Small Business Lawsuit Abuse Protection Act of 1997

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Lawsuit Abuse 
Protection Act of 1997''.

SEC. 2. FINDINGS.

    Congress finds that--
            (1) the United States civil justice system is inefficient, 
        unpredictable, unfair, costly, and impedes competitiveness in 
        the marketplace for goods, services, business, and employees;
            (2) the defects in the civil justice system have a direct 
        and undesirable effect on interstate commerce by decreasing the 
        availability of goods and services in commerce;
            (3) there is a need to restore rationality, certainty, and 
        fairness to the legal system;
            (4) the spiralling costs of litigation and the magnitude 
        and unpredictability of punitive damage awards and noneconomic 
        damage awards have continued unabated for at least the past 30 
        years;
            (5) the Supreme Court of the United States has recognized 
        that a punitive damage award can be unconstitutional if the 
        award is grossly excessive in relation to the legitimate 
        interest of the government in the punishment and deterrence of 
        unlawful conduct;
            (6) just as punitive damage awards can be grossly 
        excessive, so can it be grossly excessive in some circumstances 
        for a party to be held responsible under the doctrine of joint 
        and several liability for damages that party did not cause;
            (7) as a result of joint and several liability, entities 
        including small businesses are often brought into litigation 
        despite the fact that their conduct may have little or nothing 
        to do with the accident or transaction giving rise to the 
        lawsuit, and may therefore face increased and unjust costs due 
        to the possibility or result of unfair and disproportionate 
        damage awards;
            (8) the costs imposed by the civil justice system on small 
        businesses are particularly acute, since small businesses often 
        lack the resources to bear those costs and to challenge 
        unwarranted lawsuits;
            (9) due to high liability costs and unwarranted litigation 
        costs, small businesses face higher costs in purchasing 
        insurance through interstate insurance markets to cover their 
        activities;
            (10) liability reform for small businesses will promote the 
        free flow of goods and services, lessen burdens on interstate 
        commerce, and decrease litigiousness; and
            (11) legislation to address these concerns is an 
        appropriate exercise of Congress' powers under Article I, 
        section 8, clauses 3, 9, and 18 of the Constitution, and the 
        fourteenth amendment to the Constitution.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) Act of international terrorism.--The term ``act of 
        international terrorism'' has the same meaning as in section 
        2331 of title 18, United States Code).
            (2) Crime of violence.--The term ``crime of violence'' has 
        the same meaning as in section 16 of title 18, United States 
        Code.
            (3) Drug.--The term ``drug'' means any controlled substance 
        (as that term is defined in section 102 of the Controlled 
        Substances Act (21 U.S.C. 802(b)) that was not legally 
        prescribed for use by the defendant or that was taken by the 
        defendant other than in accordance with the terms of a lawfully 
        issued prescription.
            (4) 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.
            (5) Harm.--The term ``harm'' includes physical, 
        nonphysical, economic, and noneconomic losses.
            (6) Hate crime.--The term ``hate crime'' means a crime 
        described in section 1(b) of the Hate Crime Statistics Act (28 
        U.S.C. 534 note)).
            (7) Noneconomic losses.--The term ``noneconomic losses'' 
        means losses for physical and emotional pain, suffering, 
        inconvenience, physical impairment, mental anguish, 
        disfigurement, loss of enjoyment of life, loss of society and 
        companionship, loss of consortium (other than loss of domestic 
        service), injury to reputation, and all other nonpecuniary 
        losses of any kind or nature.
            (8) 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 less than 25 full-time employees.
                    (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.
            (10) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, American Samoa, the Northern 
        Mariana Islands, any other territory or possession of the 
        United States, or any political subdivision of any such State, 
        territory, or possession.

SEC. 4. LIMITATION ON PUNITIVE DAMAGES FOR SMALL BUSINESSES.

    (a) General Rule.--Except as provided in section 6, in any civil 
action against a small business, punitive damages may, to the extent 
permitted by applicable 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 through willful 
misconduct or 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 shall not exceed the lesser of--
            (1) two times the total amount awarded to the claimant for 
        economic and noneconomic losses; or
            (2) $250,000.
    (c) Application by Court.--This section shall be applied by the 
court and shall not be disclosed to the jury.

SEC. 5. LIMITATION ON SEVERAL LIABILITY FOR NONECONOMIC LOSS FOR SMALL 
              BUSINESSES.

    (a) General Rule.--Except as provided in section 6, in any civil 
action against a small business, the liability of each defendant that 
is a small business, or the agent of a small business, for noneconomic 
loss shall be determined in accordance with subsection (b).
    (b) Amount of Liability.--
            (1) In general.--In any civil action described in 
        subsection (a)--
                    (A) each defendant described in that subsection 
                shall be liable only for the amount of noneconomic loss 
                allocated to that defendant in direct proportion to the 
                percentage of responsibility of that defendant 
                (determined in accordance with paragraph (2)) for the 
                harm to the claimant with respect to which the 
                defendant is liable; and
                    (B) the court shall render a separate judgment 
                against each defendant described in that subsection in 
                an amount determined pursuant to subparagraph (A).
            (2) Percentage of responsibility.--For purposes of 
        determining the amount of noneconomic loss allocated to a 
        defendant under this section, the trier of fact shall determine 
        the percentage of responsibility of each person responsible for 
        the harm to the claimant, regardless of whether or not the 
        person is a party to the action.

SEC. 6. EXCEPTIONS TO LIMITATIONS ON LIABILITY.

    The limitations on liability under sections 4 and 5 do not apply to 
any misconduct of a defendant--
            (1) that constitutes--
                    (A) a crime of violence;
                    (B) an act of international terrorism; or
                    (C) a hate crime;
            (2) that involves--
                    (A) a sexual offense, as defined by applicable 
                State law; or
                    (B) a violation of a Federal or State civil rights 
                law; or
            (3) if the defendant was under the influence (as determined 
        pursuant to applicable State law) of intoxicating alcohol or a 
        drug at the time of the misconduct, and the fact that the 
        defendant was under the influence was the cause of any harm 
        alleged by the plaintiff in the subject action.

SEC. 7. PREEMPTION AND ELECTION OF STATE NONAPPLICABILITY.

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

SEC. 8. EFFECTIVE DATE.

    (a) In General.--This Act shall take effect 90 days after the date 
of enactment of this Act.
    (b) Application.--This Act applies to any claim for harm caused by 
an act or omission of a small business, if the claim is filed on or 
after the effective date of this Act, without regard to whether the 
harm that is the subject of the claim or the conduct that caused the 
harm occurred before such effective date.

Summary: Small Business Lawsuit Abuse Protection Act of 1997 - Provides that, in any civil action against a small business , punitive damages may be awarded against such business only if the claimant establishes by clear and convincing evidence that conduct carried out by the defendant through willful misconduct or 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. Prohibits, in any action against a small business, punitive damages from exceeding the lesser of: (1) twice the amount awarded for economic and noneconomic losses. Or (2) $250,000. Provides that, in such an action, the liability of each defendant small business shall be limited to the amount of noneconomic loss allocated to that defendant in direct proportion to its percentage of responsibility for the harm that is the subject of the action. Requires the court to render a separate judgment against each such defendant. Provides as exceptions to the small business liability limitations under this Act any misconduct: (1) that constitutes a crime of violence, international terrorism, or a hate crime. (2) that involves a sexual offense or a violation of a Federal or State civil rights law. Or (3) if the defendant was under the influence of intoxicating alcohol or a drug at the time of the misconduct and that fact causes any of the harm alleged.