[Congressional Record Volume 149, Number 116 (Thursday, July 31, 2003)]
[Senate]
[Pages S10674-S10679]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCONNELL (for himself and Mr. Lieberman):
  S. 1546. A bill to provide small businesses certain protection from 
litigation excesses and to limit the product liability of non-
manufacturer product sellers; to the Committee on the Judiciary.
  Mr. McCONNELL. Mr. President, today Senator Lieberman and I 
introduced the ``Small Business Liability Reform Act of 2003,'' which 
aims to restore common sense to the way our civil litigation system 
treats small businesses. Small businesses form the backbone of 
America's economy. But in our legal system, small businesses are often 
forced to defend themselves in court for actions they did not commit 
and pay damages for harms they did not cause. These businesses also 
frequently find themselves faced with extraordinarily high punitive 
damages awards. These unfortunate realities

[[Page S10675]]

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. Either way, our current system jeopardizes 
the livelihood and futures of small business owners and their 
employees.
  The Small Business Liability Reform Act of 2003 would remedy 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 allow a punitive damages award against a small 
business only upon clear and convincing evidence, rather than upon a 
simple preponderance of the evidence, and it would set reasonable 
limits on the size of punitive damages awards--the lesser of $250,000 
or three times compensatory damages.
  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 harms it did not cause. Under the current joint 
and several liability rules, if a small business is found liable with 
other defendants, the small business may be forced to pay a 
disproportionate amount of the damages if it has ``deep pockets'' 
relative to the other responsible parties. For example, a small 
business that was found responsible for only 10 percent of the harm in 
a case may have to pay half, two-thirds or even all of the damages. 
This legislation would prevent this unfair situation, but it would not 
change a small business's joint and several liability for economic 
damages, such as medical expenses and lost wages; because a small 
business could still be responsible for all economic damages, 
regardless of its degree of fault, plaintiffs will still be able to 
recover all of their out of pocket costs. By protecting small 
businesses from having to pay non-economic damages for which they are 
not responsible, though, the Small Business Liability Reform Act of 
2003 partially relieves a potentially unfair situation.
  Third, our bill addresses some of the iniquities facing non-
manufacturing product sellers. Currently, a person who has nothing to 
do with a defective and harmful product other than simply selling it 
can be sued with the manufacturer. Under the reforms in the Small 
Business Liability Reform Act of 2003, however, a product seller can 
only be held liable for harms caused by his own negligence, intentional 
wrongdoing, or breach of his own warranty.
  This bill would provide much needed protection and relief to small 
business owners, workers, and consumers. By making our legal system 
reasonable and fair to small businesses, we will remove one of the 
greatest barriers to starting and maintaining a small business: the 
threat of crippling, excessive, and unfair lawsuits. That means 
increased competition, better and more affordable goods, and more jobs 
at a time when America could use them all. The Small Business Liability 
Reform Act of 2003 is a win for all Americans, and it is my hope that 
the Senate will pass this bipartisan bill. Finally, I would ask 
unanimous consent that letters in support of this legislation from the 
National Federation of Independent Business, the National Association 
of Wholesale-Distributors, the Motorcycle Industry Council, and the 
Small Business Legal Reform Coalition be printed in the Record.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:
                                                    July 31, 2003.
     Hon. Mitch McConnell,
     U.S. Senate, Washington, DC.
       Dear Senator McConnell: On behalf of the Small Business 
     Legal Reform Coalition, we are writing to thank you for 
     sponsoring the Small Business Liability Reform Act of 2003, 
     and to 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.
       The Small Business Liability Reform Act of 2003 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 legislation 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 of 2003 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,
       American Automotive Leasing Association.
       American Council of Engineering Companies.
       American Insurance Association.
       American Machine Tool Distributors Association.
       American Rental Association.
       Associated Builders and Contractors.
       Associated Equipment Distributors.
       Automotive Parts and Service Alliance.
       Citizens for Civil Justice Reform.
       Coalition for Uniform Product Liability Law.
       Equipment Leasing Association.
       Independent Insurance Agents and Brokers of America.
       International Housewares Association.
       International Mass Retail Association.
       Motorcycle Industry Council.
       National Association of Convenience Stores.
       National Association of Manufacturers.
       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.
       Plumbing-Heating-Cooling Contractors--National Association.
       Small Business Legislative Council.
       Society of Independent Gasoline Marketers of America.
       Specialty Equipment Market Association.
       Tire Industry Association.
       Truck Renting and Leasing Association.
       U.S. Chamber of Commerce.
                                  ____



                                  Motorcycle Industry Council,

                                     Arlington, VA, July 30, 2003.
     Hon. Mitch McConnell,
     U.S. Senate, Washington, DC.
       Dear Senator McConnell: On behalf of the over 300 members 
     of the Motorcycle Industry Council (MIC), I want to express 
     our strong support for the ``Small Business Liability Reform 
     Act of 2003'' and extend sincere thanks for your sponsorship 
     of this important legislation. MIC is a nonprofit national 
     trade association that represents manufacturers and 
     distributors of motorcycles, motorcycle parts and 
     accessories, and members of allied trades. A large number of 
     our member companies are small businesses.
       This Act, which would cap punitive damages and abolish 
     joint liability for non-economic damages for businesses with 
     fewer than 25 employees, is a common sense approach to 
     sustaining the health of America's small businesses. It would 
     hold non-manufacturing product sellers liable in product 
     liability cases when they own wrongful conduct is responsible 
     for the harm and thus reduce the exposure of innocent product 
     sellers to lawsuits when they are simply present in a 
     product's chain of distribution. 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.

[[Page S10676]]

       The frequency and high cost of litigation is a matter of 
     great concern to the business community. Few companies have 
     been left unmarked by the steep increases in product 
     liability insurance costs or the crises in the availability 
     of product liability insurance. The impact on small 
     businesses is especially burdensome. the current civil 
     justice system puts small business owners across the country 
     in jeopardy of losing their livelihood, their employees and 
     their futures when faced with involvement in lawsuits through 
     no fault of their own. This Act would serve to help protect 
     these businesses from excessive damage awards and the costs 
     of defending against frivolous suits.
       Sensible reform brings predictability to the product 
     liability process, stabilizes product liability insurance 
     rates and reduces the overall costs related to product 
     liability litigation imposed on manufacturers, sellers, and 
     ultimately, consumers. This legislation is an important step 
     in alleviating the devastating effects that the current 
     system can have on small businesses and their millions of 
     employees, which continuing to ensure that businesses remain 
     accountable for negligence and intentional wrongdoing and 
     that consumers have full access to the court system for 
     redress.
       Again, thank you for your sponsorship of this legislation 
     which is so important to our small business member companies.
           Sincerely,
                                              Kathy R. Van Kleeck,
     Vice President, Government Relations.
                                  ____

                                              National Association


                                   of Wholesaler-Distributors,

                                    Washington, DC, July 30, 2003.
     Hon. Mitch McConnell,
     Hon. Joe Lieberman,
     U.S. Senate, Washington, DC.
       Dear Senators McConnell and Lieberman: I write on behalf of 
     the National Association of Wholesaler-Distributors (NAW) to 
     express our strong support for the ``Small Business Liability 
     Reform Act of 2003.''
       For nearly two decades, NAW has vigorously advocated 
     Federal civil justice reform legislation to curb unnecessary 
     lawsuits and the wasteful legal costs they generate. Title I 
     of the bill (Small Business Lawsuit Abuse Protection), which 
     proposes modest restraints in the application of joint 
     liability and punitive damages with regard to small business 
     defendants, takes a major step in that direction.
       So, too, does the product seller liability standard 
     proposed in Title II (Product Seller Fair Treatment). 
     Currently in a majority of states, non-manufacturing product 
     sellers such as wholesaler-distributors and retailers may be 
     sued for product-related injuries on the same basis as the 
     product manufacturer. Consequently, product sellers are 
     routinely joined in product liability lawsuits regardless of 
     fault. Despite the fact that product sellers are rarely 
     ultimately responsible for the damages awarded to successful 
     claimants, they do have to mount their defense and pay the 
     legal costs attendant to it. This unnecessary litigation 
     drives up costs that must be passed along and absorbed by 
     consumers in the form of higher prices, and serves the 
     interests of no one.
       By providing that non-manufacturing product sellers will be 
     liable for product-related injuries that are caused by their 
     own negligence, intentional misconduct, beeches of their own 
     express warranties, and when the liable manufacturer is 
     unreachable by judicial process, Title II of the bill 
     corrects this serious flaw in our product liability system. 
     This standard of liability is balanced and fair. It 
     appropriately reflects the different roles of manufacturers, 
     wholesaler-distributors and other non-manufacturing product 
     sellers in the chain of production and distribution, promotes 
     product safety by laying responsibility for harm at the 
     doorstep of the culpable party, and ensures that those who 
     are harmed through no fault of their own by defective, 
     unreasonably dangerous products are fully compensated for 
     their injuries.
       Thank you for your leadership in sponsoring this important 
     legislation. I look forward to working with you toward its 
     prompt enactment.
           Sincerely,
                                           James A. Anderson, Jr.,
     Vice President--Government Relations.
                                  ____

                                               National Federation


                                      of Independent Business,

                                     Washington DC, July 30, 2003.
     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 express our strong support for the Small 
     business Liability Reform Act of 2003. NFIB strongly supports 
     this legislation which would 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 for your consideration 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,
     Public Policy.
                                  ____


                                S. 1546

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Small 
     Business Liability Reform Act of 2003''.
       (b) Table of Contents.--The table of contents for this Act 
     is as follows:

Sec. 1. Short title; table of contents.

            TITLE I--SMALL BUSINESS LAWSUIT ABUSE PROTECTION

Sec. 101. Findings.
Sec. 102. Definitions.
Sec. 103. Limitation on punitive damages for small businesses.
Sec. 104. Limitation on joint and several liability for noneconomic 
              loss for small businesses.
Sec. 105. Exceptions to limitations on liability.
Sec. 106. Preemption and election of State nonapplicability.

                TITLE II--PRODUCT SELLER FAIR TREATMENT

Sec. 201. Findings; purposes.
Sec. 202. Definitions.
Sec. 203. Applicability; preemption.
Sec. 204. Liability rules applicable to product sellers, renters, and 
              lessors.
Sec. 205. Federal cause of action precluded.

                       TITLE III--EFFECTIVE DATE

Sec. 301. Effective date.

            TITLE I--SMALL BUSINESS LAWSUIT ABUSE PROTECTION

     SEC. 101. FINDINGS.

       Congress finds that--
       (1) the United States civil justice system is inefficient, 
     unpredictable, unfair, costly, and impedes competitiveness in 
     the marketplace for goods, services, business, and employees;
       (2) the defects in the United States civil justice system 
     have a direct and undesirable effect on interstate commerce 
     by decreasing the availability of goods and services in 
     commerce;
       (3) there is a need to restore rationality, certainty, and 
     fairness to the legal system;
       (4) the spiralling costs of litigation and the magnitude 
     and unpredictability of punitive damage awards and 
     noneconomic damage awards have continued unabated for at 
     least the past 30 years;
       (5) the Supreme Court of the United States has recognized 
     that a punitive damage award can be unconstitutional if the 
     award is grossly excessive in relation to the legitimate 
     interest of the government in the punishment and deterrence 
     of unlawful conduct;
       (6) just as punitive damage awards can be grossly 
     excessive, so can it be grossly excessive in some 
     circumstances for a party to be held responsible under the 
     doctrine of joint and several liability for damages that 
     party did not cause;
       (7) as a result of joint and several liability, entities 
     including small businesses are often brought into litigation 
     despite the fact that their conduct may have little or 
     nothing to do with the accident or transaction giving rise to 
     the lawsuit, and may therefore face increased and unjust 
     costs due to the possibility or result of unfair and 
     disproportionate damage awards;
       (8) the costs imposed by the civil justice system on small 
     businesses are particularly acute, since small businesses 
     often lack the resources to bear those costs and to challenge 
     unwarranted lawsuits;
       (9) due to high liability costs and unwarranted litigation 
     costs, small businesses face higher costs in purchasing 
     insurance through interstate insurance markets to cover their 
     activities;
       (10) liability reform for small businesses will promote the 
     free flow of goods and services, lessen burdens on interstate 
     commerce, and decrease litigiousness; and

[[Page S10677]]

       (11) legislation to address these concerns is an 
     appropriate exercise of the powers of Congress under clauses 
     3, 9, and 18 of section 8 of article I of the Constitution of 
     the United States, and the 14th amendment to the Constitution 
     of the United States.

     SEC. 102. DEFINITIONS.

       In this title:
       (1) Crime of violence.--The term ``crime of violence'' has 
     the same meaning as in section 16 of title 18, United States 
     Code.
       (2) Drug.--The term ``drug'' means any controlled substance 
     (as defined in section 102 of the Controlled Substances Act 
     (21 U.S.C. 802)) that was not legally prescribed for use by 
     the defendant or that was taken by the defendant other than 
     in accordance with the terms of a lawfully issued 
     prescription.
       (3) 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.
       (4) Harm.--The term ``harm'' means any physical injury, 
     illness, disease, or death or damage to property.
       (5) Hate crime.--The term ``hate crime'' means a crime 
     described under section 1(b) of the Hate Crime Statistics Act 
     (28 U.S.C. 534 note).
       (6) International terrorism.--The term ``international 
     terrorism'' has the same meaning as in section 2331 of title 
     18, United States Code.
       (7) Noneconomic loss.--The term ``noneconomic loss'' means 
     loss for physical or emotional pain, suffering, 
     inconvenience, physical impairment, mental anguish, 
     disfigurement, loss of enjoyment of life, loss of society and 
     companionship, loss of consortium (other than loss of 
     domestic service), injury to reputation, or any other 
     nonpecuniary loss of any kind or nature.
       (8) Person.--The term ``person'' means any individual, 
     corporation, company, association, firm, partnership, 
     society, joint stock company, or any other entity 
     (including any governmental entity).
       (9) Punitive damages.--The term ``punitive damages'' means 
     damages awarded against any person or entity to punish or 
     deter such person, entity, or others from engaging in similar 
     behavior in the future. Such term does not include any civil 
     penalties, fines, or treble damages that are assessed or 
     enforced by an agency of State or Federal government pursuant 
     to a State or Federal statute.
       (10) Small business.--
       (A) In general.--The term ``small business'' means any 
     unincorporated business, or any partnership, corporation, 
     association, unit of local government, or organization that 
     has fewer than 25 full-time employees as determined on the 
     date the civil action involving the small business is filed.
       (B) Calculation of number of employees.--For purposes of 
     subparagraph (A), the number of employees of a subsidiary of 
     a wholly owned corporation includes the employees of--
       (i) a parent corporation; and
       (ii) any other subsidiary corporation of that parent 
     corporation.
       (11) State.--The term ``State'' means each of the several 
     States, the District of Columbia, the Commonwealth of Puerto 
     Rico, the Virgin Islands, Guam, American Samoa, the Northern 
     Mariana Islands, any other territory or possession of the 
     United States, or any political subdivision of any such 
     State, commonwealth, territory, or possession.

     SEC. 103. LIMITATION ON PUNITIVE DAMAGES FOR SMALL 
                   BUSINESSES.

       (a) General Rule.--Except as provided in section 105, in 
     any civil action against a small business, punitive damages 
     may, to the extent permitted by applicable Federal or State 
     law, be awarded against the small business only if the 
     claimant establishes by clear and convincing evidence that 
     conduct carried out by that 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.
       (b) Limitation on Amount.--In any civil action against a 
     small business, punitive damages awarded against a small 
     business shall not exceed the lesser of--
       (1) three times the total amount awarded to the claimant 
     for economic and noneconomic losses; or
       (2) $250,000,
     except that the court may make this subsection inapplicable 
     if the court finds that the plaintiff established by clear 
     and convincing evidence that the defendant acted with 
     specific intent to cause the type of harm for which the 
     action was brought.
       (c) Application by the Court.--The limitation prescribed by 
     this section shall be applied by the court and shall not be 
     disclosed to the jury.

     SEC. 104. LIMITATION ON JOINT AND SEVERAL LIABILITY FOR 
                   NONECONOMIC LOSS FOR SMALL BUSINESSES.

       (a) General Rule.--Except as provided in section 105, in 
     any civil action against a small business, the liability of 
     each defendant that is a small business, or the agent of a 
     small business, for noneconomic loss shall be determined in 
     accordance with subsection (b).
       (b) Amount of Liability.--
       (1) In general.--In any civil action described in 
     subsection (a)--
       (A) each defendant described in that subsection shall be 
     liable only for the amount of noneconomic loss allocated to 
     that defendant in direct proportion to the percentage of 
     responsibility of that defendant (determined in accordance 
     with paragraph (2)) for the harm to the claimant with respect 
     to which that defendant is liable; and
       (B) the court shall render a separate judgment against each 
     defendant described in that subsection in an amount 
     determined under subparagraph (A).
       (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 harm to the claimant, regardless of 
     whether or not the person is a party to the action.

     SEC. 105. EXCEPTIONS TO LIMITATIONS ON LIABILITY.

       The limitations on liability under sections 103 and 104 do 
     not apply--
       (1) to any defendant whose misconduct--
       (A) constitutes--
       (i) a crime of violence;
       (ii) an act of international terrorism; or
       (iii) a hate crime;
       (B) results in liability for damages relating to the injury 
     to, destruction of, loss of, or loss of use of, natural 
     resources described in--
       (i) section 1002(b)(2)(A) of the Oil Pollution Act of 1990 
     (33 U.S.C. 2702(b)(2)(A)); or
       (ii) section 107(a)(4)(C) of the Comprehensive 
     Environmental Response, Compensation, and Liability Act of 
     1980 (42 U.S.C. 9607(a)(4)(C));
       (C) involves--
       (i) a sexual offense, as defined by applicable State law; 
     or
       (ii) a violation of a Federal or State civil rights law; or
       (D) occurred at the time the defendant was under the 
     influence (as determined under applicable State law) of 
     intoxicating alcohol or a drug, and the fact that the 
     defendant was under the influence was the cause of any harm 
     alleged by the plaintiff in the subject action; or
       (2) to any cause of action which is brought under the 
     provisions of title 31, United States Code, relating to false 
     claims (31 U.S.C. 3729 through 3733) or to any other cause of 
     action brought by the United States relating to fraud or 
     false statements.

     SEC. 106. PREEMPTION AND ELECTION OF STATE NONAPPLICABILITY.

       (a) Preemption.--Subject to subsection (b), this title 
     preempts the laws of any State to the extent that State laws 
     are inconsistent with this title.
       (b) Election of State Regarding Nonapplicability.--This 
     title does not apply to any action in a State court against a 
     small business in which all parties are citizens of the 
     State, if the State enacts a statute--
       (1) citing the authority of this subsection;
       (2) declaring the election of such State that this title 
     does not apply as of a date certain to such actions in the 
     State; and
       (3) containing no other provision.

                TITLE II--PRODUCT SELLER FAIR TREATMENT

     SEC. 201. FINDINGS; PURPOSES.

       (a) Findings.--Congress finds that--
       (1) although damage awards in product liability actions may 
     encourage the production of safer products, they may also 
     have a direct effect on interstate commerce and consumers of 
     the United States by increasing the cost of, and decreasing 
     the availability of, products;
       (2) some of the rules of law governing product liability 
     actions are inconsistent within and among the States, 
     resulting in differences in State laws that may be 
     inequitable with respect to plaintiffs and defendants and may 
     impose burdens on interstate commerce;
       (3) product liability awards may jeopardize the financial 
     well-being of individuals and industries, particularly the 
     small businesses of the United States;
       (4) because the product liability laws of a State may have 
     adverse effects on consumers and businesses in many other 
     States, it is appropriate for the Federal Government to enact 
     national, uniform product liability laws that preempt State 
     laws; and
       (5) under clause 3 of section 8 of article I of the United 
     States Constitution, it is the constitutional role of the 
     Federal Government to remove barriers to interstate commerce.
       (b) Purposes.--The purposes of this title, based on the 
     powers of the United States under clause 3 of section 8 of 
     article I of the United States Constitution, are to promote 
     the free flow of goods and services and lessen the burdens on 
     interstate commerce, by--
       (1) establishing certain uniform legal principles of 
     product liability that provide a fair balance among the 
     interests of all parties in the chain of production, 
     distribution, and use of products; and
       (2) reducing the unacceptable costs and delays in product 
     liability actions caused by excessive litigation that harms 
     both plaintiffs and defendants.

     SEC. 202. DEFINITIONS.

       In this title:
       (1) Alcohol product.--The term ``alcohol product'' includes 
     any product that contains not less than \1/2\ of 1 percent of 
     alcohol by volume and is intended for human consumption.
       (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

[[Page S10678]]

     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) Commercial loss.--The term ``commercial loss'' means--
       (A) any loss or damage solely to a product itself;
       (B) loss relating to a dispute over the value of a product; 
     or
       (C) consequential economic loss, the recovery of which is 
     governed by applicable State commercial or contract laws that 
     are similar to the Uniform Commercial Code.
       (4) Compensatory damages.--The term ``compensatory 
     damages'' means damages awarded for economic and noneconomic 
     losses.
       (5) Dram-shop.--The term ``dram-shop'' means a drinking 
     establishment where alcoholic beverages are sold to be 
     consumed on the premises.
       (6) 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 that loss is 
     allowed under applicable State law.
       (7) 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.
       (8) Manufacturer.--The term ``manufacturer'' means--
       (A) any person who--
       (i) is engaged in a business to produce, create, make, or 
     construct any product (or component part of a product); and
       (ii)(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) that 
     are created or affected when, before placing the product in 
     the stream of commerce, the product seller--
       (i) produces, creates, makes, constructs and designs, or 
     formulates an aspect of the product (or component part of the 
     product) made by another person; or
       (ii) 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) 
     that holds itself out as a manufacturer to the user of the 
     product.
       (9) Noneconomic loss.--The term ``noneconomic loss'' means 
     loss for physical or emotional pain, suffering, 
     inconvenience, physical impairment, mental anguish, 
     disfigurement, loss of enjoyment of life, loss of society and 
     companionship, loss of consortium (other than loss of 
     domestic service), injury to reputation, or any other 
     nonpecuniary loss of any kind or nature.
       (10) Person.--The term ``person'' means any individual, 
     corporation, company, association, firm, partnership, 
     society, joint stock company, or any other entity (including 
     any governmental entity).
       (11) Product.--
       (A) In general.--The term ``product'' means any object, 
     substance, mixture, or raw material in a gaseous, liquid, or 
     solid state that--
       (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 ``product'' 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.
       (12) Product liability action.--
       (A) General rule.--Except as provided in subparagraph (B), 
     the term ``product liability action'' means a civil action 
     brought on any theory for a claim for any physical injury, 
     illness, disease, death, or damage to property that is caused 
     by a product.
       (B) The following claims are not included in the term 
     ``product liability action'':
       (i) Negligent entrustment.--A claim for negligent 
     entrustment.
       (ii) Negligence per se.--A claim brought under a theory of 
     negligence per se.
       (iii) Dram-shop.--A claim brought under a theory of dram-
     shop or third-party liability arising out of the sale or 
     providing of an alcoholic product to an intoxicated person or 
     minor.
       (13) 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.

       (14) State.--The term ``State'' means each of the several 
     States, the District of Columbia, the Commonwealth of Puerto 
     Rico, the Virgin Islands, Guam, American Samoa, the Northern 
     Mariana Islands, any other territory or possession of the 
     United States, or any political subdivision of any such 
     State, commonwealth, territory, or possession.

     SEC. 203. APPLICABILITY; PREEMPTION.

       (a) Applicability.--
       (1) In general.--Except as provided in paragraph (2), this 
     title governs any product liability action brought in any 
     Federal or State court.
       (2) Actions for commercial loss.--A civil action brought 
     for commercial loss shall be governed only by applicable 
     State commercial or contract laws that are similar to the 
     Uniform Commercial Code.
       (b) Relationship to State Law.--This title supersedes a 
     State law only to the extent that the 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 any applicable 
     Federal or State law.
       (c) Effect on Other Law.--Nothing in this title shall be 
     construed to--
       (1) waive or affect any defense of sovereign immunity 
     asserted by any State under any State 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. 204. LIABILITY RULES APPLICABLE TO PRODUCT SELLERS, 
                   RENTERS, AND LESSORS.

       (a) General Rule.--
       (1) In general.--In any product liability action covered 
     under this title, a product seller other than a manufacturer 
     shall be liable to a claimant only if the claimant 
     establishes that--
       (A)(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 the harm to the claimant;
       (B)(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 the harm to the claimant; or
       (C)(i) the product seller engaged in intentional 
     wrongdoing, as determined under applicable State law; and
       (ii) the intentional wrongdoing caused 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, if--
       (A) the failure occurred because there was no reasonable 
     opportunity to inspect the product; or
       (B) the inspection, in the exercise of reasonable care, 
     would not have revealed the aspect of the product that 
     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 is or 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

[[Page S10679]]

     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) Definition.--For purposes of paragraph (2), and for 
     determining the applicability of this title to any person 
     subject to that paragraph, the term ``product liability 
     action'' means a civil action brought on any theory for harm 
     caused by a product or product use.
       (2) Liability.--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 202(13)(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 that product.

     SEC. 205. FEDERAL CAUSE OF ACTION PRECLUDED.

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

                       TITLE III--EFFECTIVE DATE

     SEC. 301. EFFECTIVE DATE.

       This Act shall take effect with respect to any civil action 
     commenced after the date of the enactment of this Act without 
     regard to whether the harm that is the subject of the action 
     occurred before such date.
                                 ______