To provide small businesses certain protections from litigation excesses.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Liability Reform Act 
of 2007''.

SEC. 2. FINDINGS.

    Congress finds that--
            (1) the defects in the United States civil justice system 
        have a direct and undesirable effect on interstate commerce by 
        decreasing the availability of goods and services in commerce;
            (2) the spiraling 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;
            (3) 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;
            (4) 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;
            (5) 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;
            (6) 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; and
            (7) legislation to address these concerns is an appropriate 
        exercise of the powers of Congress under clauses 3, 9, and 18 
        of section 8 of article I of the Constitution of the United 
        States, and the 14th amendment to the Constitution of the 
        United States.

SEC. 3. DEFINITIONS.

    In this Act:
            (1) Crime of violence.--The term ``crime of violence'' has 
        the same meaning as in section 16 of title 18, United States 
        Code.
            (2) Drug.--The term ``drug'' means any controlled substance 
        (as defined in section 102 of the Controlled Substances Act (21 
        U.S.C. 802)) 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.
            (3) 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.
            (4) Harm.--The term ``harm'' means any physical injury, 
        illness, disease, or death or damage to property.
            (5) International terrorism.--The term ``international 
        terrorism'' has the same meaning as in section 2331 of title 
        18, United States Code.
            (6) Noneconomic loss.--The term ``noneconomic loss'' means 
        loss for physical or 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, or any other nonpecuniary loss of any kind or 
        nature.
            (7) Person.--The term ``person'' means any individual, 
        corporation, company, association, firm, partnership, society, 
        joint stock company, or any other entity (including any 
        governmental entity).
            (8) 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.
            (9) 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 50 full-time employees 
                as determined on the date the civil action involving 
                the small business is filed.
                    (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, 
        commonwealth, territory, or possession.

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

    Except as provided in section 6, 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.

SEC. 5. LIMITATION ON JOINT AND 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 that 
                defendant is liable; and
                    (B) the court shall render a separate judgment 
                against each defendant described in that subsection in 
                an amount determined under 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--
            (1) to any defendant whose misconduct--
                    (A) constitutes--
                            (i) a crime of violence; or
                            (ii) an act of international terrorism;
                    (B) results in liability for damages relating to 
                the injury to, destruction of, loss of, or loss of use 
                of, natural resources described in--
                            (i) section 1002(b)(2)(A) of the Oil 
                        Pollution Act of 1990 (33 U.S.C. 
                        2702(b)(2)(A)); or
                            (ii) section 107(a)(4)(C) of the 
                        Comprehensive Environmental Response, 
                        Compensation, and Liability Act of 1980 (42 
                        U.S.C. 9607(a)(4)(C));
                    (C) involves--
                            (i) a sexual offense, as defined by 
                        applicable State law; or
                            (ii) a violation of a Federal or State 
                        civil rights law;
                    (D) occurred at the time the defendant was under 
                the influence (as determined under applicable State 
                law) of intoxicating alcohol or a drug, and the fact 
                that the defendant was under the influence was the 
                cause of any harm alleged by the plaintiff in the 
                subject action; or
            (2) to any cause of action which is brought under the 
        provisions of title 31, United States Code, relating to false 
        claims (31 U.S.C. 3729-3733) or to any other cause of action 
        brought by the United States relating to fraud or false 
        statements.

SEC. 7. PREEMPTION AND ELECTION OF STATE NONAPPLICABILITY.

    (a) Preemption.--Subject to subsection (b), this title preempts the 
laws of any State to the extent that State laws are inconsistent with 
this title.
    (b) 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--
            (1) citing the authority of this subsection;
            (2) declaring the election of such State that this title 
        does not apply as of a date certain to such actions in the 
        State; and
            (3) containing no other provision.

SEC. 8. EFFECTIVE DATE.

    This Act shall take effect with respect to any civil action 
commenced after the date of the enactment of this Act without regard to 
whether the harm that is the subject of the action occurred before such 
date.

Summary: Small Business Liability Reform Act of 2007 - Allows punitive damages against a small business only 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. States that in any civil action against a small business: (1) each defendant 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 for the harm caused to the plaintiff. And (2) the court shall render a separate judgment against each defendant describing such percentage of responsibility. Excepts from such liability limitations specified misconduct of a defendant.