[House Report 106-498]
[From the U.S. Government Publishing Office]



106th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     106-498

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   PROVIDING FOR THE CONSIDERATION OF H.R. 2366, THE SMALL BUSINESS 
                      LIABILITY REFORM ACT OF 2000

                                _______
                                

 February 15, 2000.--Referred to the House Calendar and ordered to be 
                                printed

                                _______
                                

    Mr. Linder, from the Committee on Rules, submitted the following

                              R E P O R T

                       [To accompany H. Res. 423]

    The Committee on Rules, having had under consideration 
House Resolution 423, by a nonrecord vote, report the same to 
the House with the recommendation that the resolution be 
adopted.

                summary of provisions of the resolution

    The resolution provides for the consideration of H.R. 2366, 
the Small Business Liability Reform Act of 2000, under a 
structured rule. The rule provides one hour of general debate 
dividing equally between the chairman and ranking minority 
member of the Committee on the Judiciary.
    The rule makes in order the Committee on the Judiciary 
amendment in the nature of a substitute now printed in the bill 
as an original bill for the purpose of amendment. The rule 
makes in order only those amendments printed in this report. 
The rule provides that the amendments made in order may be 
offered only in the order printed in this report, may be 
offered only by a Member designated in this report, shall be 
considered as read, shall be debatable for the time specified 
in this report equally divided and controlled by the proponent 
and an opponent, shall not be subject to amendment, and shall 
not be subject to a demand for a division of the question in 
the House or in the Committee of the Whole. The rule waives all 
points of order against the amendments printed in this report, 
which is necessary only for technical reasons.
    The rule allows the Chairman of the Committee of the Whole 
to postpone votes during consideration of the bill, and to 
reduce voting time to five minutes on a postponed question if 
the vote follows a fifteen minute vote. Finally, the rule 
provides for one motion to recommit, with or without 
instructions.

                            committee votes

    Pursuant to clause 3(b) of House rule XIII the results of 
each record vote on an amendment or motion to report, together 
with the names of those voting for and against, are printed 
below:

Rules Committee record vote No. 67

    Date: February 15, 2000.
    Measure: H.R. 2366, the Small Business Liability Reform Act 
of 2000.
    Motion By: Mrs. Slaughter.
    Summary of Motion: Make in order the Lofgren/McCarthy(NY)/
DeLauro/DeGette/Carson amendment that preserved several causes 
of action that are being used by cities and counties to hold 
manufacturers of cheap Saturday-night specials and bad-apple 
gun dealers accountable by exempting those causes of action 
from the manufacturer and product seller titles of the bill.
    Results: Defeated 3 to 6.
    Vote by Member: Goss--Nay; Pryce--Nay; Hastings--Nay; 
Sessions--Nay; Reynolds--Nay; Moakley--Yea; Hall--Yea; 
Slaughter--Yea; Dreier--Nay.

Amendments made in order under the rule to H.R. 2366--The Small 
        Business Liability Reform Act

    Rogan/Hutchinson: Replaces section 103 (limitations on 
punitive damages) to allow a court to exceed the punitive 
damage caps in the event it finds by clear and convincing 
evidence that the defendant acted with specific intent to cause 
the type of harm for which the action was brought. (10 minutes)
    Moran (VA): Adds a definition of ``punitive damages'' to 
Title I to clarify that the term does not include civil 
penalties, civil fines, or treble damages assessed or enforced 
by a government agency under federal or state statute. (10 
minutes)
    Watt #2: Strikes the part of the bill which precludes 
federal court jurisdiction under section 1337 of title 28, U.S. 
Code. (10 minutes)
    Conyers/Scott: Narrows the definition of ``small business'' 
in Title I to include businesses which had revenues in each of 
the last two years of $5,000,000 or less; limits Title II's 
application to ``small businesses''; limits Title I to product 
liability actions; revises the definition of Hate Crimes in 
Title I to mean ``a crime in which the defendant intentionally 
selects a victim, or in the case of property crime, the 
property that is the object of the crime, because of the actual 
or perceived race, color, religion, national origin, ethnicity, 
gender, disability, or sexual orientation of any person''; 
creates True Two Way preemption in Title I by allowing the bill 
to create actions for punitive damages in states for which they 
do not exist today; Creates True State Opt-Out in Title I by 
allowing it to apply to statutes as well as ``initiatives of 
referendum,'' and by deleting the requirement that this be the 
only item described in such law; and, adds a similar State opt-
out in Title II. (40 minutes)

1. An Amendment To Be Offered by Representative Rogan of California, or 
Representative Hutchinson of Arkansas, or a Designee, Debatable for 10 
                                Minutes

  Page 7, strike line 13 through line 6 on page 8 and insert 
the following:

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

  (a) General Rule.--Except as provided in section 105, in any 
civil action against a small business, punitive damages may, to 
the extent permitted by applicable Federal or State law, be 
awarded against the small business only if the claimant 
establishes by clear and convincing evidence that conduct 
carried out by that defendant with a conscious, flagrant 
indifference to the rights or safety of others was the 
proximate cause of the harm that is the subject of the action.
  (b) Limitation on Amount.--In any civil action against a 
small business, punitive damages awarded against a small 
business shall not exceed the lesser of--
          (1) 3 times the total amount awarded to the claimant 
        for economic and noneconomic losses, or
          (2) $250,000,
except that the court may make this subsection inapplicable if 
the court finds that the plaintiff established by clear and 
convincing evidence that the defendant acted with specific 
intent to cause the type of harm for which the action was 
brought.
  (c) Application by the Court.--The limitation prescribed by 
this section shall be applied by the court and shall not be 
disclosed to the jury.
                              ----------                              


2. An Amendment To Be Offered by Representative Moran of Virginia, or a 
                   Designee, Debatable for 10 Minutes

    Page 6, insert after line 15 the following:
          (9) Punitive damages.--The term ``punitive damages'' 
        means damages awarded against any person or entity to 
        punish or deter such person, entity, or others from 
        engaging in similar behavior in the future. Such term 
        does not include any civil penalties, fines, or treble 
        damages that are assessed or enforced by an agency of 
        State or Federal government pursuant to a State or 
        Federal statute.
                              ----------                              


3. An Amendment To Be Offered by Representative Watt of North Carolina, 
                or a Designee, Debatable for 10 Minutes

    Page 24, line 11, strike ``or 1337''.

4. An Amendment To Be Offered by Representative Conyers of Michigan, or 
   Representative Scott of Virginia, or a Designee, Debatable for 40 
                                Minutes


                      (Small Business Definition)

  Page 6, line 23, insert before the period the following: 
``and had revenues in each of the last 2 years of $5,000,000 or 
less''.
  Page 19, line 10, strike ``(14)'' and insert ``(15)'' and 
after line 9 insert the following:
          (14) Small business.--
                  (A) In general.--The term ``small business'' 
                means any unincorporated business, or any 
                partnership, corporation, association, unit of 
                local government, or organization that has 
                fewer than 25 full-time employees as determined 
                on the date the civil action involving the 
                small business is filed and had revenues in 
                each of the last 2 years of $5,000,000 or less.
                  (B) Calculation of number of employees.--For 
                purposes of subparagraph (A), the number of 
                employees of a subsidiary of a wholly owned 
                corporation includes the employees of--
                          (i) a parent corporation; and
                          (ii) any other subsidiary corporation 
                        of that parent corporation.

                (Title II Applicable to Small Business)

  Page 21, line 12, insert after ``title'' the following: 
``brought against a small business''.

          (Definition of Product and Product Liability Action)

  Page 6, beginning in line 16 redesignate paragraphs (9) and 
(10) as paragraphs (11) and (12), respectively, and add after 
line 15 the following:
          (9) Product.--
                  (A) In general.--The term ``product'' means 
                any object, substance, mixture, or raw material 
                in a gaseous, liquid, or solid state that--
                          (i) is capable of delivery itself or 
                        as an assembled whole, in a mixed or 
                        combined state, or as a component part 
                        or ingredient;
                          (ii) is produced for introduction 
                        into trade or commerce;
                          (iii) has intrinsic economic value; 
                        and
                          (iv) is intended for sale or lease to 
                        persons for commercial or personal use.
                  (B) Exclusion.--The term ``product'' does not 
                include--
                          (i) tissue, organs, blood, and blood 
                        products used for therapeutic or 
                        medical purposes, except to the extent 
                        that such tissue, organs, blood, and 
                        blood products (or the provision 
                        thereof) are subject, under applicable 
                        State law, to a standard of liability 
                        other than negligence; or
                          (ii) electricity, water delivered by 
                        a utility, natural gas, or steam.
          (10) Product liability action.--
                  (A) General rule.--Except as provided in 
                subparagraph (B), the term ``product liability 
                action'' means a civil action brought on any 
                theory for a claim for any physical injury, 
                illness, disease, death, or damage to property 
                that is caused by a product.
                  (B) The following claims are not included in 
                the term ``product liability action'':
                          (i) Negligent entrustment.--A claim 
                        for negligent entrustment.
                          (ii) Negligence per se.--A claim 
                        brought under a theory of negligence 
                        per se.
                          (iii) Dram-shop.--A claim brought 
                        under a theory of dram-shop or third-
                        party liability arising out of the sale 
                        or providing of an alcoholic product to 
                        an intoxicated person or minor.

     (Making Title I Applicable to only Product Liability Actions)

  Page 6, line 22 and page 8, lines 1, 11, and 16, strike 
``civil action'' and insert ``product liability action''.

                       (Definition of Hate Crime)

  Page 5, strike lines 23 through 25 and insert the following:
          (5) Hate crime.--The term ``hate crime'' means a 
        crime in which the defendant intentionally selects a 
        victim, or in the case of property crime, the property 
        that is the object of the crime, because of the actual 
        or perceived race, color, religion, national origin, 
        ethnicity, gender, disability, or sexual orientation of 
        the victim or owner of the property.

  (Making Section 103 Applicable to Punitive Damages Irrespective of 
                               State Law)

  Page 7, beginning in line 17, strike ``, to the extent 
permitted by applicable State law,''.

 (Allowing State to Elect Nonapplicability by Enacting a Referendum or 
                              Initiative)

  Page 11, line 9, after ``a statute'' insert ``, an 
initiative, or referendum'', add ``and'' at the end of line 10, 
in line 13, strike ``; and'' and insert a period, and strike 
line 14
  Page 21, insert after line 7 the following:
  (d) Election of State Regarding Nonapplicability.--This title 
does not apply to any action in a State court against a small 
business in which all parties are citizens of the State, if the 
State enacts a statute, an initiative, or referendum--
          (1) citing the authority of this subsection; and
          (2) declaring the election of such State that this 
        title does not apply as of a date certain to such 
        actions in the State.

                                  
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