[Congressional Record (Bound Edition), Volume 147 (2001), Part 6]
[Extensions of Remarks]
[Pages 7928-7929]
[From the U.S. Government Publishing Office, www.gpo.gov]



    INTRODUCTION OF THE SMALL BUSINESS LIABILITY REFORM ACT OF 2001

                                 ______
                                 

                          HON. ASA HUTCHINSON

                              of arkansas

                    in the house of representatives

                         Thursday, May 10, 2001

  Mr. HUTCHINSON. Mr. Speaker, I am pleased to be joined by my 
colleagues, the gentleman from Pennsylvania, Mr. Holden; the gentleman 
from North Carolina, Mr. Burr; and the gentleman from Virginia, Mr. 
Moran in introducing the Small Business Liability Reform Act of 2001.
  Members will recall the House's consideration and passage of similar 
legislation during the last session of Congress. Following legislative 
hearings in the Fall of 1999, that bill (H.R. 2366, 106th Congress) was 
the subject of three days of markup in the Judiciary Committee, during 
which the Committee considered 21 amendments and adopted five. On 
February 16, 2000, the full House took up H.R. 2366 and adopted three 
of the four amendments considered before passing the bill on a 
bipartisan vote of 221-193.
  Like its predecessor, Title I of the bill we are introducing today 
proposes three basic reforms to our civil justice system for defendants 
with fewer than 25 full time employees--the smallest of America's small 
businesses. Section 103 of the bill establishes fair standards of 
evidence and liability for the award of punitive damages, and 
establishes proportionality in the awarding of punitive damages against 
America's small businesses. Section 104 establishes a fair share rule 
for the payment of non-economic awards. This reform in effect abolishes 
so-called ``joint and several liability'' for damages for pain and 
suffering, ensuring that only those defendants who are truly guilty of 
inflicting such harm will be held financially responsible.
  Title II of the bill contains two important reforms to the product 
liability system and is applicable to all who sell, rent or lease 
products. First, Sections 204(a) and (b) establish a fault-based 
standard of liability for non-manufacturer product sellers in product 
liability cases, while preserving a strict liability standard for 
breach of the seller's own express warranty and where an otherwise 
culpable manufacturer is beyond the court's reach. Section 204(c) 
appropriately protects those who merely rent and lease products from 
being held vicariously liable for the wrongful conduct of someone else 
(a customer for example) simply due to product ownership.
  Mr. Speaker, the reforms proposed in the Small Business Liability 
Reform Act are both modest and fair and will improve the administration 
of civil justice in the United States by reducing needless litigation 
and the wasteful legal costs associated with it. Most important, the 
bill will advance the core purposes of our civil justice system: to 
prevent harm through the deterrence of careless or wrongful conduct; to 
assign responsibility for harm to the party in the best position to 
avoid it; and to require those whose careless or wrongful conduct cause 
harm to pay.
  I urge my colleagues on both sides of the aisle to join in supporting 
this important legislation, the enactment of which is long overdue.
  Mr. Speaker, I submit a section-by-section summary of the Small 
Business Liability Reform Act of 2001 for the Record.

  The Small Business Liability Reform Act of 2001--Section-by-Section 
                                Summary

       A bill to offer small businesses and product sellers 
     protection from litigation excesses.

            Title I: Small Business Lawsuit Abuse Protection


                         Section 101: Findings

       This section sets out congressional findings concerning the 
     litigation excesses facing small businesses, and the need for 
     reforms to protect small businesses from abusive litigation.


                        Section 102: Definitions

       This section defines various terms used in the bill. A 
     small business is defined as any business or organization 
     with fewer than 25 full-time employees. Punitive damages are 
     defined to exclude civil penalties, civil fines, or treble 
     damages assessed or enforced by a government agency under 
     federal or state statute.


    Section 103: Limitation on Punitive Damages for Small Businesses

       This section provides that punitive damages may, to the 
     extent permitted by applicable state law, be awarded against 
     a small business only if the claimant establishes by clear 
     and convincing evidence that the defendant acted with a 
     conscious, flagrant indifference to the rights or safety of 
     others, and that the conduct was the proximate cause of the 
     harm that is the subject of the action.
       This section also limits the amount of punitive damages 
     that may be awarded against a small business. In any civil 
     action against a small business, punitive damages may not 
     exceed the lesser of three times the amount awarded to the 
     claimant for economic and noneconomic losses, or $250,000. 
     However, a court is permitted to exceed the punitive damages 
     cap in the event it finds by clear and convincing evidence 
     that the defendant acted with specific intent to cause the 
     type of harm for which the action was brought.


Section 104: Limitation on Joint and Several Liability for Noneconomic 
                       Loss for Small Businesses

       This section provides that in any civil action against a 
     small business, each small business defendant will be liable 
     for non-economic loss only in proportion to its 
     responsibility for causing the harm.


          Section 105: Exceptions to Limitations on Liability

       This section ensures that the benefits of this legislation 
     are not available to any defendant whose misconduct (1) 
     constitutes a crime of violence or an act of international 
     terrorism; (2) results in certain natural resource damages; 
     (3) involves a sexual offense or a violation of civil rights 
     law; (4) occurs while the defendant is under the influence of 
     an intoxicating alcohol or a drug; (5) is prosecuted under 
     the Federal False Claims Act; or (6) is prosecuted under 
     fraud or false statement laws.


     Section 106: Preemption and Election of State Nonapplicability

       This section provides for uniform rules with regard to 
     small business liability. The bill preempts state laws to the 
     extent that any such laws are inconsistent with the 
     provisions of Title I. However, the bill includes an opt-out 
     provision for the states. A state may opt out of the 
     provisions of this title for actions in state court against a 
     small business in which all parties are citizens of the 
     state. In order to opt out, the state must enact a statute 
     citing the authority in this section and declaring its 
     intention to opt out.

                Title II: Product Seller Fair Treatment


                         Section 201: Findings

       This section sets out congressional findings concerning the 
     effect on interstate commerce of damage awards in product 
     liability cases; the present inequities resulting from 
     inconsistent product liability laws within and among the 
     states; and the need for national, uniform federal product 
     liability laws.


                        Section 202: Definitions

       This section defines various terms and phrases used in this 
     title.


                 Section 203: Applicability; Preemption

       This section applies to any product liability action 
     brought in federal or state court. Civil actions for 
     commercial loss are excluded from the applicability of this 
     title.
       In addition, this section clarifies that the preemption of 
     state law by this title is limited to only those issues 
     specifically addressed by the legislation and not other 
     unrelated liability laws.


Section 204: Liability Rules Applicable to Product Sellers, Renters and 
                                Lessors

       This section provides that product sellers other than the 
     manufacturer (such as wholesaler distributors and retailers) 
     may be held liable only if they are directly at fault for the 
     harm; if the harm was caused by the failure of the product to 
     conform to the product seller's own, independent express 
     warranty; or if the harm was the result of the product 
     seller's intentional wrongdoing.
       However, the provision ensures that product sellers will 
     ``stand in the shoes'' of a culpable manufacturer when the 
     manufacturer is judgment-proof In addition, the statute of 
     limitations in such cases is tolled.
       Finally, this section specifies that product renters and 
     lessors will not be liable for the tortious acts of another 
     solely by reason of product ownership.


             Section 205: Federal Cause of Action Precluded

       This section clarifies that the bill does not create 
     federal district court jurisdiction pursuant to Section 1331 
     or Section 1337 of Title 28, United States Code.

                       Title III: Effective Date


                      Section 301: Effective Date

       This section provides that the bill's provisions will apply 
     to any civil action commenced after the date of enactment of 
     the legislation.


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