permit him or her to supersede the district attorney in
order to prosecute a criminal action if he or she can prove
by a preponderance of the evidence that the district attorney
has failed or refused to prosecute and such failure or
refusal constitutes an abuse of discretion.
Minnesota--Minn. Stat. Sec. 388.12 provides that a judge
may appoint an attorney to act as or in the place of the
county attorney either before the court or the grand jury.
North Dakota--If a judge finds that the state's attorney is
absent or unable to attend the state's attorney's duties, or
that the state's attorney has refused to perform or neglected
to perform any of his duties to institute a civil suit to
which the state or county is a party and it is necessary that
the state's attorney act, the judge shall (1) request that
the district attorney take charge or the prosecution or (2)
appoint an attorney to take charge of the prosecution.
Tennessee--Tenn. Const. art. VI, Sec. 6 provides that in
all cases where the Attorney for any district fails or
refuses to attend and prosecute according to law, the Court
shall have power to appoint an Attorney pro tempore.
case law
Florida--Taylor v. Florida, 49 Fla. 69 (1905)--The Supreme
Court of Florida held that absent an express legislative
statement prohibiting a court from doing so, in the event the
state attorney refuses to represent the state, that a court
has the inherent power to appoint another attorney.
Arkansas--Owen v. State, 263 Ark 493 (1978)--The Supreme
Court of Arkansas held that ``[i]t is well settled that the
circuit judge had the power to appoint a special prosecuting
attorney.'' Various other state courts have embraced the
inherent power concept of a court to appoint a special
prosecutor in a criminal case. See White v. Polk County, 17
Iowa 413 (1864); Territory v. Harding, 6 Mont. (1887); State
v. Henderson, 123 Ohio St. 474 (1931); Hisaw v. State, 13
Okla. Crim. 484 (1917).
Mr. SPECTER. I yield the floor.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. SPECTER. Mr. President, I ask unanimous consent the order for the
quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. SPECTER. Mr. President, I would like to note for the record two
previous statements I made on this subject, one on September 7, 2000,
appearing in the Congressional Record beginning at page S-8188, and
also a statement on September 15, 2000, appearing in the Congressional
Record on page S-8625. I would note that my statement of September 7,
2000, provides some more detailed facts concerning the Ford-Firestone
issue and discusses several other cases involving punitive damages.
I note one other consideration, and that is, I am aware that in
subscribing to the requirement that there is a criminal prosecution as
a basis for an award of punitive damages, that does require proof
beyond a reasonable doubt. On punitive damages, there have been varying
standards applied, for example, clear and convincing evidence. And
while proof beyond a reasonable doubt is obviously more than a
preponderance of the evidence, it is my view that where you deal with
these horrendous kinds of cases--the Pinto, where there is a
calculation regarding the gas tank in the rear of the car, or the Ford-
Firestone case--in these kinds of cases where we are really looking to
make an example, that the proof will be there for proof beyond a
reasonable doubt.
Having had some considerable experience prosecuting criminal cases,
it has been my view that in most situations the vagaries of burdens of
proof--beyond a reasonable doubt, clear and convincing evidence,
preponderance of the evidence--really are not the ultimate
determinants. But to the extent that proof beyond a reasonable doubt is
an additional burden, I think the gain in moving in this direction to
impose criminal liability is certainly worth it from the point of view
of public policy.
Mr. President, I yield the floor and suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Ms. LANDRIEU. Madam President, I ask unanimous consent the order for
the quorum call be rescinded and that I be recognized as in morning
business.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________