[House Report 104-481]
[From the U.S. Government Publishing Office]



104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 2d Session                                                     104-481
_______________________________________________________________________


 
        COMMON SENSE PRODUCT LIABILITY LEGAL REFORM ACT OF 1996

                                _______


                 March 14, 1996.--Ordered to be printed

_______________________________________________________________________


  Mr. Hyde, from the committee of conference, submitted the following

                           CONFERENCE REPORT

                        [To accompany H.R. 956]

    The committee of conference on the disagreeing votes of the 
two Houses on the amendment of the Senate to the bill (H.R. 
956), to establish legal standards and procedures for product 
liability litigation, and for other purposes, having met, after 
full and free conference, have agreed to recommend and do 
recommend to their respective Houses as follows:
    That the House recede from its disagreement to the 
amendment of the Senate and agree to the same with an amendment 
as follows:
    In lieu of the matter proposed to be inserted by the Senate 
amendment, insert the following:

SECTION 1. SHORT TITLE AND TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Common 
Sense Product Liability Legal Reform Act of 1996''.
    (b) Table of Contents.--The table of contents is as 
follows:

Sec. 1. Short title and table of contents.
Sec. 2. Findings and purposes.

                    TITLE I--PRODUCT LIABILITY REFORM

Sec. 101. Definitions.
Sec. 102. Applicability; preemption.
Sec. 103. Liability rules applicable to product sellers, renters, and 
          lessors.
Sec. 104. Defense based on claimant's use of intoxicating alcohol or 
          drugs.
Sec. 105. Misuse or alteration.
Sec. 106. Uniform time limitations on liability.
Sec. 107. Alternative dispute resolution procedures.
Sec. 108. Uniform standards for award of punitive damages.
Sec. 109. Liability for certain claims relating to death.
Sec. 110. Several liability for noneconomic loss.
Sec. 111. Workers' compensation subrogation.

                 TITLE II--BIOMATERIALS ACCESS ASSURANCE

Sec. 201. Short title.
Sec. 202. Findings.
Sec. 203. Definitions.
Sec. 204. General requirements; applicability; preemption.
Sec. 205. Liability of biomaterials suppliers.
Sec. 206. Procedures for dismissal of civil actions against biomaterials 
          suppliers.

         TITLE III--LIMITATIONS ON APPLICABILITY; EFFECTIVE DATE

Sec. 301. Effect of court of appeals decisions.
Sec. 302. Federal cause of action precluded.
Sec. 303. Effective date.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds that--
            (1) our Nation is overly litigious, the civil 
        justice system is overcrowded, sluggish, and 
        excessively costly and the costs of lawsuits, both 
        direct and indirect, are inflicting serious and 
        unnecessary injury on the national economy;
            (2) excessive, unpredictable, and often arbitrary 
        damage awards and unfair allocations of liability have 
        a direct and undesirable effect on interstate commerce 
        by increasing the cost and decreasing the availability 
        of goods and services;
            (3) the rules of law governing product liability 
        actions, damage awards, and allocations of liability 
        have evolved inconsistently within and among the 
        States, resulting in a complex, contradictory, and 
        uncertain regime that is inequitable to both plaintiffs 
        and defendants and unduly burdens interstate commerce;
            (4) as a result of excessive, unpredictable, and 
        often arbitrary damage awards and unfair allocations of 
        liability, consumers have been adversely affected 
        through the withdrawal of products, producers, 
        services, and service providers from the marketplace, 
        and from excessive liability costs passed on to them 
        through higher prices;
            (5) excessive, unpredictable, and often arbitrary 
        damage awards and unfair allocations of liability 
        jeopardize the financial well-being of many individuals 
        as well as entire industries, particularly the Nation's 
        small businesses and adversely affects government and 
        taxpayers;
            (6) the excessive costs of the civil justice system 
        undermine the ability of American companies to compete 
        internationally, and serve to decrease the number of 
        jobs and the amount of productive capital in the 
        national economy;
            (7) the unpredictability of damage awards is 
        inequitable to both plaintiffs and defendants and has 
        added considerably to the high cost of liability 
        insurance, making it difficult for producers, 
        consumers, volunteers, and nonprofit organizations to 
        protect themselves from liability with any degree of 
        confidence and at a reasonable cost;
            (8) because of the national scope of the problems 
        created by the defects in the civil justice system, it 
        is not possible for the States to enact laws that fully 
        and effectively respond to those problems;
            (9) it is the constitutional role of the national 
        government to remove barriers to interstate commerce 
        and to protect due process rights; and
            (10) there is a need to restore rationality, 
        certainty, and fairness to the civil justice system in 
        order to protect against excessive, arbitrary, and 
        uncertain damage awards and to reduce the volume, 
        costs, and delay of litigation.
    (b) Purposes.--Based upon the powers contained in Article 
I, Section 8, Clause 3 and the Fourteenth Amendment of the 
United States Constitution, the purposes of this Act are to 
promote the free flow of goods and services and to lessen 
burdens on interstate commerce and to uphold constitutionally 
protected due process rights by--
            (1) establishing certain uniform legal principles 
        of product liability which provide a fair balance among 
        the interests of product users, manufacturers, and 
        product sellers;
            (2) placing reasonable limits on damages over and 
        above the actual damages suffered by a claimant;
            (3) ensuring the fair allocation of liability in 
        civil actions;
            (4) reducing the unacceptable costs and delays of 
        our civil justice system caused by excessive litigation 
        which harm both plaintiffs and defendants; and
            (5) establishing greater fairness, rationality, and 
        predictability in the civil justice system.

                   TITLE I--PRODUCT LIABILITY REFORM

SEC. 101. DEFINITIONS.

    For purposes of this title--
            (1) Actual malice.--The term ``actual malice'' 
        means specific intent to cause serious physical injury, 
        illness, disease, death, or damage to property.
            (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 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) Claimant's benefits.--The term ``claimant's 
        benefits'' means the amount paid to an employee as 
        workers' compensation benefits.
            (4) Clear and convincing evidence.--The term 
        ``clear and convincing evidence'' is that measure or 
        degree of proof that will produce in the mind of the 
        trier of fact a firm belief or conviction as to the 
        truth of the allegations sought to be established. The 
        level of proof required to satisfy such standard is 
        more than that required under preponderance of the 
        evidence, but less than that required for proof beyond 
        a reasonable doubt.
            (5) Commercial loss.--The term ``commercial loss'' 
        means any loss or damage solely to a product itself, 
        loss relating to a dispute over its value, or 
        consequential economic loss, the recovery of which is 
        governed by the Uniform Commercial Code or analogous 
        State commercial or contract law.
            (6) Compensatory damages.--The term ``compensatory 
        damages'' means damages awarded for economic and non-
        economic loss.
            (7) Durable good.--The term ``durable good'' means 
        any product, or any component of any such product, 
        which has a normal life expectancy of 3 or more years, 
        or is of a character subject to allowance for 
        depreciation under the Internal Revenue Code of 1986 
        and which is--
                    (A) used in a trade or business;
                    (B) held for the production of income; or
                    (C) sold or donated to a governmental or 
                private entity for the production of goods, 
                training, demonstration, or any other similar 
                purpose.
            (8) 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.
            (9) 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.
            (10) Insurer.--The term ``insurer'' means the 
        employer of a claimant if the employer is self-insured 
        or if the employer is not self-insured, the workers' 
        compensation insurer of the employer.
            (11) Manufacturer.--The term ``manufacturer'' 
        means--
                    (A) any person who is engaged in a business 
                to produce, create, make, or construct any 
                product (or component part of a product) and 
                who (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) which are created or 
                affected when, before placing the product in 
                the stream of commerce, the product seller 
                produces, creates, makes or constructs and 
                designs, or formulates, or 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) which holds itself out as a 
                manufacturer to the user of the product.
            (12) Noneconomic loss.--The term ``noneconomic 
        loss'' means subjective, nonmonetary loss resulting 
        from harm, including pain, suffering, inconvenience, 
        mental suffering, emotional distress, loss of society 
        and companionship, loss of consortium, injury to 
        reputation, and humiliation.
            (13) Person.--The term ``person'' means any 
        individual, corporation, company, association, firm, 
        partnership, society, joint stock company, or any other 
        entity (including any governmental entity).
            (14) Product.--
                    (A) In general.--The term ``product'' means 
                any object, substance, mixture, or raw material 
                in a gaseous, liquid, or solid state which--
                            (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 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 
                        except to the extent that electricity, 
                        water delivered by a utility, natural 
                        gas, or steam, is subject, under 
                        applicable State law, to a standard of 
                        liability other than negligence.
            (15) Product liability action.--The term ``product 
        liability action'' means a civil action brought on any 
        theory for harm caused by a product.
            (16) 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.
            (17) Punitive damages.--The term ``punitive 
        damages'' means damages awarded against any person or 
        entity to punish or deter such person or entity, or 
        others, from engaging in similar behavior in the 
        future.
            (18) State.--The term ``State'' means any State of 
        the United States, the District of Columbia, 
        Commonwealth of Puerto Rico, the Northern Mariana 
        Islands, the Virgin Islands, Guam, American Samoa, and 
        any other territory or possession of the United States 
        or any political subdivision of any of the foregoing.

SEC. 102. APPLICABILITY; PREEMPTION.

    (a) Preemption.--
            (1) In general.--This Act governs any product 
        liability action brought in any State or Federal court 
        on any theory for harm caused by a product.
            (2) Actions excluded.--A civil action brought for 
        commercial loss shall be governed only by applicable 
        commercial or contract law.
    (b) Relationship to State Law.--This title supersedes State 
law only to the extent that 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 otherwise applicable State 
or Federal law.
    (c) Effect on Other Law.--Nothing in this Act shall be 
construed to--
            (1) waive or affect any defense of sovereign 
        immunity asserted by any State under any 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. 103. LIABILITY RULES APPLICABLE TO PRODUCT SELLERS, RENTERS, AND 
                    LESSORS.

    (a) General Rule.--
            (1) In general.--In any product liability action, a 
        product seller other than a manufacturer shall be 
        liable to a claimant only if the claimant establishes--
                    (A) that--
                            (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 harm to the claimant;
                    (B) that--
                            (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 harm to 
                        the claimant; or
                    (C) that--
                            (i) the product seller engaged in 
                        intentional wrongdoing, as determined 
                        under applicable State law; and
                            (ii) such intentional wrongdoing 
                        was a proximate cause of 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--
                    (A) if the failure occurred because there 
                was no reasonable opportunity to inspect the 
                product; or
                    (B) if the inspection, in the exercise of 
                reasonable care, would not have revealed the 
                aspect of the product which 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 
                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 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) 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 101(16)(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 such product.
            (2) For purposes of paragraph (1), and for 
        determining the applicability of this title to any 
        person subject to paragraph (1), the term ``product 
        liability action'' means a civil action brought on any 
        theory for harm caused by a product or product use.
    (d) Actions for Negligent Entrustment.--A civil action for 
negligent entrustment shall not be subject to the provisions of 
this section, but shall be subject to any applicable State law.

SEC. 104. DEFENSE BASED ON CLAIMANT'S USE OF INTOXICATING ALCOHOL OR 
                    DRUGS.

    (a) General Rule.--In any product liability action, it 
shall be a complete defense to such action if--
            (1) the claimant was intoxicated or was under the 
        influence of intoxicating alcohol or any drug when the 
        accident or other event which resulted in such 
        claimant's harm occurred; and
            (2) the claimant, as a result of the influence of 
        the alcohol or drug, was more than 50 percent 
        responsible for such accident or other event.
    (b) Construction.--For purposes of subsection (a)--
            (1) the determination of whether a person was 
        intoxicated or was under the influence of intoxicating 
        alcohol or any drug shall be made pursuant to 
        applicable State law; and
            (2) the term ``drug'' means any controlled 
        substance as defined in the Controlled Substances Act 
        (21 U.S.C. 802(6)) that was not legally prescribed for 
        use by the claimant or that was taken by the claimant 
        other than in accordance with the terms of a lawfully 
        issued prescription.

SEC. 105. MISUSE OR ALTERATION.

    (a) General Rule.--
            (1) In general.--In a product liability action, the 
        damages for which a defendant is otherwise liable under 
        Federal or State law shall be reduced by the percentage 
        of responsibility for the claimant's harm attributable 
        to misuse or alteration of a product by any person if 
        the defendant establishes that such percentage of the 
        claimant's harm was proximately caused by a use or 
        alteration of a product--
                    (A) in violation of, or contrary to, a 
                defendant's express warnings or instructions if 
                the warnings or instructions are adequate as 
                determined pursuant to applicable State law; or
                    (B) involving a risk of harm which was 
                known or should have been known by the ordinary 
                person who uses or consumes the product with 
                the knowledge common to the class of persons 
                who used or would be reasonably anticipated to 
                use the product.
            (2) Use intended by a manufacturer is not misuse or 
        alteration.--For the purposes of this Act, a use of a 
        product that is intended by the manufacturer of the 
        product does not constitute a misuse or alteration of 
        the product.
    (b) Workplace Injury.--Notwithstanding subsection (a), and 
except as otherwise provided in section 111, the damages for 
which a defendant is otherwise liable under State law shall not 
be reduced by the percentage of responsibility for the 
claimant's harm attributable to misuse or alteration of the 
product by the claimant's employer or any coemployee who is 
immune from suit by the claimant pursuant to the State law 
applicable to workplace injuries.

SEC. 106. UNIFORM TIME LIMITATIONS ON LIABILITY.

    (a) Statute of Limitations.--
            (1) In general.--Except as provided in paragraph 
        (2) and subsection (b), a product liability action may 
        be filed not later than 2 years after the date on which 
        the claimant discovered or, in the exercise of 
        reasonable care, should have discovered--
                    (A) the harm that is the subject of the 
                action; and
                    (B) the cause of the harm.
            (2) Exception.--A person with a legal disability 
        (as determined under applicable law) may file a product 
        liability action not later than 2 years after the date 
        on which the person ceases to have the legal 
        disability.
    (b) Statute of Repose.--
            (1) In general.--Subject to paragraphs (2) and (3), 
        no product liability action that is subject to this Act 
        concerning a product, that is a durable good, alleged 
        to have caused harm (other than toxic harm) may be 
        filed after the 15-year period beginning at the time of 
        delivery of the product to the first purchaser or 
        lessee.
            (2) State law.--Notwithstanding paragraph (1), if 
        pursuant to an applicable State law, an action 
        described in such paragraph is required to be filed 
        during a period that is shorter than the 15-year period 
        specified in such paragraph, the State law shall apply 
        with respect to such period.
            (3) Exceptions.--
                    (A) A motor vehicle, vessel, aircraft, or 
                train, that is used primarily to transport 
                passengers for hire, shall not be subject to 
                this subsection.
                    (B) Paragraph (1) does not bar a product 
                liability action against a defendant who made 
                an express warranty in writing as to the safety 
                or life expectancy of the specific product 
                involved which was longer than 15 years, but it 
                will apply at the expiration of that warranty.
                    (C) Paragraph (1) does not affect the 
                limitations period established by the General 
                Aviation Revitalization Act of 1994 (49 U.S.C. 
                40101 note).
    (c) Transitional Provision Relating to Extension of Period 
for Bringing Certain Actions.--If any provision of subsection 
(a) or (b) shortens the period during which a product liability 
action could be otherwise brought pursuant to another provision 
of law, the claimant may, notwithstanding subsections (a) and 
(b), bring the product liability action not later than 1 year 
after the date of enactment of this Act.

SEC. 107. ALTERNATIVE DISPUTE RESOLUTION PROCEDURES.

    (a) Service of Offer.--A claimant or a defendant in a 
product liability action may, not later than 60 days after the 
service of--
            (1) the initial complaint; or
            (2) the applicable deadline for a responsive 
        pleading;

whichever is later, serve upon an adverse party an offer to 
proceed pursuant to any voluntary, nonbinding alternative 
dispute resolution procedure established or recognized under 
the law of the State in which the product liability action is 
brought or under the rules of the court in which such action is 
maintained.
    (b) Written Notice of Acceptance or Rejection.--Except as 
provided in subsection (c), not later than 10 days after the 
service of an offer to proceed under subsection (a), an offeree 
shall file a written notice of acceptance or rejection of the 
offer.
    (c) Extension.--The court may, upon motion by an offeree 
made prior to the expiration of the 10-day period specified in 
subsection (b), extend the period for filling a written notice 
under such subsection for a period of not more than 60 days 
after the date of expiration of the period specified in 
subsection (b). Discovery may be permitted during such period.

SEC. 108. UNIFORM STANDARDS FOR AWARD OF PUNITIVE DAMAGES.

    (a) General Rule.--Punitive damages may, to the extent 
permitted by applicable State law, be awarded against a 
defendant if the claimant establishes by clear and convincing 
evidence that conduct carried out by the 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 in any product liability action.
    (b) Limitation on Amount.--
            (1) In general.--The amount of punitive damages 
        that may be awarded in an action described in 
        subsection (a) may not exceed the greater of--
                    (A) 2 times the sum of the amount awarded 
                to the claimant for economic loss and 
                noneconomic loss; or
                    (B) $250,000.
            (2) Special rule.--Notwithstanding paragraph (1), 
        in any action described in subsection (a) against an 
        individual whose net worth does not exceed $500,000 or 
        against an owner of an unincorporated business, or any 
        partnership, corporation, association, unit of local 
        government, or organization which has fewer that 25 
        full-time employees, the punitive damages shall not 
        exceed the lesser of--
                    (A) 2 times the sum of the amount awarded 
                to the claimant for economic loss and 
                noneconomic loss; or
                    (B) $250,000.
        For the purpose of determining the applicability of 
        this paragraph to a corporation, the number of 
        employees of a subsidiary or wholly-owned corporation 
        shall include all employees of a parent or sister 
        corporation.
            (3) Exception for insufficient award in cases of 
        egregious conduct.--
                    (A) Determination by court.--If the court 
                makes a determination, after considering each 
                of the factors in subparagraph (B), that the 
                application of paragraph (1) would result in an 
                award of punitive damages that is insufficient 
                to punish the egregious conduct of the 
                defendant against whom the punitive damages are 
                to be awarded or to deter such conduct in the 
                future, the court shall determine the 
                additional amount of punitive damages (referred 
                to in this paragraph as the ``additional 
                amount'') in excess of the amount determined in 
                accordance with paragraph (1) to be awarded 
                against the defendant in a separate proceeding 
                in accordance with this paragraph.
                    (B) Factors for consideration.--In any 
                proceeding under paragraph (A), the court shall 
                consider--
                            (i) the extent to which the 
                        defendant acted with actual malice;
                            (ii) the likelihood that serious 
                        harm would arise from the conduct of 
                        the defendant;
                            (iii) the degree of the awareness 
                        of the defendant of that likelihood;
                            (iv) the profitability of the 
                        misconduct to the defendant;
                            (v) the duration of the misconduct 
                        and any concurrent or subsequent 
                        concealment of the conduct by the 
                        defendant;
                            (vi) the attitude and conduct of 
                        the defendant upon the discovery of the 
                        misconduct and whether the misconduct 
                        has terminated;
                            (vii) the financial condition of 
                        the defendant; and
                            (viii) the cumulative deterrent 
                        effect of other losses, damages, and 
                        punishment suffered by the defendant as 
                        a result of the misconduct, reducing 
                        the amount of punitive damages on the 
                        basis of the economic impact and 
                        severity of all measures to which the 
                        defendant has been or may be subjected, 
                        including--
                                    (I) compensatory and 
                                punitive damage awards to 
                                similarly situated claimants;
                                    (II) the adverse economic 
                                effect of stigma or loss of 
                                reputation;
                                    (III) civil fines and 
                                criminal and administrative 
                                penalties; and
                                    (IV) stop sale, cease and 
                                desist, and other remedial or 
                                enforcement orders.
                    (C) Requirements for awarding additional 
                amount.--If the court awards an additional 
                amount pursuant to this subsection, the court 
                shall state its reasons for setting the amount 
                of the additional amount in findings of fact 
                and conclusions of law.
                    (D) Preemption.--This section does not 
                create a cause of action for punitive damages 
                and does not preempt or supersede any State or 
                Federal law to the extent that such law would 
                further limit the award of punitive damages. 
                Nothing in this subsection shall modify or 
                reduce the ability of courts to order 
                remittiturs.
            (4) Application by court.--This subsection shall be 
        applied by the court and application of this subsection 
        shall not be disclosed to the jury. Nothing in this 
        subsection shall authorize the court to enter an award 
        of punitive damages in excess of the jury's initial 
        award of punitive damages.
    (c) Bifurcation at Request of Any Party.--
            (1) In general.--At the request of any party the 
        trier of fact in any action that is subject to this 
        section shall consider in a separate proceeding, held 
        subsequent to the determination of the amount of 
        compensatory damages, whether punitive damages are to 
        be awarded for the harm that is the subject of the 
        action and the amount of the award.
            (2) Inadmissibility of evidence relative only to a 
        claim of punitive damages in a proceeding concerning 
        compensatory damages.--If any party requests a separate 
        proceeding under paragraph (1), in a proceeding to 
        determine whether the claimant may be awarded 
        compensatory damages, any evidence, argument, or 
        contention that is relevant only to the claim of 
        punitive damages, as determined by applicable State 
        law, shall be inadmissible.

SEC. 109. LIABILITY FOR CERTAIN CLAIMS RELATING TO DEATH.

    In any civil action in which the alleged harm to the 
claimant is death and, as of the effective date of this Act, 
the applicable State law provides, or has been construed to 
provide, for damages only punitive in nature, a defendant may 
be liable for any such damages without regard to section 108, 
but only during such time as the State law so provides. This 
section shall cease to be effective September 1, 1996.

SEC. 110. SEVERAL LIABILITY FOR NONECONOMIC LOSS.

    (a) General Rule.--In a product liability action, the 
liability of each defendant for noneconomic loss shall be 
several only and shall not be joint.
    (b) Amount of Liability.--
            (1) In general.--Each defendant shall be liable 
        only for the amount of noneconomic loss allocated to 
        the defendant in direct proportion to the percentage of 
        responsibility of the defendant (determined in 
        accordance with paragraph (2)) for the harm to the 
        claimant with respect to which the defendant is liable. 
        The court shall render a separate judgment against each 
        defendant in an amount determined pursuant to the 
        preceding sentence.
            (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 claimant's harm, whether or 
        not such person is a party to the action.

SEC. 111. WORKERS' COMPENSATION SUBROGATION.

    (a) General Rule.--
            (1) Right of subrogation.--
                    (A) In general.--An insurer shall have a 
                right of subrogation against a manufacturer or 
                product seller to recover any claimant's 
                benefits relating to harm that is the subject 
                of a product liability action that is subject 
                to this Act.
                    (B) Written notification.--To assert a 
                right of subrogation under subparagraph (A), 
                the insurer shall provide written notice to the 
                court in which the product liability action is 
                brought.
                    (C) Insurer not required to be a party.--An 
                insurer shall not be required to be a necessary 
                and proper party in a product liability action 
                covered under subparagraph (A).
            (2) Settlements and other legal proceedings.--
                    (A) In general.--In any proceeding relating 
                to harm or settlement with the manufacturer or 
                product seller by a claimant who files a 
                product liability action that is subject to 
                this Act, an insurer may participate to assert 
                a right of subrogation for claimant's benefits 
                with respect to any payment made by the 
                manufacturer or product seller by reason of 
                such harm, without regard to whether the 
                payment is made--
                            (i) as part of a settlement;
                            (ii) in satisfaction of judgment;
                            (iii) as consideration for a 
                        covenant not to sue; or
                            (iv) in another manner.
                    (B) Written notification.--Except as 
                provided in subparagraph (C), an employee shall 
                not make any settlement with or accept any 
                payment from the manufacturer or product seller 
                without written notification to the insurer.
                    (C) Exemption.--Subparagraph (B) shall not 
                apply in any case in which the insurer has been 
                compensated for the full amount of the 
                claimant's benefits.
            (3) Harm resulting from action of employer or 
        coemployee.--
                    (A) In general.--If, with respect to a 
                product liability action that is subject to 
                this Act, the manufacturer or product seller 
                attempts to persuade the trier of fact that the 
                harm to the claimant was caused by the fault of 
                the employer of the claimant or any coemployee 
                of the claimant, the issue of that fault shall 
                be submitted to the trier of fact, but only 
                after the manufacturer or product seller has 
                provided timely written notice to the insurer.
                    (B) Rights of insurer.--
                            (i) In general.--Notwithstanding 
                        any other provision of law, with 
                        respect to an issue of fault submitted 
                        to a trier of fact pursuant to 
                        subparagraph (A), an insurer shall, in 
                        the same manner as any party in the 
                        action (even if the insurer is not a 
                        named party in the action), have the 
                        right to--
                                    (I) appear;
                                    (II) be represented;
                                    (III) introduce evidence;
                                    (IV) cross-examine adverse 
                                witnesses; and
                                    (V) present arguments to 
                                the trier of fact.
                            (ii) Last issue.--The issue of harm 
                        resulting from an action of an employer 
                        or coemployee shall be the last issue 
                        that is submitted to the trier of fact.
                    (C) Reduction of damages.--If the trier of 
                fact finds by clear and convincing evidence 
                that the harm to the claimant that is the 
                subject of the product liability action was 
                caused by the fault of the employer or a 
                coemployee of the claimant--
                            (i) the court shall reduce by the 
                        amount of the claimant's benefits--
                                    (I) the damages awarded 
                                against the manufacturer or 
                                product seller; and
                                    (II) any corresponding 
                                insurer's subrogation lien; and
                            (ii) the manufacturer or product 
                        seller shall have no further right by 
                        way of contribution or otherwise 
                        against the employer.
                    (D) Certain rights of subrogation not 
                affected.--Notwithstanding a finding by the 
                trier of fact described in subparagraph (C), 
                the insurer shall not lose any right of 
                subrogation related to any--
                            (i) intentional tort committed 
                        against the claimant by a coemployee; 
                        or
                            (ii) act committed by a coemployee 
                        outside the scope of normal work 
                        practices.
    (b) Attorney's Fees.--If, in a product liability action 
that is subject to this section, the court finds that harm to a 
claimant was not caused by the fault of the employer or a 
coemployee of the claimant, the manufacturer or product seller 
shall reimburse the insurer for reasonable attorney's fees and 
court costs incurred by the insurer in the action, as 
determined by the court.

                TITLE II--BIOMATERIALS ACCESS ASSURANCE

SEC. 201. SHORT TITLE.

    This title may be cited as the ``Biomaterials Access 
Assurance Act of 1996''.

SEC. 202. FINDINGS.

    Congress finds that--
            (1) each year millions of citizens of the United 
        States depend on the availability of lifesaving or life 
        enhancing medical devices, many of which are 
        permanently implantable within the human body;
            (2) a continued supply of raw materials and 
        component parts is necessary for the invention, 
        development, improvement, and maintenance of the supply 
        of the devices;
            (3) most of the medical devices are made with raw 
        materials and component parts that--
                    (A) are not designed or manufactured 
                specifically for use in medical devices; and
                    (B) come in contact with internal human 
                tissue;
            (4) the raw materials and component parts also are 
        used in a variety of nonmedical products;
            (5) because small quantities of the raw materials 
        and component parts are used for medical devices, sales 
        of raw materials and component parts for medical 
        devices constitute an extremely small portion of the 
        overall market for the raw materials and medical 
        devices;
            (6) under the Federal Food, Drug, and Cosmetic Act 
        (21 U.S.C. 301 et seq.), manufacturers of medical 
        devices are required to demonstrate that the medical 
        devices are safe and effective, including demonstrating 
        that the products are properly designed and have 
        adequate warnings or instructions;
            (7) notwithstanding the fact that raw materials and 
        component parts suppliers do not design, produce, or 
        test a final medical device, the suppliers have been 
        the subject of actions alleging inadequate--
                    (A) design and testing of medical devices 
                manufactured with materials or parts supplied 
                by the suppliers; or
                    (B) warnings related to the use of such 
                medical devices;
            (8) even though suppliers of raw materials and 
        component parts have very rarely been held liable in 
        such actions, such suppliers have ceased supplying 
        certain raw materials and component parts for use in 
        medical devices because the costs associated with 
        litigation in order to ensure a favorable judgment for 
        the suppliers far exceeds the total potential sales 
        revenues from sales by such suppliers to the medical 
        device industry;
            (9) unless alternate sources of supply can be 
        found, the unavailability of raw materials and 
        component parts for medical devices will lead to 
        unavailability of lifesaving and life-enhancing medical 
        devices;
            (10) because other suppliers of the raw materials 
        and component parts in foreign nations are refusing to 
        sell raw materials or component parts for use in 
        manufacturing certain medical devices in the United 
        States, the prospects for development of new sources of 
        supply for the full range of threatened raw materials 
        and component parts for medical devices are remote;
            (11) it is unlikely that the small market for such 
        raw materials and component parts in the United States 
        could support the large investment needed to develop 
        new suppliers of such raw materials and component 
        parts;
            (12) attempts to develop such new suppliers would 
        raise the cost of medical devices;
            (13) courts that have considered the duties of the 
        suppliers of the raw materials and component parts have 
        generally found that the suppliers do not have a duty--
                    (A) to evaluate the safety and efficacy of 
                the use of a raw material or component part in 
                a medical device; and
                    (B) to warn consumers concerning the safety 
                and effectiveness of a medical device;
            (14) attempts to impose the duties referred to in 
        subparagraphs (A) and (B) of paragraph (13) on 
        suppliers of the raw materials and component parts 
        would cause more harm than good by driving the 
        suppliers to cease supplying manufacturers of medical 
        devices; and
            (15) in order to safeguard the availability of a 
        wide variety of lifesaving and life-enhancing medical 
        devices, immediate action is needed--
                    (A) to clarify the permissible bases of 
                liability for suppliers of raw materials and 
                component parts for medical devices; and
                    (B) to provide expeditious procedures to 
                dispose of unwarranted suits against the 
                suppliers in such manner as to minimize 
                litigation costs.

SEC. 203. DEFINITIONS.

    As used in this title:
            (1) Biomaterials supplier.--
                    (A) In general.--The term ``biomaterials 
                supplier'' means an entity that directly or 
                indirectly supplies a component part or raw 
                material for use in the manufacture of an 
                implant.
                    (B) Persons included.--Such term includes 
                any person who--
                            (i) has submitted master files to 
                        the Secretary for purposes of premarket 
                        approval of a medical device; or
                            (ii) licenses a biomaterials 
                        supplier to produce component parts or 
                        raw materials.
            (2) Claimant.--
                    (A) In general.--The term ``claimant'' 
                means any person who brings a civil action, or 
                on whose behalf a civil action is brought, 
                arising from harm allegedly caused directly or 
                indirectly by an implant, including a person 
                other than the individual into whose body, or 
                in contact with whose blood or tissue, the 
                implant is placed, who claims to have suffered 
                harm as a result of the implant.
                    (B) Action brought on behalf of an 
                estate.--With respect to an action brought on 
                behalf of or through the estate of an 
                individual into whose body, or in contact with 
                whose blood or tissue the implant is placed, 
                such term includes the decedent that is the 
                subject of the action.
                    (C) Action brought on behalf of a minor or 
                incompetent.--With respect to an action brought 
                on behalf of or through a minor or incompetent, 
                such term includes the parent or guardian of 
                the minor or incompetent.
                    (D) Exclusions.--Such term does not 
                include--
                            (i) a provider of professional 
                        health care services, in any case in 
                        which--
                                    (I) the sale or use of an 
                                implant is incidental to the 
                                transaction; and
                                    (II) the essence of the 
                                transaction is the furnishing 
                                of judgment, skill, or 
                                services; or
                            (ii) a person acting in the 
                        capacity of a manufacturer, seller, or 
                        biomaterials supplier.
            (3) Component part.--
                    (A) In general.--The term ``component 
                part'' means a manufactured piece of an 
                implant.
                    (B) Certain components.--Such term includes 
                a manufactured piece of an implant that--
                            (i) has significant non-implant 
                        applications; and
                            (ii) alone, has no implant value or 
                        purpose, but when combined with other 
                        component parts and materials, 
                        constitutes an implant.
            (4) Harm.--
                    (A) In general.--The term ``harm'' means--
                            (i) any injury to or damage 
                        suffered by an individual;
                            (ii) any illness, disease, or death 
                        of that individual resulting from that 
                        injury or damage; and
                            (iii) any loss to that individual 
                        or any other individual resulting from 
                        that injury or damage.
                    (B) Exclusion.--The term does not include 
                any commercial loss or loss of or damage to an 
                implant.
            (5) Implant.--The term ``implant'' means--
                    (A) a medical device that is intended by 
                the manufacturer of the device--
                            (i) to be placed into a surgically 
                        or naturally formed or existing cavity 
                        of the body for a period of at least 30 
                        days; or
                            (ii) to remain in contact with 
                        bodily fluids or internal human tissue 
                        through a surgically produced opening 
                        for a period of less than 30 days; and
                    (B) suture materials used in implant 
                procedures.
            (6) Manufacturer.--The term ``manufacturer'' means 
        any person who, with respect to an implant--
                    (A) is engaged in the manufacture, 
                preparation, propagation, compounding, or 
                processing (as defined in section 510(a)(1)) of 
                the Federal Food, Drug, and Cosmetic Act (21 
                U.S.C. 360(a)(1)) of the implant; and
                    (B) is required--
                            (i) to register with the Secretary 
                        pursuant to section 510 of the Federal 
                        Food, Drug, and Cosmetic Act (21 U.S.C. 
                        360) and the regulations issued under 
                        such section; and
                            (ii) to include the implant on a 
                        list of devices filed with the 
                        Secretary pursuant to section 510(j) of 
                        such Act (21 U.S.C. 360(j)) and the 
                        regulations issued under such section.
            (7) Medical device.--The term ``medical device'' 
        means a device, as defined in section 201(h) of the 
        Federal Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)) 
        and includes any device component of any combination 
        product as that term is used in section 503(g) of such 
        Act (21 U.S.C. 353(g)).
            (8) Raw material.--The term ``raw material'' means 
        a substance or product that--
                    (A) has a generic use; and
                    (B) may be used in an application other 
                than an implant.
            (9) Secretary.--The term ``Secretary'' means the 
        Secretary of Health and Human Services.
            (10) Seller.--
                    (A) In general.--The term ``seller'' means 
                a person who, in the course of a business 
                conducted for that purpose, sells, distributes, 
                leases, packages, labels, or otherwise places 
                an implant in the stream of commerce.
                    (B) Exclusions.--The term 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 an implant is incidental to 
                        the transaction and the essence of the 
                        transaction is the furnishing of 
                        judgment, skill, or services; or
                            (iii) any person who acts in only a 
                        financial capacity with respect to the 
                        sale of an implant.

SEC. 204. GENERAL REQUIREMENTS; APPLICABILITY; PREEMPTION.

    (a) General Requirements.--
            (1) In general.--In any civil action covered by 
        this title, a biomaterials supplier may raise any 
        defense set forth in section 205.
            (2) Procedures.--Notwithstanding any other 
        provision of law, the Federal or State court in which a 
        civil action covered by this title is pending shall, in 
        connection with a motion for dismissal or judgment 
        based on a defense described in paragraph (1), use the 
        procedures set forth in section 206.
    (b) Applicability.--
            (1) In general.--Except as provided in paragraph 
        (2), notwithstanding any other provision of law, this 
        title applies to any civil action brought by a 
        claimant, whether in a Federal or State court, against 
        a manufacturer, seller, or biomaterials supplier, on 
        the basis of any legal theory, for harm allegedly 
        caused by an implant.
            (2) Exclusion.--A civil action brought by a 
        purchaser of a medical device for use in providing 
        professional services against a manufacturer, seller, 
        or biomaterials supplier for loss or damage to an 
        implant or for commercial loss to the purchaser--
                    (A) shall not be considered an action that 
                is subject to this title; and
                    (B) shall be governed by applicable 
                commercial or contract law.
    (c) Scope of Preemption.--
            (1) In general.--This title supersedes any State 
        law regarding recovery for harm caused by an implant 
        and any rule of procedure applicable to a civil action 
        to recover damages for such harm only to the extent 
        that this title establishes a rule of law applicable to 
        the recovery of such damages.
            (2) Applicability of other laws.--Any issue that 
        arises under this title and that is not governed by a 
        rule of law applicable to the recovery of damages 
        described in paragraph (1) shall be governed by 
        applicable Federal or State law.
    (d) Statutory Construction.--Nothing in this title may be 
construed--
            (1) to affect any defense available to a defendant 
        under any other provisions of Federal or State law in 
        an action alleging harm caused by an implant; or
            (2) to create a cause of action or Federal court 
        jurisdiction pursuant to section 1331 or 1337 of title 
        28, United States Code, that otherwise would not exist 
        under applicable Federal or State law.

SEC. 205. LIABILITY OF BIOMATERIALS SUPPLIERS.

    (a) In General.--
            (1) Exclusion from liability.--Except as provided 
        in paragraph (2), a biomaterials supplier shall not be 
        liable for harm to a claimant caused by an implant.
            (2) Liability.--A biomaterials supplier that--
                    (A) is a manufacturer may be liable for 
                harm to a claimant described in subsection (b);
                    (B) is a seller may be liable for harm to a 
                claimant described in subsection (c); and
                    (C) furnishes raw materials or component 
                parts that fail to meet applicable contractual 
                requirements or specifications may be liable 
                for a harm to a claimant described in 
                subsection (d).
    (b) Liability as Manufacturer.--
            (1) In general.--A biomaterials supplier may, to 
        the extent required and permitted by any other 
        applicable law, be liable for harm to a claimant caused 
        by an implant if the biomaterials supplier is the 
        manufacturer of the implant.
            (2) Grounds for liability.--The biomaterials 
        supplier may be considered the manufacturer of the 
        implant that allegedly caused harm to a claimant only 
        if the biomaterials supplier--
                    (A)(i) has registered with the Secretary 
                pursuant to section 510 of the Federal Food, 
                Drug, and Cosmetic Act (21 U.S.C. 360) and the 
                regulations issued under such section; and
                    (ii) included the implant on a list of 
                devices filed with the Secretary pursuant to 
                section 510(j) of such Act (21 U.S.C. 360(j)) 
                and the regulations issued under such section;
                    (B) is the subject of a declaration issued 
                by the Secretary pursuant to paragraph (3) that 
                states that the supplier, with respect to the 
                implant that allegedly caused harm to the 
                claimant, was required to--
                            (i) register with the Secretary 
                        under section 510 of such Act (21 
                        U.S.C. 360), and the regulations issued 
                        under such section, but failed to do 
                        so; or
                            (ii) include the implant on a list 
                        of devices filed with the Secretary 
                        pursuant to section 510(j) of such Act 
                        (21 U.S.C. 360(j)) and the regulations 
                        issued under such section, but failed 
                        to do so; or
                    (C) is related by common ownership or 
                control to a person meeting all the 
                requirements described in subparagraph (A) or 
                (B), if the court deciding a motion to dismiss 
                in accordance with section 206(c)(3)(B)(i) 
                finds, on the basis of affidavits submitted in 
                accordance with section 206, that it is 
                necessary to impose liability on the 
                biomaterials supplier as a manufacturer because 
                the related manufacturer meeting the 
                requirements of subparagraph (A) or (B) lacks 
                sufficient financial resources to satisfy any 
                judgment that the court feels it is likely to 
                enter should the claimant prevail.
            (3) Administrative procedures.--
                    (A) In general.--The Secretary may issue a 
                declaration described in paragraph (2)(B) on 
                the motion of the Secretary or on petition by 
                any person, after providing--
                            (i) notice to the affected persons; 
                        and
                            (ii) an opportunity for an informal 
                        hearing.
                    (B) Docketing and final decision.--
                Immediately upon receipt of a petition filed 
                pursuant to this paragraph, the Secretary shall 
                docket the petition. Not later than 180 days 
                after the petition is filed, the Secretary 
                shall issue a final decision on the petition.
                    (C) Applicability of statute of 
                limitations.--Any applicable statute of 
                limitations shall toll during the period during 
                which a claimant has filed a petition with the 
                Secretary under this paragraph.
    (c) Liability as Seller.--A biomaterials supplier may, to 
the extent required and permitted by any other applicable law, 
be liable as a seller for harm to a claimant caused by an 
implant if--
            (1) the biomaterials supplier--
                    (A) held title to the implant that 
                allegedly caused harm to the claimant as a 
                result of purchasing the implant after--
                            (i) the manufacture of the implant; 
                        and
                            (ii) the entrance of the implant in 
                        the stream of commerce; and
                (B) subsequently resold the implant; or
            (2) the biomaterials supplier is related by common 
        ownership or control to a person meeting all the 
        requirements described in paragraph (1), if a court 
        deciding a motion to dismiss in accordance with section 
        206(c)(3)(B)(ii) finds, on the basis of affidavits 
        submitted in accordance with section 206, that it is 
        necessary to impose liability on the biomaterials 
        supplier as a seller because the related seller meeting 
        the requirements of paragraph (1) lacks sufficient 
        financial resources to satisfy any judgment that the 
        court feels it is likely to enter should the claimant 
        prevail.
    (d) Liability for Violating Contractual Requirements or 
Specifications.--A biomaterials supplier may, to the extent 
required and permitted by any other applicable law, be liable 
for harm to a claimant caused by an implant, if the claimant in 
an action shows, by a preponderance of the evidence, that--
            (1) the raw materials or component parts delivered 
        by the biomaterials supplier either--
                    (A) did not constitute the product 
                described in the contract between the 
                biomaterials supplier and the person who 
                contracted for delivery of the product; or
                    (B) failed to meet any specifications that 
                were--
                            (i) provided to the biomaterials 
                        supplier and not expressly repudiated 
                        by the biomaterials supplier prior to 
                        acceptance of delivery of the raw 
                        materials or component parts;
                            (ii)(I) published by the 
                        biomaterials supplier;
                            (II) provided to the manufacturer 
                        by the biomaterials supplier; or
                            (III) contained in a master file 
                        that was submitted by the biomaterials 
                        supplier to the Secretary and that is 
                        currently maintained by the 
                        biomaterials supplier for purposes of 
                        premarket approval of medical devices; 
                        or
                            (iii) included in the submissions 
                        for purposes of premarket approval or 
                        review by the Secretary under section 
                        510, 513, 515, or 520 of the Federal 
                        Food, Drug, and Cosmetic Act (21 U.S.C. 
                        360, 360c, 360e, or 360j), and received 
                        clearance from the Secretary if such 
                        specifications were provided by the 
                        manufacturer to the biomaterials 
                        supplier and were not expressly 
                        repudiated by the biomaterials supplier 
                        prior to the acceptance by the 
                        manufacturer of delivery of the raw 
                        materials or component parts; and
            (2) such conduct was an actual and proximate cause 
        of the harm to the claimant.

SEC. 206. PROCEDURES FOR DISMISSAL OF CIVIL ACTIONS AGAINST 
                    BIOMATERIALS SUPPLIERS.

    (a) Motion To Dismiss.--In any action that is subject to 
this title, a biomaterials supplier who is a defendant in such 
action may, at any time during which a motion to dismiss may be 
filed under an applicable law, move to dismiss the action 
against it on the grounds that--
            (1) the defendant is a biomaterials supplier; and
            (2)(A) the defendant should not, for the purposes 
        of--
                    (i) section 205(b), be considered to be a 
                manufacturer of the implant that is subject to 
                such section; or
                    (ii) section 205(c), be considered to be a 
                seller of the implant that allegedly caused 
                harm to the claimant; or
            (B)(i) the claimant has failed to establish, 
        pursuant to section 205(d), that the supplier furnished 
        raw materials or component parts in violation of 
        contractual requirements or specifications; or
            (ii) the claimant has failed to comply with the 
        procedural requirements of subsection (b).
    (b) Manufacturer of Implant Shall Be Named a Party.--The 
claimant shall be required to name the manufacturer of the 
implant as a party to the action, unless--
            (1) the manufacturer is subject to service of 
        process solely in a jurisdiction in which the 
        biomaterials supplier is not domiciled or subject to a 
        service of process; or
            (2) an action against the manufacturer is barred by 
        applicable law.
    (c) Proceeding on Motion To Dismiss.--The following rules 
shall apply to any proceeding on a motion to dismiss filed 
under this section:
            (1) Affidavits relating to listing and 
        declarations.--
                    (A) In general.--The defendant in the 
                action may submit an affidavit demonstrating 
                that defendant has not included the implant on 
                a list, if any, filed with the Secretary 
                pursuant to section 510(j) of the Federal Food, 
                Drug, and Cosmetic Act (21 U.S.C. 360(j)).
                    (B) Response to motion to dismiss.--In 
                response to the motion to dismiss, the claimant 
                may submit an affidavit demonstrating that--
                            (i) the Secretary has, with respect 
                        to the defendant and the implant that 
                        allegedly caused harm to the claimant, 
                        issued a declaration pursuant to 
                        section 205(b)(2)(B); or
                            (ii) the defendant who filed the 
                        motion to dismiss is a seller of the 
                        implant who is liable under section 
                        205(c).
            (2) Effect of motion to dismiss on discovery.--
                    (A) In general.--If a defendant files a 
                motion to dismiss under paragraph (1) or (2) of 
                subsection (a), no discovery shall be permitted 
                in connection to the action that is the subject 
                of the motion, other than discovery necessary 
                to determine a motion to dismiss for lack of 
                jurisdiction, until such time as the court 
                rules on the motion to dismiss in accordance 
                with the affidavits submitted by the parties in 
                accordance with this section.
                    (B) Discovery.--If a defendant files a 
                motion to dismiss under subsection (a)(2)(B)(i) 
                on the grounds that the biomaterials supplier 
                did not furnish raw materials or component 
                parts in violation of contractual requirements 
                or specifications, the court may permit 
                discovery, as ordered by the court. The 
                discovery conducted pursuant to this 
                subparagraph shall be limited to issues that 
                are directly relevant to--
                            (i) the pending motion to dismiss; 
                        or
                            (ii) the jurisdiction of the court.
            (3) Affidavits relating status of defendant.--
                    (A) In general.--Except as provided in 
                clauses (i) and (ii) of subparagraph (B), the 
                court shall consider a defendant to be a 
                biomaterials supplier who is not subject to an 
                action for harm to a claimant caused by an 
                implant, other than an action relating to 
                liability for a violation of contractual 
                requirements or specifications described in 
                subsection (d).
                    (B) Responses to motion to dismiss.--The 
                court shall grant a motion to dismiss any 
                action that asserts liability of the defendant 
                under subsection (b) or (c) of section 205 on 
                the grounds that the defendant is not a 
                manufacturer subject to such section 205(b) or 
                seller subject to section 205(c), unless the 
                claimant submits a valid affidavit that 
                demonstrates that--
                            (i) with respect to a motion to 
                        dismiss contending the defendant is not 
                        a manufacturer, the defendant meets the 
                        applicable requirements for liability 
                        as a manufacturer under section 205(b); 
                        or
                            (ii) with respect to a motion to 
                        dismiss contending that the defendant 
                        is not a seller, the defendant meets 
                        the applicable requirements for 
                        liability as a seller under section 
                        205(c).
            (4) Basis of ruling on motion to dismiss.--
                    (A) In general.--The court shall rule on a 
                motion to dismiss filed under subsection (a) 
                solely on the basis of the pleadings of the 
                parties made pursuant to this section and any 
                affidavits submitted by the parties pursuant to 
                this section.
                    (B) Motion for summary judgment.--
                Notwithstanding any other provision of law, if 
                the court determines that the pleadings and 
                affidavits made by parties pursuant to this 
                section raise genuine issues as concerning 
                material facts with respect to a motion 
                concerning contractual requirements and 
                specifications, the court may deem the motion 
                to dismiss to be a motion for summary judgment 
                made pursuant to subsection (d).
    (d) Summary Judgment.--
            (1) In general.--
                    (A) Basis for entry of judgment.--A 
                biomaterials supplier shall be entitled to 
                entry of judgment without trial if the court 
                finds there is no genuine issue as concerning 
                any material fact for each applicable element 
                set forth in paragraphs (1) and (2) of section 
                205(d).
                    (B) Issues of material fact.--With respect 
                to a finding made under subparagraph (A), the 
                court shall consider a genuine issue of 
                material fact to exist only if the evidence 
                submitted by claimant would be sufficient to 
                allow a reasonable jury to reach a verdict for 
                the claimant if the jury found the evidence to 
                be credible.
            (2) Discovery made prior to a ruling on a motion 
        for summary judgment.--If, under applicable rules, the 
        court permits discovery prior to a ruling on a motion 
        for summary judgment made pursuant to this subsection, 
        such discovery shall be limited solely to establishing 
        whether a genuine issue of material fact exists as to 
        the applicable elements set forth in paragraphs (1) and 
        (2) of section 205(d).
            (3) Discovery with respect to a biomaterials 
        supplier.--A biomaterials supplier shall be subject to 
        discovery in connection with a motion seeking dismissal 
        or summary judgment on the basis of the inapplicability 
        of section 205(d) or the failure to establish the 
        applicable elements of section 205(d) solely to the 
        extent permitted by the applicable Federal or State 
        rules for discovery against nonparties.
    (e) Stay Pending Petition for Declaration.--If a claimant 
has filed a petition for a declaration pursuant to section 
205(b)(3)(A) with respect to a defendant, and the Secretary has 
not issued a final decision on the petition, the court shall 
stay all proceedings with respect to that defendant until such 
time as the Secretary has issued a final decision on the 
petition.
    (f) Manufacturer Conduct of Proceeding.--The manufacturer 
of an implant that is the subject of an action covered under 
this title shall be permitted to file and conduct a proceeding 
on any motion for summary judgment or dismissal filed by a 
biomaterials supplier who is a defendant under this section if 
the manufacturer and any other defendant in such action enter 
into a valid and applicable contractual agreement under which 
the manufacturer agrees to bear the cost of such proceeding or 
to conduct such proceeding.
    (g) Attorney Fees.--The court shall require the claimant to 
compensate the biomaterials supplier (or a manufacturer 
appearing in lieu of a supplier pursuant to subsection (f)) for 
attorney fees and costs, if--
            (1) the claimant named or joined the biomaterials 
        supplier; and
            (2) the court found the claim against the 
        biomaterials supplier to be without merit and 
        frivolous.

        TITLE III--LIMITATIONS ON APPLICABILITY; EFFECTIVE DATE

SEC. 301. EFFECT OF COURT OF APPEALS DECISIONS.

    A decision by a Federal circuit court of appeals 
interpreting a provision of this Act (except to the extent that 
the decision is overruled or otherwise modified by the Supreme 
Court) shall be considered a controlling precedent with respect 
to any subsequent decision made concerning the interpretation 
of such provision by any Federal or State court within the 
geographical boundaries of the area under the jurisdiction of 
the circuit court of appeals.

SEC. 302. FEDERAL CAUSE OF ACTION PRECLUDED.

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

SEC. 303. EFFECTIVE DATE.

    This Act shall apply with respect to any action commenced 
on or after the date of the enactment of this Act without 
regard to whether the harm that is the subject of the action or 
the conduct that caused the harm occurred before such date of 
enactment.
    And the Senate agree to the same.
                From the Committee on the Judiciary, for 
                consideration of the House bill, and the Senate 
                amendment, and modifications committed to 
                conference:
                                   Henry Hyde,
                                   James Sensenbrenner, Jr.,
                                   George W. Gekas,
                                   Bob Inglis,
                                   Ed Bryant,
                From the Committee on Commerce, for 
                consideration of the House bill, and the Senate 
                amendment, and modifications committed to 
                conference:
                                   Tom Bliley,
                                   Michael Oxley,
                                   Christopher Cox,
                                 Managers on the Part of the House.

                                   Larry Pressler,
                                   Slade Gorton,
                                   Trent Lott,
                                   Ted Stevens,
                                   Olympia Snowe,
                                   John Ashcroft,
                                   J.J. Exon,
                                   John D. Rockefeller,
                                Managers on the Part of the Senate.
       JOINT EXPLANATORY STATEMENT OF THE COMMITTEE OF CONFERENCE

      The managers on the part of the House and the Senate at 
the conference on the disagreeing votes of the two Houses on 
the amendment of the Senate to the bill (H.R. 956), to 
establish legal standards and procedures for product liability 
litigation, and for other purposes, submit the following joint 
statement to the House and the Senate in explanation of the 
effect of the action agreed upon by the managers and 
recommended in the accompanying conference report:
      The Senate amendment struck all of the House bill after 
the enacting clause and inserted a substitute text.
      The House recedes from its disagreement to the amendment 
of the Senate with an amendment that is a substitute for the 
House bill and the Senate amendment. The differences between 
the House bill, the Senate amendment, and the substitute agreed 
to in conference are noted below, except for clerical 
corrections, conforming changes made necessary by agreements 
reached by the conferees, and minor drafting and clerical 
changes.
      The conferees incorporate by reference in this Statement 
of Managers the legislative history reflected in both House 
Report 104-64, Part 1 and Senate Report 104-69. To the extent 
not otherwise inconsistent with the conference agreement, those 
reports give expression to the intent of the conferees. (The 
conferees also take note of House Report 104-63, Part 1, which 
contains supplementary legislative history on a related bill.)

                   Short Title and Table of Contents

      The conferees, in section 1(a), modified the short title 
of the House bill to reflect the terms of the conference 
agreement. The conferees also decided that a table of contents 
would be helpful and therefore incorporated in section 1(b) the 
headings of the separate titles and sections of this 
legislation.

                         Findings and Purposes

      H.R. 956--but not the Senate amendment--included findings 
and purposes. The conferees decided it was important--in the 
legislation itself--to delineate the factual basis for 
congressional action and explain what Congress seeks to 
accomplish. The language adopted, contained in section 2, 
generally follows the House-passed bill with some 
modifications.
      Paragraph (1) of the findings in H.R. 956 was not 
included in the conference agreement because the conferees 
decided that describing misuses of the civil justice system in 
very broad terms was unnecessary. That paragraph had been 
written at a level of generality exceeding other findings. The 
omission of the paragraph should not be interpreted as 
reflecting adversely on its accuracy.
      Section 2(a)(9) of the conference agreement refers to two 
constitutional roles of the national government that are 
directly relevant to this legislation--``to remove barriers to 
interstate commerce and to protect due process rights.'' 
Although the latter was not included in H.R. 956's findings, 
legislative history clearly conveyed the House's recognition of 
the Federal government's due process related role. The report 
of the Committee on the Judiciary (House Report 104-64, Part 1) 
noted: Section 5 of the Fourteenth Amendment provides an 
independent constitutional ground for Congressional legislation 
limiting awards for punitive damages. Congress is given the 
authority, under section 5, ``to enforce, by appropriate 
legislation'' the provisions of the Fourteenth Amendment--which 
include a proscription on state deprivations of ``life, 
liberty, or property, without due process of law.'' [p. 8]
      Including explicit reference to due process rights in the 
findings is appropriate if the findings are to more fully 
reflect our understanding of the constitutional underpinnings 
for this legislation.
       The purposes of this legislation, as delineated in 
section 2(b), are ``to promote the free flow of goods and 
services and to lessen burdens on interstate commerce and to 
uphold constitutionally protected due process rights. * * *'' 
Upholding due process rights was an important objective the 
House sought to advance even though explicit reference to it 
did not appear in H.R. 956's statement of purposes. The 
Committee on the Judiciary's report (House Report 104-64, Part 
1) on H.R. 956 stated: ``The Committee acted to reform punitive 
damages not only to ameliorate adverse effects on interstate 
and foreign commerce but also to protect due process rights.'' 
[page 9] Adding the phrase ``uphold constitutionally protected 
due process rights'' to the purposes provides a more complete 
statement of congressional objectives.

                              Definitions

      Section 101 defines 18 terms for purposes of Title I. One 
of these terms--compensatory damages--is not defined in either 
H.R. 956 or the Senate amendment.

                       Applicability; Preemption

      Section 102 addresses preemption, relationship to State 
law, and effect on other law.

  Liability Rules Applicable to Product Sellers, Renters, and Lessors

      Both the House bill and Senate amendment included 
liability rules applicable to product sellers. Section 103 of 
the conference agreement is designed to reduce consumer costs 
and provide fair treatment for product sellers--defined to 
include those who sell, rent, or lease a product in the course 
of a business conducted for that purpose. To more fully reflect 
the application of this section's remedial provisions beyond 
sellers in the narrow sense of the word, the conference 
agreement refers to renters and lessors in section 103's title.
      As a general rule, liability of product sellers can be 
predicated on harm resulting from a product seller's (1) 
failure to exercise reasonable care, (2) breach of its own 
express warranty, or (3) intentional wrong-doing. The failure 
to exercise reasonable care requirement for potential liability 
applies not only to products sold by the product seller--as 
stated in H.R. 956--but also to products rented or leased by 
the product seller--as stated in the Senate amendment. The 
conferees recognize that the unfairness of imputing 
manufacturer conduct to others applies regardless of whether a 
product is sold, rented, or leased--and for that reason adopt 
the Senate language. That language is consistent with the 
intent of the House to make protections available in a sale 
situation also available in a rental or lease situation.
      Both H.R. 956 and the Senate amendment set forth those 
limited circumstances in which a product seller can be treated 
as a manufacturer of a product. One covered situation involves 
a court determination that ``the claimant would be unable to 
enforce a judgment against the manufacturer.'' In response to 
concerns raised after House consideration of the bill that 
claimants might not learn about such a judicial determination 
within the period of the statute of limitations--and therefore 
would be barred unfairly from proceeding against the seller--
the Senate included a provision tolling the statute of 
limitations for limited purposes ``from the date of the filing 
of a complaint against the manufacturer to the date that 
judgment is entered against the manufacturer.'' The conferees 
accept this provision because it safeguards a protection for 
claimants given expression in both bills. Since the conference 
agreement incorporates a uniform statute of limitations in 
section 106, the inclusion of this safeguard relating to the 
time bar is particularly appropriate.
      The conference agreement clarifies that State law, rather 
than the provisions of section 103, govern actions for 
negligent entrustment. State law, for example, will continue to 
apply to lawsuits predicated on the alleged negligence involved 
in giving a loaded gun to a young child or allowing an 
unlicensed and unqualified minor below driving age to operate 
an automobile. Similarly, the potential liability of a service 
station that sells gasoline to an obviously drunk driver will 
be determined under State law. Section 103(d) gives expression 
to the interest of each State in setting standards for 
determining whether conduct within its borders constitutes 
negligent entrustment.

            Defenses Involving Intoxicating Alcohol or Drugs

      Both H.R. 956 and the Senate amendment provide a complete 
defense to a product liability action in situations in which a 
claimant, under the influence of alcohol or drugs, is more than 
fifty percent responsible--as a result of such influence--for 
the accident or event resulting in the harm he or she sustains. 
A society that seeks to discourage alcohol and drug abuse 
should not allow individuals to collect damages when their 
disregard of such an important societal norm is the primary 
cause of accidents or events.
      The conference committee generally accepts the House 
formulation in section 104. The conferees did not incorporate 
the Senate reference to the defendant proving alcohol or drug 
related facts because the issue of who has the burden of proof 
on these issues is best left to State law. A requirement for 
the availability of the defense related to alcohol or drug use, 
under the Senate amendment, is that the claimant was ``under 
the influence.'' The House language, which was adopted, is more 
broadly worded and refers to the claimant being ``intoxicated 
or * * * under the influence.'' The House provision was 
accepted because the conferees want to ensure the availability 
of the defense relating to alcohol or drugs in cases in which 
State law may consider an individual to be ``intoxicated'' but 
not necessarily ``under the influence''--perhaps because the 
latter term does not have legal significance in a particular 
jurisdiction.
      The conferees specifically incorporate the Controlled 
Substances Act definition of controlled substance in the 
conference agreement's delineation of what the term ``drug'' 
means--following the House version in that respect. The Senate 
amendment was silent in this regard. The reference to the 
Controlled Substances Act will foster uniformity in decisions 
by State courts on whether particular substances constitute 
drugs. A substance that is taken by a claimant in accordance 
with the terms of a lawfully issued prescription, however, is 
not considered a drug for purposes of this section. The policy 
fostered is the denial of recovery to those whose accidents are 
primarily caused by the abuse of drugs.
      Although the use of controlled substances in accordance 
with the terms of lawfully issued prescriptions can lead to 
accidents--in circumstances, for example, where one's ability 
to drive may be impaired--the conferees leave to individual 
States the responsibility of resolving whether potential 
recovery is defeated by such conduct. The conference agreement 
focuses on the most egregious conduct implicating Federal 
interests--noting the national market for illegal drugs and the 
transportation of illegal drugs across State lines and in 
international commerce.
      The Senate provision's reference to a drug that ``was not 
prescribed by a physician for use by the claimant'' does not 
cover situations in which the terms of a lawfully issued 
prescription are disregarded--perhaps by consuming excessive 
quantities. The conferees conclude, however, that individuals 
who abuse prescription drugs lack sufficient equities to 
recover for accidents primarily caused by their drug use--and 
for that reason refer to any controlled substance ``taken by 
the claimant other than in accordance with the terms of a 
lawfully issued prescription'', thus opting for the broader 
House formulation.
      Finally, the House version of this section is modified to 
cover controlled substances ``not legally prescribed for use by 
the claimant'' in addition to controlled substances ``taken by 
the claimant other than in accordance with the terms of a 
lawfully issued prescription.'' The phrase ``not legally 
prescribed for use by the claimant'' makes unambiguous the 
requirement that the prescription be for the claimant's own 
use. A claimant cannot cause an accident after using someone 
else's prescription, even in accordance with its terms, and 
recover damages.
      The phrase ``legally prescribed'' is a variation on the 
Senate provision's reference to ``prescribed by a physician.'' 
The change takes into account the fact that the right to 
prescribe medication is not limited to physicians in every 
jurisdiction. The potential applicability of defenses involving 
drugs should not depend on whether a legally issued 
prescription comes from a physician or non-physician--
particularly in view of the fact that physicians may not be 
available or accessible in some areas of the country.

                          Misuse or Alteration

      Both H.R. 956 and the Senate amendment include an 
important reform--incorporated in section 105 of the conference 
agreement--designed to assure manufacturers and sellers that 
they can develop and sell products without undue concern about 
unknowable and unpredictable liability attributable to claims 
resulting from the misuse or alteration of their products.
      Subsection (a)(1) of section 105 generally follows the 
House language. Damages will be reduced because of misuse or 
alteration, however, not only in cases of liability arising 
under State law--as H.R. 956 provides--but also in possible 
cases of liability arising under Federal law. Damages are 
reduced if the defendant establishes the requisite link between 
a certain percentage of the claimant's harm and specified 
conduct.
      Although the ``preponderance of the evidence'' standard 
will apply--as the House version explicitly states--the 
conference agreement deletes reference to this evidentiary 
standard in section 105(a) in order to avoid any possible 
negative inference from the fact that the legislation does not 
refer to ``preponderance of the evidence'' in other sections. 
Preponderance of the evidence is the usual standard in civil 
cases--including product liability cases. The conferees' intent 
is that courts apply the usual standard in all situations 
covered by this legislation except where another standard is 
explicitly mandated.
      Subsection (a)(2) follows Senate language. Although this 
provision appears to state a self-evident proposition--that a 
use intended by the manufacturer does not constitute a misuse 
or alteration--it is included to alleviate concerns that some 
courts might reach a different result.
      Subsection (b) follows House language and states the 
general rule that a claimant's damages will not be reduced 
because of misuse or alteration by others in the workplace who 
are immune from suit by the claimant. The rationale is that 
Federal law should not mandate a reduction in damages for a 
claimant who cannot collect from an employer or co-employee for 
misuse or alteration. The conference agreement, however, carves 
an exception to the general prohibition against such reductions 
by specifying that damages will not be reduced ``except as 
otherwise provided in section 111'' of the conference agreement 
dealing with workers' compensation subrogation.
      The conferees intend that, consistent with normal 
principles of law, this section shall supersede State law 
concerning misuse or alteration of a product only to the extent 
that State law is inconsistent with this section. The deletion 
of language in the Senate amendment on this point was intended 
merely to avoid any possible inference that it is not intended 
to be the case in other sections of the legislation.

                         Statute of Limitations

      The fact that consumers generally do not live in the 
States in which the products they purchase and use are 
manufactured creates confusion and uncertainty for 
manufacturers when the law allows determinations of whether 
product liability actions are barred by a statute of 
limitations to vary from jurisdiction to jurisdiction. This 
uncertainty and unpredictability ultimately means higher prices 
for consumers. In addition, it is unfair to deny the potential 
for a remedy to an injured party living in one State that may 
be available to an injured party using the same product in 
another State. The conferees conclude that uniformity is needed 
and agree that two years is a reasonable limitation on the 
period of time for the filing of a lawsuit by an injured 
individual--regardless of where he or she may reside. This 
decision is reflected in the language contained in section 
106(a).
      The conferees expect that in most cases legal actions 
will be brought within two years of the accident or injury, 
because generally individuals have knowledge--or can be charged 
with knowledge--of the resulting harm and its cause at the time 
of an injury. An inflexible rule linking the running of the 
statute of limitations to the time of injury, however, would be 
unfair to those few injured parties who could not--despite the 
exercise of reasonable care--discover the harm and its cause. 
To address the exigencies of those situations, the conferees 
adopted the language of the Senate amendment referencing the 
date ``on which the claimant discovered or, in the exercise of 
reasonable care, should have discovered'' the harm and its 
cause.

                           Statute of Repose

      Both the House bill and Senate amendment included 
provisions to protect manufacturers against stale claims that 
arise many years after a product's first intended use. A 
statute of repose would allow U.S. manufacturers to compete 
with foreign companies that have entered the American 
marketplace in recent years and face no liability exposure for 
very old products. Section 106(b) advances U.S. 
competitiveness, preserves and expands employment opportunities 
here at home, and protects American consumers from the higher 
prices for goods and services that result from excessive 
litigation related expenses, inflated settlement offers, and 
increased liability insurance rates.
      The statute of repose contained in the conference 
agreement will, for durable goods, generally bar product 
liability actions that are not filed within 15 years of a 
product's delivery. The time of delivery refers to the date 
that the product reaches its first purchaser or lessee who was 
not engaged in the business of selling or leasing the product 
or of using the product as a component in the manufacture of 
another product. The only exceptions to the statute of repose 
that courts appropriately can recognize are those explicitly 
provided for in section 106(b)(3) itself. The 15 year time 
period is taken from the House bill.
      Section 106(b) adopts Senate language making the time bar 
applicable only to durable goods. Section 106(b)(2) is also 
language from the Senate amendment. It provides for deferring 
to State law time bars--on actions covered by this 
legislation--that are shorter than 15 years. The conferees 
believe that States should remain free to impose time limits of 
less than 15 years--a concept given expression in section 
106(b)(2). Such State limitations are not inconsistent with the 
objectives of section 106(b)--including fostering a more 
conducive environment for U.S. companies to compete in the 
global marketplace. Furthermore, nothing in the conference 
agreement is to be interpreted to preempt state statutes of 
repose which may apply to goods other than durable goods as 
defined in this agreement.
      Section 106(c) is a transition provision that permits 
product liability actions to be brought within one year of the 
date of enactment in situations in which the application of the 
statute of repose (or statute of limitations) shortens the 
period otherwise available under State law. The provision 
protects potential claimants by affording them a fair and 
reasonable opportunity to adjust to time limitations contained 
in section 106.

                     Alternative Dispute Resolution

      Section 107 incorporates a provision of the Senate 
amendment dealing with alternative dispute resolution.

                            Punitive Damages

      The requirement of ``conscious, flagrant indifference to 
the rights or safety of others'' in section 108(a) makes it 
clear that punitive damages may be awarded only in the most 
serious cases. Punitive damages are not intended as 
compensation for injured parties. Rather, they are intended to 
punish and to deter wrongful conduct.
      The conferees understand that punitive damages can be 
awarded in cases of intentional harm. For this reason, it was 
not felt necessary to express the concept explicitly. Thus, the 
conference agreement does not retain the language contained in 
the House passed bill regarding conduct ``specifically intended 
to cause harm.''
      Section 108(b) imposes a limitation on punitive damages--
with a special rule applicable to individuals of limited net 
worth and businesses or entities with small numbers of 
employees. The limitation on punitive damages cannot be 
disclosed to the jury. A punitive damage award may be appealed 
even if it falls within the limitation. Nothing in the bill 
prevents a trial court (and each reviewing court) from 
reviewing punitive damage awards individually and determining 
whether the award is appropriate under the particular 
circumstances of that case.
      Although the conferees establish a mechanism for awarding 
additional punitive damages in limited circumstances 
(``egregious conduct'' on the part of the defendant and a 
punitive damages jury verdict insufficient to punish such 
egregious conduct, or to deter the defendant), it is 
anticipated that occasions for additional awards will be very 
limited indeed. Findings of fact and conclusions of law 
relating to the award of additional punitive damages are 
designed both to ensure that judges carefully consider such 
decisions and to facilitate appellate review. The court may not 
enter an award of punitive damages in excess of the amount of 
punitive damages originally assessed by the jury. The 
additional award provisions do not apply in cases covered by 
section 108(b)(2)--actions against an individual whose net 
worth does not exceed $500,000 or against entities that have 
fewer than 25 full-time employees.
      Section 108(c)(1) clarifies that a separate proceeding on 
punitive damages--pursuant to a bifurcation request of any 
party--shall be held subsequent to the determination of the 
amount of compensatory damages. This order of proceedings, 
consistent with the intent of both the House and Senate, is 
being made explicit to avoid any possible confusion. A 
determination of punitive damages first can adversely and 
unfairly influence financial markets and result in 
inappropriate pressure on defendants to settle. Punitive 
damages expressed as a multiple of compensatory damages to be 
determined later may not result in any liability if a different 
jury considering compensatory damages decides in favor of the 
defendant. This potential verdict for a defendant, however, may 
come too late because of the realities of the business world.
      The conferees clarify in section 108(c)(2) that it is 
improper not only to offer evidence--but also to raise 
arguments or contentions--relevant only to a claim of punitive 
damages in the compensatory damages proceeding, because of the 
potential prejudicial effects. The conferees' objective is to 
avoid infecting determinations of liability--or the amount of 
compensatory damages--with such irrelevant information.

                  Liability for Claims Involving Death

      Section 109 incorporates a provision of the Senate 
amendment designed to address a situation unique to one State.

                 Several Liability for Noneconomic Loss

      The language of section 110 on several liability for 
noneconomic loss in product liability cases substantially 
follows the Senate amendment. The rule of several liability for 
noneconomic loss applies to all product liability actions 
nationwide.
      The conference agreement, based on the Senate amendment, 
clearly states that in allocating noneconomic damages to a 
defendant, ``the trier of fact shall determine the percentage 
of responsibility of each person responsible for the claimant's 
harm, whether or not such person is a party to the action.'' 
[Emphasis added] The Senate formulation reflected here is fully 
consistent with the intent of the House as expressed in Report 
Number 104-64, Part 1: ``[T]he trier of fact will determine the 
proportion of responsibility of each person responsible for the 
claimant's harm, without regard to whether or not such person 
is a party to the action.'' pp. 13-14. Persons who may be 
responsible for the claimant's harm include, but are not 
necessarily limited to, defendants, third-party defendants, 
settled parties, nonparties, and persons or entities that 
cannot be tried (e.g., bankrupt persons, employers and other 
immune entities).
      The House passed version specified that the section 
``does not preempt or supersede any State or Federal law to the 
extent that such law would further limit the application of the 
theory of joint liability to any kind of damages.'' The 
conferees have not included this language in the conference 
report itself because it is superfluous and self-evident. 
Reference is made to it in the statement of managers, however, 
to rebut any possible negative inference from its omission. The 
quoted language itself reflects the conference agreement's 
intent.

                   Workers' Compensation Subrogation

      Section 111(a)(1)(A) provides that, in any product 
liability action involving a workplace injury, an insurer shall 
have a right of subrogation. Section 111(a)(1)(B) provides 
that, to assert a right of subrogation, an insurer must provide 
the court with written notice that it is asserting a right of 
subrogation. Section 111(a)(1)(C) states that the insurer need 
not be a necessary party to the product liability action. Thus, 
an employee can pursue a product liability action against a 
manufacturer without regard to the insurer's participation in 
the action. This section focuses on eliminating unsafe 
workplaces and is, therefore, applicable in all actions where 
employer or coemployee fault for a claimant's harm is at issue. 
Conversely, section 111 does not apply in cases where the 
product liability defendant chooses not to raise employer or 
coemployer fault as a defense.
      Section 111(a)(2)(A) preserves the right of an insurer to 
assert a right of subrogation against payment made by a product 
liability defendant, without regard to whether the payment is 
made as part of a settlement, in satisfaction of a judgment, as 
consideration for a covenant not to sue, or for any other 
reason. ``Claimant's benefits'' is defined in section 101(3) 
and is a broad term which includes the total workers' 
compensation award, including compensation representing lost 
wages, payments made by way of an annuity, health care 
expenses, and all other payments made by the insurer for the 
benefit of the employee to compensate for a workplace injury.
      Section 111(a)(3) provides the mechanism for increased 
workplace safety. Under section 111(a)(3)(A), a product 
liability defendant may attempt to prove to the trier of fact 
that the claimant's injury was caused by the fault of the 
claimant's employer or a coemployee. The term ``employer 
fault'' means that the conduct of the employer or a coemployee 
was a substantial cause of the claimant's harm or contributed 
to the claimant's harm in a meaningful way; it is more than a 
de minimus level of fault. Section 111(a)(3)(C)(i) provides 
that, if the trier of fact finds by clear and convincing 
evidence that the claimant's injury was caused by the fault of 
the claimant's employer or a coemployee, the product liability 
damages award and, correspondingly, the insurer's subrogation 
lien shall be reduced by the amount of the claimant's benefits. 
In no case shall the employee's third-party damage award 
reduction exceed the amount of the subrogation lien. Thus, the 
amount the injured employee would receive remains totally 
unaffected. The Act merely provides that the insurer will not 
be able to recover workers' compensation benefits it paid to 
the employee if it is found by clear and convincing evidence 
that the claimant's harm was caused by the fault of the 
employer or a coemployee.

                              Biomaterials

      Title II of the conference agreement contains the 
``Biomaterials Access Assurance Act of 1996.'' A similar title 
passed both as a part of the House bill and the Senate 
amendment. Title II is intended to provide a defense to 
suppliers of materials or parts which are used to manufacture 
implantable medical devices. The definition of ``medical 
device'' in existing law, which is incorporated by reference 
into Title II, would limit this defense to a device which does 
not ``achieve any of its principal intended purposes through 
chemical action within or on the body of man * * * '', in 
short, devices which do not contain drugs.
       Newly patented devices, and others now in development, 
are manufactured from ``parts'' intended to be covered by Title 
II, but also contain an active ingredient or drug. The purpose 
of such devices is long term (up to one year) release of such 
materials into the body. Such devices can introduce medications 
affecting numerous bodily functions, previously only available 
by regular injections or oral dosages.
      The conferees adopted a new definition which brings the 
``parts,'' but not the active ingredients, used in such 
``combination products'' (as that term is used in section 
503(g) of the Act) within the purview of this section. This 
will ensure that the development and availability of such 
devices will not be impaired because of the same liability 
concerns affecting the availability of materials for other 
types of implants.

                       Court of Appeal Decisions

      Section 301 describes the precedential effect of certain 
Federal appellate decisions. It is based on a provision of the 
Senate amendment.

                        Federal Cause of Action

      Both H.R. 956 and the Senate amendment include provisions 
on preclusion. Section 302 incorporates the language of the 
House bill.

                             Effective Date

      The effective date provision of H.R. 956 references 
actions commenced ``after'' the enactment date. Corresponding 
Senate provisions refer to actions ``on or after'' the date of 
enactment and clarify that the effective date is without regard 
to whether the relevant harm or conduct occurred before the 
enactment date. The conferees, in section 303, accept the ``on 
or after'' formulation and the clarifying clause from the 
Senate amendment.

                From the Committee on the Judiciary, for 
                consideration of the House bill, and the Senate 
                amendment, and modifications committed to 
                conference:
                                   Henry Hyde,
                                   James Sensenbrenner, Jr.,
                                   George W. Gekas,
                                   Bob Inglis,
                                   Ed Bryant,
                From the Committee on Commerce, for 
                consideration of the House bill, and the Senate 
                amendment, and modifications committed to 
                conference:
                                   Tom Bliley,
                                   Michael Oxley,
                                   Christopher Cox,
                                 Managers on the Part of the House.

                                   Larry Pressler,
                                   Slade Gorton,
                                   Trent Lott,
                                   Ted Stevens,
                                   Olympia Snowe,
                                   John Ashcroft,
                                   J.J. Exon,
                                   John D. Rockefeller,
                                Managers on the Part of the Senate.


                                
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