[Congressional Record Volume 150, Number 127 (Friday, October 8, 2004)]
[Extensions of Remarks]
[Pages E1839-E1840]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




CRS LETTER CLARIFYING EFFECTS OF H.R. 4571, THE LAWSUIT ABUSE REDUCTION 
                                  ACT

                                 ______
                                 

                          HON. LAMAR S. SMITH

                                of texas

                    in the house of representatives

                       Wednesday, October 6, 2004

  Mr. SMITH of Texas. Mr. Speaker, September 14 2004, the House debated 
and passed H.R. 4571, the Lawsuit Abuse Reduction Act, a bill I 
authored to help prevent frivolous lawsuits and the notorious practice 
of forum shopping from ruining America's small businesses.
  In the midst of floor debate on H.R. 4571, the Congressional Research 
Service issued a self-described ``rush memorandum'' dated September 14, 
2004, to the minority staff of the House Judiciary Committee, which 
stated ``H.R. 4571 does provide an option for filing [a lawsuit] where 
a business has a principal place of business . . . However, if a 
defendant's principal place of business was not in the United States, 
then this option could not be exercised in a United States court. 
Consequently, it would appear that in certain circumstances, a United 
States citizen or resident injured in this country would not have a 
judicial forum in the United States in which to seek relief.''
  This statement left the misleading impression that H.R. 4571, were it 
to become law, would somehow make it more difficult to bring some 
personal injury lawsuits in the United States. Not surprisingly, the 
misleading impression left by the CRS memorandum was exploited by those 
on the opposite side of the aisle in the midst of debate on H.R. 4571, 
and later by the press. For example, a report in CongressDaily/A.M. 
describing debate on H.R. 4571 stated ``Many Democrats . . . cited a 
Congressional Research Service memorandum advising lawmakers that the 
bill could prevent U.S. citizens from having their cases heard in a 
U.S. court if the defendant's main place of business is located in a 
foreign country. Rep. Jay Inslee, D-Wash., sarcastically called the 
legislation `the Foreign Corporation Protection Act.'''
  Those statements are deeply misleading, and here's why. In fact, 
nothing in H.R. 4571 would prevent cases from being brought against 
foreign defendants that are not already precluded under current law. I 
wrote to CRS requesting a clarification of current law, and I received 
the following response: ``[U]nder the Due Process Clause, a foreign 
corporation that had its principal place of business overseas, engaged 
in little or no economic activity in the United States, and did not 
otherwise subject itself to the jurisdiction of the United States, 
could not be subject to the jurisdiction of the various state courts. 
If such a corporation engaged in a tortious activity such as 
manufacturing a defective product, then a plaintiff would be unable to 
bring an action in a state court forum for such tortious activity, even 
if the product caused an injury in the United States. In such a case, 
an injured party would be required to seek compensation in the courts 
of another country.''
  This makes clear that while some Members on the other side of the 
aisle claimed that H.R. 4571, if enacted, would preclude certain 
lawsuits from being brought that could be brought under current law, 
the Due Process Clause of the Constitution has precluded under current 
law, and would continue to preclude under H.R. 4571, some plaintiffs 
from bringing an action in a state court forum against a foreign 
defendant for tortious activity in certain circumstances, even if the 
product caused an injury in the United States. The bottom line is that 
H.R. 4571 would do nothing to change current law in that regard. 
Indeed, no legislation could change current law in that regard since 
the constitutional requirements of the Due Process Clause cannot be 
changed by legislation.

  In fact, the venue statute of the gentleman from Washington Mr. 
Inslee's own state provides that ``An action . . . for the recovery of 
damages for injuries to the person or for injury to personal property 
may be brought, at the plaintiffs option, either in the district in 
which the cause of action, or some part thereof, arose, or in the 
district in which the defendant, or, if there be more than one 
defendant, where some one of the defendants, resides at the time the 
complaint is filed.'' That venue standard is for all practical purposes 
the same as that provided in H.R. 4571. H.R. 4571 provides that a 
personal injury lawsuit could be brought in any state where the person 
bringing the claim resides at the time of filing or resided at the time 
of the alleged injury, any state where the alleged injury or 
circumstances giving rise to the personal injury claim allegedly 
occurred, or where the defendant's principal place of business is 
located. Insofar as opponents of H.R. 4571 have a complaint regarding 
the inability to bring certain lawsuits against foreign corporations in 
the United States, their complaint is with the Constitution's Due 
Process Clause, and not with H.R. 4571, which simply reflects the same 
standard that prevails among the state's venue laws, subject of course 
to the Due Process Clause of the Constitution. If a foreign 
corporation's contacts with the United States are so minimal as to make 
it unconstitutional under the Constitution's Due Process Clause to 
subject them to suit in the United States regardless of whether the 
venue criteria of H.R. 4571--or of any State venue statute--are met, 
there is nothing a legislature can do by statute to remedy that 
situation.
  To help set the record straight, I am submitting for the record both 
my letter to CRS requesting a clarification, and the CRS memorandum I 
received in response.


                                     House of Representatives,

                               Washington, DC, September 16, 2004.
     Kenneth R. Thomas,
     Legislative Attorney, American Law Division, Congressional 
         Research Service, Washington, DC.
       Dear Mr. Thomas, It is my understanding that, under each 
     State's venue statutes, there might occur circumstances in 
     which a foreign corporation with its principal place of 
     business outside the United States causes personal injury to 
     a person within the State, yet a tort lawsuit brought by such 
     injured person against such foreign corporation would be 
     precluded in the United States.
       I am writing to request that the Congressional Research 
     Service provide me with the following information:
       Under each State's venue laws, are there any circumstances 
     in which a foreign corporation with its principal place of 
     business outside the United States would not be subject to 
     suit in such State (or elsewhere in the United States) by a 
     person within the State who alleges such foreign corporation 
     caused such person personal injury within the State?
       I would greatly appreciate this information by September 
     27, 2004.
           Sincerely,
                                                      Lamar Smith,
     Member of Congress.
                                  ____



                               Congressional Research Service,

                                  Washington, DC, October 4, 2004.


                               memorandum

     To: Honorable Lamar Smith.
     From: Kenneth R. Thomas, Legislative Attorney, American Law 
         Division.
     Subject: Preclusion of Tort Suits Against Foreign 
         Corporations Under State Law.
       The revised memorandum is to respond to your request to 
     evaluate whether a state long-arm statute could allow 
     plaintiffs to bring suits against a foreign corporation in a 
     state where a tortious injury occurred based solely on the 
     fact that injury occurred in that state. You also requested a 
     determination as to whether, if a foreign corporation had its 
     principal place of business outside of the United States, 
     whether state statutes could allow law suits to be brought in 
     all instances against such corporations based solely on the 
     fact that such injury occurred in this country. As discussed 
     below, because of constitutional and statutory concerns, a 
     foreign corporation could in some instances be beyond the 
     reach of United States' state courts.
       In order, to sue a tortfeasor in a court, a plaintiff must 
     generally establish that such court has personal jurisdiction 
     over the defendant. At the state level, such jurisdiction is 
     generally established by state long-arm statutes, which 
     specify what level of contact must exist between a defendant 
     and a state in order for a plaintiff to sue in that state. 
     For instance, Tennessee law provides that a Tennessee state 
     court may exercise personal jurisdiction over a defendant 
     based on conduct outside the state for causing tortuous 
     injury inside the: state. However, to do so, the defendant 
     must ``regularly * * * solicit[] business, or engage[] in any 
     other persistent course of conduct, or derive[] substantial 
     revenue from goods used or consumed or services rendered, in 
     this state.'' So, a corporation that manufactures a defective 
     product but does not meet the above stated criteria, would 
     not be subject to the jurisdiction of the Tennessee courts, 
     even if it manufactured a product which caused an injury to a 
     plaintiff in Tennessee.
       These types of statutory limitations are generally related 
     to a need for a state's assertion of personal jurisdiction to 
     be consistent with the United States Constitution. Under the 
     Due Process Clause of the 14th

[[Page E1840]]

     Amendment, a state court must find that there are minimum 
     contacts between the jurisdiction of a court and the 
     defendant in a law suit in order to establish jurisdiction. 
     As with the Tennessee statute cited above, the fact that an 
     injury occurred in that forum would not generally be a 
     sufficient basis to establish jurisdiction, but there must 
     also be sufficient contacts between the defendant and the 
     judicial forum.
       Thus, under the Due Process Clause, a foreign corporation 
     that had its principal place of business overseas, engaged in 
     little or no economic activity in the United States and did 
     not otherwise subject itself to the jurisdiction of the 
     United States, could not be subject to the jurisdiction of 
     the various state courts. If such a corporation engaged in a 
     tortious activity such as manufacturing a defective product, 
     then a plaintiff would be unable to bring an action in a 
     state court forum for such tortious activity, even if the 
     product caused an injury in the United States. In such a 
     case, an injured party would be required to seek compensation 
     in the courts of another country.

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