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27–707 PDF 2006

S. HRG. 109–421

DEFECTIVE PRODUCTS: WILL CRIMINAL PENALTIES

ENSURE CORPORATE ACCOUNTABILITY?

HEARING

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

MARCH 10, 2006

Serial No. J–109–63

Printed for the use of the Committee on the Judiciary

(

(II)

COMMITTEE ON THE JUDICIARY 

ARLEN SPECTER, Pennsylvania, Chairman 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

SAM BROWNBACK, Kansas 

TOM COBURN, Oklahoma 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERBERT KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

MICHAEL O’NEILL, Chief Counsel and Staff Director 

BRUCE A. COHEN, Democratic Chief Counsel and Staff Director 

(III)

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page

Kohl, Hon. Herbert, a U.S. Senator from the State of Wisconsin ....................... 2

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont, prepared 

statement .............................................................................................................. 130

Sessions, Hon. Jeff, a U.S. Senator from the State of Alabama .......................... 20

Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ................. 1

WITNESSES 

Engler, John, Former Governor of Michigan, and President, National Association of Manufacturers, Washington, D.C. .......................................................... 9

Maron, Barry J., M.D., Director, Hypertrophic Cardiomyopathy Center, 

Mineapolis Heart Institute Foundation, Minneapolis, Minnesota ................... 4

Mays, Donald L., Senior Director, Product Safety and Consumer Sciences, 

Consumers Union, Yonkers, New York .............................................................. 15

Panish, Brian J., Panish, Shea and Boyle, LLP, Los Angeles, California .......... 7

Schwartz, Victor E., Shook, Hardy and Bacon, LLP, Washington, D.C. ............. 13

Steinbuch, Rob, Professor, University of Arkansas at Little Rock, William 

H. Bowen School of Law, Little Roxk, Arkansas ............................................... 12

Vandall, Frank, Professor, Emory School of Law, Atlanta, Georgia ................... 11

QUESTIONS AND ANSWERS 

Responses of John Engler to questions submitted by Senator Specter ............... 32

Responses of Barry J. Maron to questions submitted by Senator Specter ......... 39

Responses of Donald L. Mays to questions submitted by Senators Specter 

and Leahy ............................................................................................................. 44

Responses of Brian J. Panish to questions submitted by Senators Specter 

and Leahy ............................................................................................................. 53

Responses of Victor E. Schwartz to questions submitted by Senators Specter 

and Leahy ............................................................................................................. 61

Responses of Rob Steinbuch to questions submitted by Senators Specter and 

Leahy ..................................................................................................................... 76

Responses of Frank Vandall to questions submitted by Senators Specter and 

Leahy ..................................................................................................................... 81

SUBMISSIONS FOR THE RECORD 

Center for Corporate Policy, Charlie Cray, Director, Washington, D.C, prepared statement ................................................................................................... 89

Claybrook, Joan, President, Public Citizen, Laura MacCleery, Deputy Director, Auto Safety Group, Public Citizen, and Rachel Weintraub, Director 

of Product Safety & Senior Counsel, Consumer Federation of America, 

Washington, D.C., joint prepared statement ..................................................... 102

Engler, John, former Governor of Michigan, and President, National Association of Manufacturers, Washington, D.C., prepared statement ....................... 114

Hester, Theordore M., King & Spalding, LLP, Washington, D.C., on behalf 

of Guidant Corporation, letter ............................................................................ 128

Maron, Barry J., M.D., Director, Hypertrophic Cardiomyopathy Center, 

Mineapolis Heart Institute Foundation, Minneapolis, Minnesota, prepared 

statement .............................................................................................................. 132

Mays, Donald L., Senior Director, Product Safety and Consumer Sciences, 

Consumers Union, Yonkers, New York, prepared statement and oral testimony ...................................................................................................................... 137

Page

IV

New York Times, Stephen Labaton, March 10, 2006, article .............................. 149

Panish, Brian J., Panish, Shea and Boyle, LLP, Los Angeles, California, 

prepared statement .............................................................................................. 152

Schwartz, Victor E., Shook, Hardy and Bacon, LLP, Washington, D.C., prepared statement and attachment ........................................................................ 179

Steinbuch, Rob, Professor, University of Arkansas at Little Rock, William 

H. Bowen School of Law, Little Roxk, Arkansas, prepared statement ............ 202

Terwilliger, George J., III, White & Case LLP, Washington, D.C., prepared 

statement and attachment .................................................................................. 213

Vandall, Frank, Professor, Emory School of Law, Atlanta, Georgia, prepared 

statement and attachement ................................................................................ 246

(1)

DEFECTIVE PRODUCTS: WILL CRIMINAL PENALTIES ENSURE CORPORATE ACCOUNTABILITY? 

FRIDAY, MARCH 10, 2006

UNITED STATES SENATE, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Committee met, pursuant to notice, at 9:30 a.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Arlen Specter, 

Chairman of the Committee, presiding. 

Present: Senators Specter, Sessions and Kohl. 

OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. 

SENATOR FROM THE STATE OF PENNSYLVANIA 

Chairman SPECTER. Good morning, ladies and gentlemen. The 

Senate Judiciary Committee will now proceed with our hearing on 

the subject of defective products, with a focus on whether the imposition in certain extraordinary circumstances of criminal penalties 

would promote individual and corporate accountability. 

The essential issue is that when an individual knowingly, maliciously, intentionally engages in reckless conduct which results in 

the death of another person, such conduct constitutes malice at 

common law and supports prosecution for murder in the second degree. The issue which the Committee will be exploring is whether 

that would be, as a matter of public policy, appropriate for legislation at the Federal level. 

I would have preferred to have held this hearing last Tuesday 

when it was originally scheduled, but the Judiciary Committee has 

had a very, very heavy workload and we were occupied with the 

immigration reform legislation, so we had to put it off. And the 

question was whether we put it off for several weeks or try to move 

ahead, and many witnesses were lined up and we thought we 

would do it on Friday, since we had an open date. 

Friday is not a very good day to hold hearings from the point of 

view of having Senators present, but it is a good day to hold hearings from the point of view of being uninterrupted because the Senate is not in session today, so there will not be votes, which frequently occur which delay the hearings. 

Senators characteristically return to their home States as soon as 

the Senate is not in session to take care of business in their home 

States. As a matter of fact, later today I will be back in Pennsylvania myself. We have heard that at least one other Senator plans 

2

to attend, and we will see what develops and there may be others 

who come in. 

The issue at hand came into very sharp focus many years ago 

with the Pinto case, where there were corporate documents which 

showed that the gas tank was placed in a dangerous position because it was cheaper to put the gas tank in that locale and to pay 

damages for injuries and deaths, that it would be a matter of corporate profitability. 

That case made a fair size impact on me personally. I was district attorney of Philadelphia at the time. There ultimately was a 

prosecution in that case by a local prosecutor in Indiana, I believe, 

and there was an acquittal. From all indications, the case was not 

handled as well as it might have been, certainly not as well as a 

Federal prosecution would be. 

Welcome, Senator Kohl. 

The problems continue at the present time with story just last 

week in the New York Times concerning the Guidant Corporation, 

where there was knowledge for 3 years that its heart defibrillator 

might short-circuit and fail after being implanted. The publication 

in the New York Times suggested that a number of patients might 

have died there, and the problem is as current as the Guidant case 

and we will hear some testimony on that today. 

In selecting the matters to be presented in the hearing, we necessarily have gone to some cases which are old cases, and they 

have been selected because they make the point. To the extent that 

this conduct continues at the present time is something which we 

will endeavor to determine. 

It is not our intent to create any further problems for any companies which are having tough times in a tough market. I think it 

not inappropriate to note that foreign manufacturers illustratively 

of automobiles would have liability. Even though the cars were 

manufactured out of the United States, where they are sold in the 

United States and injuries occur in the United States, that would 

be within the jurisdiction of Federal legislation. So as a competitive 

matter, it would balance out. 

Let me yield at this time to my distinguished colleague, Senator 

Kohl, of Wisconsin. 

STATEMENT OF HON. HERB KOHL, A U.S. SENATOR FROM THE 

STATE OF WISCONSIN 

Senator KOHL. Thank you very much, Senator Specter. I appreciate very much your calling this hearing today. It is an unfortunate truth that from time to time consumers are injured by products they purchase. Your bill tries to minimize the frequency of 

these injuries by punishing anyone who would knowingly sell unsafe items. That is an admirable and a serious approach to the 

issue, but not the only one. 

Another way to protect consumers is to let them know when the 

products they buy have done harm to others. This is the goal of a 

bill that I have supported for many years called the Sunshine in 

Litigation Act. This bill would curb the ongoing abuse of secret settlement agreements in Federal courts. The result of this abuse is 

to keep important health and safety information from the public. 

3

The problem is not hard to understand. Typically, an individual 

sues a manufacturer for an injury resulting from a product defect. 

The injured person has limited resources and faces a corporation 

that can spend an unlimited amount of money to delay and defend 

the case. Facing a formidable opponent, plaintiffs often seek to settle the litigation. In exchange for the award that they sought, the 

victim agrees to keep secret information disclosed during the litigation. While the plaintiff gets a respectable settlement, the defendant keeps secret the information about the defective product. Others eventually pay the price, as the public remains unaware of critical public health and safety information that could potentially 

save lives. 

The most famous case of abuse involved Bridgestone-Firestone 

tires. From 1992 to 2000, tread separations of various tires were 

causing accidents across the country, many resulting in serious injuries and even fatalities. Instead of acting responsibly, 

Bridgestone-Firestone quietly settled dozens of lawsuits, most of 

which included secrecy agreements. It wasn’t until 1999 when a 

Houston public television station broke the story that the company 

acknowledged its wrongdoing and recalled 6.5 million tries. But by 

then, it was too late to prevent many unnecessary injuries and 

deaths which occurred. 

The case of General Motors fuel tanks also demonstrates the 

problem. An internal memo showed that GM was aware of the 

risks from crashes of trucks with side-saddle fuel tanks which 

eventually led to an estimated 750 fatalities. When victims sued, 

GM disclosed documents only under protective orders and settled 

these cases on the condition that the information remain secret. 

GM used this type of fuel tank for 15 years before it was discontinued. 

There are no records kept of the number of confidentiality orders 

accepted by the State or Federal courts. However, anecdotal evidence suggests that court secrecy and confidential settlements are 

prevalent. Beyond General Motors and Bridgestone-Firestone, secrecy agreements had real-life consequences by allowing Dalkon 

Shield, Bork-Shiley heart valves, Con Edison cable covers and numerous other dangerous products to remain on the market. 

The Sunshine in Litigation Act is a modest proposal that would 

require Federal judges to perform a simple balancing test to compare the defendant’s interest in secrecy against the public’s interest 

in health and safety information. Specifically, prior to making any 

portion of a case confidential or sealed, a judge would have to determine by making a particularized finding of fact that doing so 

would not restrict the disclosure of information relevant to public 

health and safety. 

Moreover, all courts, both Federal and State, would be prohibited 

from issuing protective orders that prevent disclosure to relevant 

regulatory agencies. Of course, important trade secret information 

could still be kept private. This legislation does not prohibit secrecy 

agreements across the board. It does not place an undue burden on 

judges or our courts. It simply states that where the public interest 

in disclosure outweighs legitimate interests in secrecy, then courts 

should not shield important health and safety information from the 

public. 

4

Mr. Chairman, letting sunshine in on these secret settlements 

would complement your legislation on defective products, and I 

hope that we can work together on this issue to protect consumers. 

Thank you, Mr. Chairman. 

Chairman SPECTER. Thank you very much, Senator Kohl. 

Senator Leahy, the Ranking Member of this Committee, could 

not be here today. When the hearing was rescheduled, he could not 

make it. He had other business in his State to attend to. But without objection, we will make his statement a part of the record. The 

first paragraph I think it appropriate to read briefly. 

Senator Leahy in his statement writes, quote, ‘‘Today, we convene to discuss the merits of legislation that would provide Federal 

criminal penalties for the introduction of dangerously defective 

products into the stream of interstate commerce. This is important 

legislation that could protect millions of Americans and its potential is something we should carefully explore. Today’s hearing is a 

good start, and I commend Chairman Specter for his efforts here.’’

Our first witness this morning is Dr. Barry Maron, Director of 

the Hypertrophic Cardiomyopathy Center at Minneapolis Heart Institution Foundation, and was active in disclosures on the Guidant 

defibrillator case. Dr. Maron received his undergraduate degree 

from Occidental College, in Los Angeles, and his M.D. from Tulane 

University in New Orleans. 

By way of brief additional introduction, the New York Times just 

yesterday published a story accounting for certain events in this 

matter, and one worth noting specifically was a memorandum submitted by a consultant, Dr. Richard Fogus, who told the company 

that their decision to withhold data about device defects was a 

breach of ethical duty and has subjected patients to the risk of serious bodily harm or, beyond that, fatalities. 

Dr. Maron, thank you for joining us. The rule of our Committee 

is that there be 5-minute opening statements, and before you testify I would like to have all the witnesses stand and have the oath 

administered, which is the Committee’s practice. 

Do each of you solemnly swear that the testimony you will give 

this Senate Judiciary Committee will be the truth, the whole truth 

and nothing but the truth, so help you God? 

May the record show that all have answered in the affirmative. 

Dr. Maron, the floor is yours. 

STATEMENT OF BARRY J. MARON, M.D., DIRECTOR, HYPERTROPHIC CARDIOMYOPATHY CENTER, MINNEAPOLIS HEART 

INSTITUTE FOUNDATION, MINNEAPOLIS, MINNESOTA 

Dr. MARON. Thank you, Chairman Specter, Senator Kohl. As you 

mentioned, my name is Dr. Barry Maron. I am a cardiologist, in 

Minneapolis, at the Minneapolis Heart Institute. 

Hypertrophic cardiomyopathy, also known as HCM, is a genetic 

form of heart disease and the most common cause of sudden cardiac death in young people, including athletes. Since 2000, I have 

promoted the implantable defibrillator as a preventive therapy for 

sudden death in hypertrophic cardiomyopathy, and with good reason, for we have demonstrated repeatedly that the defibrillator is 

life-saving by virtue of recognizing and automatically terminating 

lethal disturbances of heart rhythm. 

5

In 1999, I and my colleague, Robert Hauser, treated a 21-yearold student, Joshua Oukrop. He had a severe form of this disease 

and was at high risk for sudden and unpredictable death. We recommended that a defibrillator be implanted as a prophylactic 

measure in late 2001. The model is Guidant Prizm 2DR 1861. 

Three-and-a-half years after receiving his defibrillator, Joshua 

Oukrop died unexpectedly while on vacation in Utah. Analysis of 

the defibrillator by Guidant found that a short-circuiting defect 

caused the device to become electrically inoperative and to fail. 

When the defibrillator tried to issue a life-saving shock, electrical 

energy short-circuited and dissipated, and therefore did not enter 

Joshua’s heart as it should have and he was unprotected and he 

died. 

Shortly thereafter, in a meeting with four Guidant executives, I 

learned that this precise problem had been known by the company 

for over 3 years, but only to Guidant and to any physicians or patients. It was obvious that Guidant believed that it was correct, 

and even prudent, to conceal all information related to such 

defibrillator defects. I was asked for my opinion on this strategy 

and I said I think this is going to be the biggest mistake you will 

ever make. They said they did not agree. 

Mr. Oukrop’s reaction, the father: ‘‘I told Joshua that the 

defibrillator was his best chance, that it would allow him to survive 

and live his life, and you are telling me that they knew all along?’’ 

In fact, at that time Guidant did know. They had already documented 25 other similar short-circuited defibrillators and had already made adjustments in 2002 to newly manufactured 

defibrillators to correct the problem. Still, Guidant had not informed physicians, patients or the Government. Furthermore, and 

perhaps most disturbing, the company continued to sell old 

defibrillators known to be defective. 

Therefore, this death was not due to an unforeseen, random component failure, as the company once suggested, but, in fact, was a 

systematic, repetitive, and to some extent predictable problem that 

cannot be anticipated or monitored. In effect, Guidant had taken 

over the primary medical management of thousands of high-risk 

defibrillator patients without their permission. It was the executives who were practicing medicine in this situation and not the 

physicians. 

Only because the facts of this unfortunate situation were documented in a series of New York Times articles by Barry Meier have 

these problems in the defibrillator industry become evident to all. 

In fact, these circumstances ultimately led to the largest recall of 

defibrillators and pacemakers in the 25-year history of this industry. 

The Guidant affair is about patients and their physicians, and 

the overwhelming importance of informed consent and full disclosure to patients through their physicians. Patients have the right 

to know any information that could potentially impact their risk for 

injury or death. It simply is not ethical to withhold such information. Patients must have this autonomy, the opportunity to make 

important medical decisions in conjunction with their fully informed physicians. 

6

It is also important to establish what the Guidant affair is not. 

It is not a statistical issue. It is not about percentages and probabilities, because patients are not numbers. They are individuals 

with a reasonable expectation that industry will communicate 

openly and accurately with their physician. I think most observers 

agree that that did not happen here. One of our patients told a 

Guidant executive, quote, ‘‘It is just not your call to make,’’ unquote. Most of the cardiovascular community, I think, would agree 

with that. 

It is time for greater oversight, greater transparency and communication between industry and the physician community in order to 

restore the trust of patients in powerful medical devices such as 

the implantable defibrillator. To make it criminal to knowingly sell 

defective defibrillators would, I think, have the desired effect on 

the willingness of companies to make full disclosure. However, such 

a bill would have to be drawn narrowly enough to avoid a potentially chilling effect on law-abiding companies whose products 

could, in fact, have occasional random defects. 

Thank you for the opportunity to tell this story to the Committee. 

Chairman SPECTER. Thank you, Dr. Maron. 

We had extended an invitation to Guidant to come in and participate in the hearing so that they would have an opportunity to respond to what Dr. Maron has testified to. Ordinarily, we await the 

conclusion of the entire panel before Senators question and we will 

follow that as a generalization here today, but in an effort to get 

Guidant’s point on the record contemporaneously with your testimony, Dr. Maron, I note that your statement says that Guidant executives believed that it was correct, and even prudent, to conceal 

all information related to such defibrillator defects. 

To state their position to the extent you can, when you say that 

they believed it was correct and even prudent, what factors would 

lead Guidant to that conclusion? 

Dr. MARON. Yes. That argument includes the idea that they did 

not want to frighten the general public, and part of that would 

have been that—and this is their position, obviously, not mine—patients would have their devices removed, these potentially defective 

devices, and replaced with other devices, and that would place 

these patients at undue risk. 

The risk I think they are talking about there is the small risk 

of infection which is treatable. It is less than 1 percent, and every 

patient who has a defibrillator must have their device removed and 

replaced every 5 years, on the average, anyway. So the argument 

is a little bit weak in the sense that they are suggesting a danger 

by replacing defibrillators that would have to be replaced anyway 

as a course of the standard management of their disease and the 

defibrillator. 

Chairman SPECTER. Thank you, Dr. Maron. 

[The prepared statement of Dr. Maron appears as a submission 

for the record.] 

Chairman SPECTER. Our next witness is Mr. Brian Panish, lead 

plaintiff’s counsel in the products liability case against General Motors involving a defective 1979 Chevrolet Malibu fuel tank that 

caused serious bodily injury to several people. Mr. Panish received 

7

his undergraduate degree from California State University and his 

law degree from Southwestern University Law School. 

Mr. Panish, you are going to be testifying about a case which is 

admittedly an old case, and I think that ought to be plain on the 

record so that those who are listening to it understand that these 

events happened a long while ago and do not necessarily mean that 

General Motors is engaging in the same conduct at the present 

time. But the case did receive considerable public attention because 

of the underlying facts and it was decided that this is a case which 

had value for a public understanding of the nature of the problem. 

Thank you for joining us and we look forward to your testimony. 

STATEMENT OF BRIAN J. PANISH, PANISH, SHEA AND BOYLE, 

LLP, LOS ANGELES, CALIFORNIA 

Mr. PANISH. Well, thank you. Good morning, and I thank the 

members of the Committee for inviting me to speak here today. 

This issue is an issue extremely important to the health and safety 

of all Americans, and I am pleased that the Senate Judiciary Committee is taking the time to examine it in detail. 

I am also encouraged by your willingness, Senator Specter, to 

consider additional legislative steps that would complement the 

civil justice system in helping to deter corporations from selling 

products that they know are dangerous. I look forward to working 

with the Committee on this issue. 

I have seen firsthand the devastating impacts that corporate deceit can have on a family. I represented Patricia Anderson and her 

four children in a case against General Motors that went to trial 

in 1999. 

Chairman SPECTER. That went to trial in 1999? 

Mr. PANISH. Was the trial, yes, sir. 

Patricia and her children suffered horrendous and disfiguring 

burn injuries by General Motors because General Motors put a car 

on the market, the Malibu, that it knew contained dangerous defects related to the placement of the fuel system. If the tank had 

been designed differently, the vehicle would not have exploded 

when it was rear-ended and the children would have suffered only 

minor injuries and walked away. 

On Christmas Eve, Patricia and her children were returning 

from church in their 1979 Malibu. As they approached an intersection, their vehicle was rear-ended and the gas tank, due to its close 

location to the bumper, was punctured, resulting in leakage of fuel 

and a huge explosion. Patricia saw smoke and flames and heard 

her children asking Jesus to help them. Her 8-year-old daughter 

Kiontra tried to shield her younger brother and sister from the 

flames with her body. As a result, she received horrific burn injuries. 

Several witnesses immediately rushed to the vehicle trying to 

free the passengers, but the door knobs were too hot to open the 

doors. So they used a shopping cart to smash the window to remove 

the passengers. As a result of the fire, Patricia and her children 

suffered third-degree burns over large portions of their bodies and 

underwent numerous skin-grafting surgeries which involved taking 

healthy skin from other parts of their bodies and grafting it to the 

unhealthy skin that had been burned. The burns resulted in loss 

8

of limb, severe scarring and significant deformities. The scarring 

resulted in serious pain to the children as they grew, causing future surgeries, loss of range of motion and serious psychological 

damage. 

General Motors knew what was going to happen. What makes 

this horrible story more outrageous is that the injuries were preventable. Before General Motors sold the gas tank in the Malibu, 

they knew that the placement was dangerous. The evidence revealed that they knew a safer location of the fuel tank existed, that 

they had performed cost/benefit analysis comparing the cost of 

human life in a dollar amount versus the cost of redesigning the 

fuel system. They knew that its testing was woefully inadequate 

and they made a conscious decision to sell a product they knew was 

dangerous and could cause death or serious injury. 

At trial, we established and the evidence proved that General 

Motors knew for several decades that a safer design existed. As far 

back as 1961, Ed Cole, a design engineer who later became president of General Motors, had patented an over-the-axle tank that 

had been proposed that GM had designed prototype vehicles for 

and had tested. GM again had engineers perform cost/benefit analysis evaluating the location of the fuel system, and in this case less 

than 11 inches from the rear bumper, in a memo which later became known as the Ivey memo, and I have provided copies. 

Mr. Ivey determined that about 500 deaths per year were caused 

by fuel-fed fires and they, General Motors, would spend an average 

of $200,000 per fatality. Mr. Ivey further concluded that based on 

the number of vehicles on the roadway, General Motors would 

spend approximately $2.40 per vehicle to prevent fuel system-fed 

fires. The amount to redesign and place the gas tank in the alternative location cost $8.59. At trial, the chief design engineer of fuel 

systems testified that performing cost/benefit analysis of human 

life was despicable. Finally, in 1983, this memo came to light and 

Mr. Ivey was interviewed by General Motors lawyers and admitted 

that, in fact, he had performed this memo for his superiors, that 

he was directed to perform it, and the jury was able to hear the 

cold, calculated decisions that General Motors made. 

Patricia Anderson and her children’s lives will never be the 

same. Perhaps your attention to this issue will avoid similar outcomes for other families. This case illustrates the vital role the civil 

justice system plays in both revealing facts that are important to 

the public’s health and safety and attaining some measure of justice for those families injured or killed due to the deliberate actions 

of others. 

Sadly, this is not the only example of corporate executives choosing to risk the lives and futures of families like the Andersons for 

a few extra dollars of profit. Not too long ago, we faced the FordFirestone crisis. I encourage any additional steps this Committee 

can take to see that only safe products are put on the market and 

that if a product well on the market is determined unsafe that the 

manufacturers do the right thing and remove it from the market. 

The threat of criminal sanctions could help corporate execs make 

better and safer choices. 

I thank you for your time and welcome any questions you may 

have. Thank you. 

9

[The prepared statement of Mr. Panish appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Mr. Panish. 

Our next witness is the former Governor of the State of Michigan, Mr. John Engler, now the President of the National Association of Manufacturers—three-term Governor, actually, from Michigan, with extensive experience as majority leader of the Michigan 

State Senate before that. He has his undergraduate degree from 

Michigan State and his law degree from Thomas Cooley Law 

School. 

We welcome you back to the Judiciary Committee, Governor 

Engler. You were here to testify about the asbestos crisis, which 

has caused serious injuries to tens of thousands of people and resulted in 77 bankruptcies and an enormous drain on the economy. 

I mention that because it is relevant as to your contribution and 

help to the Senate, and also to say that we are still working on asbestos. So you may be recalled at a later time. 

But today you are here representing the National Association of 

Manufacturers and we welcome you to give another perspective on 

this issue. 

STATEMENT OF JOHN ENGLER, FORMER GOVERNOR OF 

MICHIGAN, AND PRESIDENT, NATIONAL ASSOCIATION OF 

MANUFACTURERS, WASHINGTON, D.C. 

Governor ENGLER. Thank you very much, Mr. Chairman. I am 

delighted to be back, and I also want to compliment you on the 

work that you have been doing this week on immigration, also a 

very important topic. We are grateful for you and the Committee. 

Mr. Chairman, the National Association of Manufacturers is the 

Nation’s largest industrial trade association, representing small 

and large manufacturers in every industrial sector in all 50 States, 

including Senator Kohl’s State of Wisconsin. Through our direct 

membership and our affiliated organizations, the Council of Manufacturing Associations, the Employer Association Group and State 

Associations Group, we represent more than 100,000 manufacturers. We are grateful for the invitation and the opportunity to testify 

on this very important question: Would it be wise to make the act 

of knowingly allowing a defective to be introduced into the stream 

of interstate commerce a criminal offense? 

While this proposal may be well-intentioned, the NAM believes 

it is fraught with many unforeseen and potentially counterproductive consequences. The National Association of Manufacturers does not defend any manufacturing employee who would intentionally introduce a defective product into the marketplace. However, we are here today because of our concern about the real-world 

and practical difficulties of criminalizing what often are subjective 

judgments. 

There already are criminal statutes at the disposal of a U.S. Attorney to address this kind of behavior. This relatively new idea of 

criminalizing product liability has been explored by Congress at 

least twice in the recent past, in 2000—this has been mentioned already—when the Transportation Recall Enhancement, Accountability and Documentation Act was passed. That was the FirestoneFord matter. 

10

More recently, a criminal penalties provision for maritime products actually showed up in the Senate-passed Coast Guard Authorization Act of 2004. That language didn’t have the chance to come 

before this Committee, was not publicly debated, ended up being 

modified in conference and ultimately tied to objective criteria. 

In both cases, the NAM felt that the committees with jurisdiction 

over criminal penalties—and that would be the respective Judiciary 

Committees of the Senate and House—needed to explore the issue 

more carefully. Here is why. Thousands of decisions are made in 

a manufacturing company everyday by the R and D staff, by the 

engineers, product and quality personnel, assembly line and factory 

floor workers. 

Defining ‘‘product defect’’ is one of the most complex and varied 

aspects of product liability, as evidenced by the numerous variations of product defect standards among the States. At the same 

time, the legal concept of what constitutes a criminal act is sort of 

being whittled away by the courts. 

Imagine the dilemma faced by a manufacturer who keeps very 

precise records about products that are returned. What if one or 

more proved to be defective? Even if the defect rate is extremely 

low, would the manufacturer knowingly be placing a defective product into the stream of interstate commerce simply because the 

product line is not one hundred-percent defect-free? Are we seeking 

to hold a manufacturer criminally liable for the one-in-a-million 

problem? By the same token, would criminal intent be established 

if there was a warning label and that warning label was not clear 

enough for every single consumer user of the product to understand? 

Every product can cause injury under some circumstances. Justice Breyer wrote, ‘‘Using this vivid example, over the next 13 years 

we could expect more than a dozen deaths from ingested toothpicks,’’ end quote. If product liability violations were criminalized, 

actual victims also might find themselves forced to wait out the 

criminal justice system. 

Mr. Panish’s example of a trial that took place in 1999—that 

would be a long wait, almost as long as some of those asbestos 

cases, Senator. But no judge presiding over civil litigation is certainly going to force an individual involved to forswear his or her 

right to Fifth Amendment protections. The criminalization of product liability law could impede safety, as companies delay improving 

products for fear it will be seen as an admission that their products 

are dangerous. 

Poorly conceived legislation could end up forestalling fact-finding, 

including how and why the problem occurred. It could also worsen 

the U.S.’s comparative advantage, or in this case disadvantage, in 

legal costs which, expressed in GDP terms, are twice as high as in 

other industrial nations that we compete everyday with. 

As you consider this matter, I hope that this Committee will remember the genesis of punitive damages in the common law is that 

they were to serve as a substitute punishment and deterrent for 

acts that would be difficult to criminalize. We are pleased that the 

Judiciary Committee is studying the issue. We hope the Committee 

will carefully weigh the arguments and conclude that the proposal 

to criminalize product liability as prepared today is not a good idea. 

11

We are happy to answer questions, Mr. Chairman. 

[The prepared statement of Governor Engler appears as a submission for the record.] 

Chairman SPECTER. Thank you very much, Governor Engler. 

Our next witness is Professor Frank Vandall, a professor at the 

Emory School of Law. He has written extensively on torts, product 

liability and design defects of consumer products. He received his 

undergraduate degree from Washington and Jefferson College, near 

Pittsburgh, and his law degree from Vanderbilt University. 

Thank you for coming to Washington today, Professor Vandall, 

and we look forward to your testimony. 

STATEMENT OF FRANK VANDALL, PROFESSOR, EMORY 

SCHOOL OF LAW, ATLANTA, GEORGIA 

Mr. VANDALL. Mr. Chairman, Senator Sessions, it is my pleasure 

to be here. I would like to discuss with you two concepts—preemption and non-enforcement of the law. 

Preemption is a recent development and holds that Federal statutes or regulations may preempt a State statute, regulation or the 

common law. Preemption emanates from the Supremacy Clause of 

the Constitution, Article VI, section 2. My reading of the key 

cases—Cipollone v. Liggett, Geir v. American Honda and 

Medtronics v. Lohr—is that the Federal courts can decide to preempt State law at will. The goal in a preemption case is to discern 

the intent of Congress. Therefore, it is on a case-by-case basis and 

there is no black letter law of preemption. The bill as drafted 

leaves open the risk that it may be interpreted to preempt State 

products liability law. 

Non-enforcement refers to the issue of whether or not a particular written law will be enforced. Because of insufficient funds 

and a shortage of personnel in the investigative and prosecutorial 

levels, there is a real risk that the Act will not be enforced. People 

respond to the level of enforcement, not the written law. This can 

be shown by driving on the interstate in Atlanta, Georgia. The 

speed limit is 70 miles an hour. The people travel at 80 miles an 

hour, until they see a police car. Then they slow down to 70 or 65. 

My concern is the interplay between preemption and non-enforcement. Once the bill is passed, it is likely that the courts will hold 

that it preempts State products liability law because it occupies the 

field. This would be a tragedy because civil products liability law 

is the cheap and effective method of deterring defective products. 

Further, because of the high cost of prosecuting corporate executives and social realities—that is that the judges and the CEOs 

come from the same class, have similar educations and perhaps are 

golfing buddies—the Act will not likely be enforced. The reality is 

that corporate executives and employees will not likely be prosecuted. The result will be that although the Act will not be enforced, it will be interpreted to preempt State products liability 

law. The solution is easy, and that is that the bill should clearly 

state that Congress does not intend to preempt State statutes, regulations or the common law with this Act. 

In conclusion, I am in favor of the bill if the phrase ‘‘Congress 

does not intend to preempt State law’’ is inserted. I am opposed to 

the bill if it could be interpreted to preempt State products liability 

12

law. I am concerned that the Act will not be fully enforced. In my 

opinion, a better solution than the bill would be to shore up and 

support the civil products liability system. The product system police, the litigation attorneys, are trained and ready. 

Thank you. 

[The prepared statement of Mr. Vandall appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Professor Vandall. 

We now turn to Professor Robert Steinbuch, from the University 

of Arkansas School of Law, formerly counsel to Senator Michael 

DeWine, a distinguished member of this Committee, and Professor 

Steinbuch was special counsel to the Justice Department at one 

time. He received his undergraduate and master’s degrees from the 

University of Pennsylvania, and a law degree from Columbia. 

The floor is yours, Professor. 

STATEMENT OF ROB STEINBUCH, PROFESSOR, UNIVERSITY 

OF ARKANSAS AT LITTLE ROCK, WILLIAM H. BOWEN 

SCHOOL OF LAW, LITTLE ROCK, ARKANSAS 

Mr. STEINBUCH. Thank you, Mr. Chairman, Senator Sessions. It 

is an honor to be back before this Committee. 

Currently, only corporations are exposed to civil liability for risky 

corporate behavior. Corporate executives do not face a comparable 

liability. Corporate actors, however, receive the benefits of risk-taking by corporations. These corporate actors externalize the costs of 

risky behavior, but internalize those benefits. The result is excessively dangerous behavior and unsafe outcomes. 

Your legislation, Senator, will correct this. Your legislation will 

correct the incentive asymmetry that is created by this dual system 

of liability. It places non-transferrable costs directly on corporate 

actors. Your legislation will create appropriate incentives for data 

collection and investigation, and appropriate incentives for disclosure. A core premise underlying the efficient market theory is that 

adequate information is disseminated to the public. Your legislation will pursue this goal. 

Senator, if Sarbanes-Oxley can impose criminal penalties on corporate actors for financial wrongs, surely we can have the same 

standard for acts that kill. There have been several criticisms levied against your legislation. First is that it is hard to define a defect or an excessively dangerous product. Let’s be clear about what 

we are talking. 

There are many products on the market today that are dangerous, but not excessively dangerous. There are many products on 

the market today that are dangerous, but have no defects. More 

Americans die in car accidents over 2 years than died in the whole 

Vietnam war, but cars are not inherently defective. They have an 

inherent danger. That is acceptable. 

A defect is defined in several ways; as Mr. Panish described, one 

refers to the introduction of a risk that is beyond what is already 

in the marketplace. That is unacceptable. There are several examples of this, some discussed already here. You mentioned the Ford 

Pinto case, a well-known case; the Dalkon Shield case, where the 

company allowed women to be subjected to defective products that 

injure or kill for years before it was disclosed. 

13

Also, Senator, I am involved with the Chest Pain Society, and 

through this work I have come to learn a little bit about heart attacks. If you are having a heart attack, you go to a hospital. You 

go because you want an angioplasty. You want that blocked blood 

vessel to be opened. Well, there are many hospitals that don’t have 

this capability, but they want your business, and so they advertise 

the ability to treat chest pain patients. 

Mather Memorial Hospital in New York is one such hospital. 

They put out this flyer which is entitled ‘‘Community News.’’ It 

looks like a news report. It contains articles looking like news reports. It is not a news report. It is an advertisement. In that advertisement, they say patients are seen and evaluated within moments of their arrival for chest pain and appropriate treatment is 

begun immediately. 

The problem with this advertising, Senator, is that they can’t do 

angioplasty. What is the appropriate treatment? The American 

Heart Association and the American College of Cardiology says it 

is angioplasty, but this hospital advertises for your business. That 

is misleading. That causes death. 

Another concern raised about your bill, Senator, is that there 

may be rogue prosecutors and law enforcement pursuing these 

cases for their own personal interest. Well, I guess that is a possibility. I do know, Senator, that you as well as Senator Sessions 

were both prosecutors, and I trust in the public service of people 

like you to do the right thing. 

There is also the suggestion that criminal prosecution would 

delay civil recovery. That is simply wrong. Civil cases run parallel 

to criminal cases. Indeed, any plaintiff’s attorney worth his salt 

wants the criminal case; it helps his case. 

Senator, I thank you for listening to my remarks and I am open 

to any questions. 

[The prepared statement of Mr. Steinbuch appears as a submission for the record.] 

Chairman SPECTER. Thank you very much, Professor Steinbuch. 

We now turn to Mr. Victor Schwartz, who chairs the Public Policy Group at Shook, Hardy and Bacon, and has been co-author of 

the most widely used tort case book in the United States. He has 

an undergraduate degree from Boston and a law degree from Columbia. Mr. Schwartz has appeared before Congressional committees with some frequency over the past couple of decades, to my 

knowledge, and he is very, very experienced in this field. 

We welcome you back, Mr. Schwartz. 

STATEMENT OF VICTOR E. SCHWARTZ, SHOOK, HARDY AND 

BACON, LLP, WASHINGTON, D.C. 

Mr. SCHWARTZ. Thank you, Senator, and good morning to you, 

Senator, and to Senator Sessions. I have been pleased to be invited 

here today. The U.S. Chamber Institute for Legal Reform, thousands of members, and the American Tort Reform Association 

asked me to be here on their behalf. But they have heard me before, so they said they are not responsible for anything I say. 

I do want to address something in this proposed bill because it 

it relates to a topic that I have learned from the people who taught 

me law, Bill Prosser, and for 30 years Dean Wade, my coauthor. 

14

They first attempted to define ‘‘defect’’ in Restatement of Torts (Second), where they said a defective product was unreasonably dangerous to the user or consumer. That is what they said. 

This definition of defect spawned more case law than any other 

words in the history of torts, conflicting all over the place. What 

is a design defect? What is a warning defect? Case books, law 

books, thousands of pages. Can such a word be used to describe a 

crime? You can know something, and a knowing standard is a very 

important standard, but if what you know is a non-descriptive 

word, it really isn’t fair to somebody because they have no notice 

of what the crime is. 

Senator Sessions, you pointed that out in the TREAD Act when 

that was going through and helped modify it so there wasn’t a nondescriptive word used for a crime like ‘‘defect.’’

From 1992 to 1998, I worked with the brightest law professors 

in America. I learned then what I saw today: you can have two law 

professors and four opinions. But I also learned that the trouble of 

defining ‘‘defect’’ persists. We tried to define ‘‘defect.’’ It is in Restatement of Torts (Third). We did a better job, I think, because of 

the 30 years of experience that we had, but it is still an opaque 

concept. 

Just take the recent Vioxx cases. In the first case, Vioxx manufacturers lost a $253 million judgment under ‘‘defect.’’ In the second 

case, in Atlantic City, a jurisdiction that is friendly to plaintiffs, 

Merck won. In the third case, which was in Texas, there was a 

hung jury. In the next case, which was the same case moved over 

to Louisiana, there was a defense verdict. I don’t think we want the 

criminal law to depend on standards like that, a roulette wheel of 

that type. 

The bill also tries to talk about comparative safety, and that is 

an important concept, but any product that is made today has a degree of safety and you usually can find a product that is safer and 

less safe. The bill suggests that the one on the bottom of the food 

chain is going to be criminally viable. But if they are, then you go 

up one more. How many safety features are on a product may depend on the price of the product. If you buy a toaster oven for $100, 

it is going to have more features than one for $20. But this would, 

apart from searching for something that I think is very hard to 

find, and that is a defective product, cause manufacturers to shun 

less expensive products that do the job, but really are not dangerous at the level that deserves punishment. And let me mention 

punishment. 

We have punitive damages. If anything, there is over-heating in 

the system now. Just as Sandra Day O’Connor said, punitive damages have run wild in this country and people don’t know when 

they are going to be punished or how they are going to be punished 

or where. It is over-heated at this point, and that is why constitutional constraints have been put on punitive damages. It is really 

not a wise thing right now to add yet another vague alternative 

and make it criminal. 

I did want to add to the record an article by Professor Wheeler, 

who tried the Pinto criminal law case. I didn’t append it to my testimony because I didn’t want a lot of paper sent up here, but I 

think you would find it informative. 

15

In a nutshell, this is an idea that really does sound good. We 

don’t want manufacturers to be killing people, but to put a crime 

based on the topic of defect is putting a crime based on a fog. And 

we don’t want our Department of Justice to be there where instead 

of doing their job, you have good friends, like one who testified earlier, kind of waiting outside to see if there is going to be an indictment, because even if there was the slightest hint of an indictment, 

I assure you there would be a product liability pinata lawsuit following that that no one has ever seen before. 

I thank you for your time. I look forward to your questions. 

[The prepared statement of Mr. Schwartz appears as a submission for the record.] 

Chairman SPECTER. Thank you very much, Mr. Schwartz. 

Our final witness is Mr. Donald Mays, Senior Director for Product Safety and Consumer Services at Consumer Reports. He received his undergraduate and master’s degrees from Manhattan 

College. 

Thank you for joining us today, Mr. Mays, and we look forward 

to your testimony. 

STATEMENT OF DONALD L. MAYS, SENIOR DIRECTOR, PRODUCT SAFETY AND CONSUMER SCIENCES, CONSUMERS 

UNION, YONKERS, NEW YORK 

Mr. MAYS. Good morning, Chairman Specter and Senator Sessions. I am Donald Mays, Senior Director of Product Safety and 

Consumer Sciences for Consumers Union, publisher of ‘‘Consumer 

Reports.’’ Thank you for providing me the opportunity to come before you today to discuss ways to improve the quality and safety 

of the consumer marketplace and support all efforts to achieve this 

important goal. 

The ultimate question before the Committee today is whether or 

not criminal penalties will ensure corporate accountability. Will the 

threat of jail time serve as an effective deterrent in preventing dangerous products from reaching the hands of consumers? Will it 

force manufacturers to think twice? Would such legislation have 

prevented Ford-Firestone? 

Before we answer those questions, I believe that it is critical to 

look at why legislation targeting marketplace accountability is necessary for the consumer interest, which, based on my experience, 

I believe to be very much the case. 

My career has focused on product safety and performance testing 

for manufacturers and retailers, as well as for consumers. I believe 

I bring to the floor a unique perspective of someone who understands the competitive pressures of getting new products to the 

marketplace as quickly and as economically as possible. And from 

a consumer perspective, I understand the need to trust that all the 

products in the marketplace are produced with a high degree of integrity and safety. 

My breadth of experience includes work in laboratories and factories both here and abroad. It has exposed me to countless examples of suppliers that failed to diligently build safety into their 

products. What is more disturbing are cases that I have seen where 

manufacturers and retailers have continued to sell unsafe products, 

16

despite the emergence of a clear hazard pattern that results in serious injury. 

My product safety work and expertise have led me to six overall 

conclusions that I would like to share with the Committee. No. 1, 

many injuries are avoidable if adequate pre-market safety testing 

is conducted. Two, manufacturers do not always react responsibly 

when informed that their products could potentially cause a repeated pattern of death or injury. 

Three, due to changes in the global marketplace, consumers face 

increased risk from defective products. Four, there is a lack of compliance with voluntary safety standards. Five, there is inadequate 

enforcement authority, resources and activity by Federal agencies. 

And, six, civil penalties may not be an effective deterrent in preventing unsafe products from being in the marketplace. An example: a $750,000 civil penalty levied against Wal-Mart in 2003 for 

failing to report safety hazards with fitness machines cost the company an equivalent of their sales rung up in only 1 minute and 33 

seconds. 

So, clearly, Consumers Union strongly believes that the consumer marketplace does, in fact, need greater accountability. Consumers Union supports the introduction of legislation clearly designed to deter company employees with decisionmaking authority 

from knowingly jeopardizing consumer safety. And on this point, 

please let me be clear. We understand that any company can make 

a mistake, but it is what companies do after they have taken the 

time to do their due diligence and establish that they have a defect 

that could likely cause bodily injury or death that should be the 

focus of this bill. If companies don’t go public and they continue to 

sell their defective products, then the individuals responsible 

should be punished to the fullest extent possible. 

We believe the language of any legislation should be targeted so 

that responsibility cannot be avoided by company representatives 

who have the power to ensure that unsafe products are not marketed. In addition, knowledgeable employees who fail to pass along 

this information to appropriate government agencies should be held 

criminally responsible. Without this important information, government watchdog agencies are ineffective. 

Furthermore, we believe the scope of any bill should be broad 

enough to underlie the entire marketplace and include not only traditionally manufactured products, but also vehicles, foods and 

drugs. A company representative that knowingly allows the introduction of tainted meats or hazardous pharmaceuticals to the market should be just as culpable as manufacturers that produce unsafe vehicles. We believe that the triggers for determining when a 

product is defective must be clearly defined and that an appropriate definition of ‘‘defective’’ is when a product could potentially 

cause a repeated serious injury or death. 

Finally, this legislation should be expanded and address head-on 

how a company whose employees are prosecuted under the law 

must deal with removing their defective product from the marketplace. While it sends a strong message to make corporate officials 

responsible for their misdeeds, it is also important to take timely 

and effective measures to inform and assist consumers who still 

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17

vent future death and injury, the product itself should also be 

placed behind bars so that it cannot cause anymore harm. 

Therefore, we urge you to consider expanding corporate duties to 

include an intensive effort on the part of the manufacturer to get 

the defective products off the market. Companies should at least be 

required to spend advertising dollars to inform consumers about 

their defective products with as much splash and sophistication as 

they spend on marketing it in the first place. Effective legislation 

to ensure responsible corporate behavior must focus on appropriate 

liability in a court of law and accountability in the court of public 

expectations. 

I thank the Chairman and other members of the Committee for 

the opportunity to testify and I look forward to answering questions. Thank you. 

[The prepared statement of Mr. Mays appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Mr. Mays. 

We will now proceed with 10-minute rounds of questions by the 

Senators on the panel, Senator Sessions and myself. 

Beginning with you, Mr. Mays, you made reference to a case involving Wal-Mart. What are the facts of that case? 

Mr. MAYS. Wal-Mart continued to sell some exercise devices in 

their stores even after they knew that they were causing injury to 

customers who were actually trying the equipment out in their 

stores. Their failure to report that information to the Consumer 

Products Safety Commission, as required by Section 15(b), resulted 

in a civil penalty of only $750,000. 

Chairman SPECTER. Are there many similar matters called to the 

attention of the Commission? 

Mr. MAYS. There are many similar matters. Failure to report incident data to the Commission is probably the most common cause 

of civil penalties. 

Chairman SPECTER. Mr. Schwartz, do you think that the possibility of a criminal sanction would have any effect at all on judgments of corporate officials in evaluating safety precautions which 

are expensive, contrasted with the evaluation of what their damages would be if the safety precautions are not undertaken? 

Mr. SCHWARTZ. That is a good question and it does call for speculation, but I don’t think so. I think that right now they can lose 

their jobs and they can lose their market share completely on a 

product once it is branded in the product liability system as being 

bad. It takes some time, and that threat, potentially millions and 

billions of dollars, is sufficient. 

I think if there are additional penalties in the CPSC, that may 

be needed. That is a different question as to whether you introduce 

something that is very vague, very hard to understand, and illusory to kind of grab onto. So I don’t think it will. Specific penalties, 

sir, that would be very clear and easy to understand might be 

needed in some areas, and they may help proper decisionmaking. 

Chairman SPECTER. In what areas? 

Mr. SCHWARTZ. Well, let’s take the CPSC. If there isn’t proper reporting of defective products to the CPSC, current penalties may be 

insufficient. People have a reason to know when they are supposed 

to report to the CPSC. 

18

Chairman SPECTER. Those penalties go against the company, not 

the individuals. 

Mr. SCHWARTZ. That is right. The separation of individuals and 

the companies is nothing that I have seen in my practice in 30 

years. They are the company. 

Chairman SPECTER. You think there would be no difference between an impact of a decisionmaker, say a chief executive officer, 

if he or she faced criminal sanctions, contrasted with the punitive 

damages in a civil case which would be awarded against the company and a cost really to the shareholders? 

Mr. SCHWARTZ. As the appendix to my testimony shows, there 

are criminal sanctions for very serious acts by individual executives, and State attorneys general have power, which you would 

know, to go after people personally if they have the evidence that 

they have done something criminally wrong. 

Chairman SPECTER. On defects in products? 

Mr. SCHWARTZ. Well, not on defects in the products, and that is, 

I guess, the core of my testimony. ‘‘Defect’’ is one of those words 

that we think we know what it means, but not when it gets down 

to actually defining it, it is hard enough to define it in tort law. 

It is one of those words that we think, ah, I know what that means, 

like we may think we know what a reasonable person is in tort 

law. 

Chairman SPECTER. I take it your answer is no. 

Mr. SCHWARTZ. Well, I began with ‘‘no,’’ but then you wanted to 

get me to ‘‘yes,’’ so I went back to ‘‘no.’’

Chairman SPECTER. I didn’t hear a ‘‘no.’’ If I had heard a ‘‘no,’’ 

I would have moved on to the next question. The question isn’t 

whether there are some penalties scattered through the State law 

books. The question is whether there is any real program which 

deals with defects. And I will use that word; I think we can define 

it. I think there are many terms that are difficult to define. You 

started to move on to the definition of ‘‘reasonable.’’ There are tens 

of thousands, hundreds of thousands of cases written on it, but on 

individual cases we deal with it. 

That is why, Mr. Schwartz, I come back to the question as to 

whether the existing laws which you refer to involve products, and 

your answer to that was no. 

Mr. SCHWARTZ. Well, the product liability laws are amazingly 

strong, over-strong, in my view, and this separation of somehow an 

executive, because he may not feel personally that he is going to 

go to jail, needs additional deterrence I have answered. I think 

when people are working in the companies—I work with them 

every single day of my life—they are thinking carefully about what 

decisions they are making, what warnings are to be on products. 

I have spent hundreds of hours on this and I don’t see the need 

for any additional criminal deterrence to get to the right decision. 

That is just based on my experience. 

Chairman SPECTER. Well, summarize for us again what are existing criminal deterrents. 

Mr. SCHWARTZ. Well, there are existing criminal laws on manslaughter, negligent homicide and other provisions, and they are 

spelled out more carefully in the appendix to my statement. But I 

think that the power of——

19

Chairman SPECTER. But those don’t refer specifically to products. 

Mr. SCHWARTZ. No, they don’t, but they can capture somebody 

who has knowingly and willfully tried to intentionally kill another 

person. I mean, those words we understand. We know what those 

words mean. We have always been kind to one another and we just 

happen to differ here, but the tort law classes—I was thinking of 

Fleming James, who may have been your teacher back at Yale. 

Chairman SPECTER. He was. 

Mr. SCHWARTZ. In tort law classes, they will say, ‘‘Well, what 

about this? What about that? ’’ It is all vague. You step over into 

the criminal law and then there are very precise rules that govern 

conduct, and I think the two worlds shouldn’t be put together. 

Chairman SPECTER. When you describe the sequence of events, 

including manslaughter, those are not available to the Federal 

prosecutor. 

Mr. SCHWARTZ. Well, there are State prosecutors and State tort 

laws. I don’t see a need for Federal intervention and the Department of Justice getting into the area of defective products. 

Chairman SPECTER. I take it your answer then to my question 

is they do not apply for Federal prosecutions. 

Mr. SCHWARTZ. That is right. 

Chairman SPECTER. OK, we got there. 

Dr. Maron, tell us a little bit about the defibrillator. How does 

it work? What is its structure? What are the functions? 

Dr. MARON. Well, it is a sophisticated device that has been in the 

marketplace for 25 years that is intended to——

Chairman SPECTER. And what happened to your patient? 

Dr. MARON. Well, what happened was the device short-circuited, 

literally, and therefore the electrical energy that was intended to 

go into the heart to defibrillate, to restore normal rhythm, did not. 

It was dissipated. As a consequence, it was a non-functioning device at the precise moment that it was intended to function and 

was implanted for that reason. 

Chairman SPECTER. And did Guidant, the manufacturer, know 

about that kind of a defect? 

Dr. MARON. Yes. At the time of the death, they had 25 other examples, including 4 near-deaths, with precisely the same defect, 

the short-circuiting. 

Chairman SPECTER. How do you know that Guidant knew that? 

Dr. MARON. They told us. It is a matter of record. There is no 

dispute. 

Chairman SPECTER. Professor Steinbuch, you mentioned the 

Dalkon Shield case. In passing, could you amplify what the facts 

were in the Dalkon Shield matter? 

Mr. STEINBUCH. Senator, I am not an expert on that case, but I 

can tell you that the company put out a product for women to use, 

an IUD, that turned out to be severely flawed. It made women 

much more prone to infection, and then the company discovered 

this defect and did not disclose it to the public. And many women 

were injured, and I believe some women died as a result of this 

product. 

Chairman SPECTER. And what were the facts, as you understand 

them, with respect to the knowledge on the part of the A.H. Robins 

Company which manufactured the Dalkon Shield IUD? 

20

Mr. STEINBUCH. Well, I think it is the same issue that Dr. Maron 

just spoke about, and this is the same issue that pervades product 

defect cases. Companies discover that there is a defect. They have 

complaints and the complaints are processed and they are analyzed 

and they are evaluated. And they don’t share this information with 

the public. They don’t allow the public to make these choices. 

Today, we live in a complex world where a strict application of the 

concept of caveat emptor is no longer appropriate. 

Chairman SPECTER. My time is almost up, so I want to come to 

a core question. Do you think the response from corporate executives would be different in notifying in the public, as you put it, if 

a potential criminal sanction was present? 

Mr. STEINBUCH. Absolutely, Senator. Corporate tenure has been 

on the decline. People move from company to company, and the response of civil liability often comes after corporate actors leave individual corporations. Putting the responsibility on them criminally 

will carry along with them wherever they are and their actions will 

reflect that. 

Chairman SPECTER. Thank you very much, Professor, and I will 

turn now to my distinguished colleague, Senator Sessions. By way 

of a brief introduction, you might be interested to know that yesterday at this time we had the tables arranged differently and we had 

a dozen Senators in this room going over a 300-page statute on immigration reform. And one of our most active participants was Senator Sessions, who had an array of amendments, and we went 

through them one by one. 

We did our best to focus on an issue and, when we had a Committee consensus, to move on so that we could have some prospect 

at some time of finishing that bill. One of the most interesting moments that Senator Sessions and I were both involved in was a 

complex amendment offered by Senator Feingold which no one understood. I won’t say Senator Feingold didn’t. You would have to 

examine the transcript. 

But the way we function is we have papers and we have assistants behind us and when we come to a question that we don’t know 

the answer to—and I know this will be hard for you to believe that 

there are some questions we don’t know the answers to—we turn 

to our assistants. And the communication is not very good on these 

complex questions, and we had gone around for about 30 minutes 

on an issue and we were getting nowhere. And as Chairman, I set 

the question aside until we could find out what we were talking 

about. We were analogizing it to Charlie McCarthy and Edgar Bergen, with the staff assistants trying to tell us what was happening 

here. But it just wasn’t working, so we moved on. That is what you 

call a 1-minute digression. 

Senator Sessions.

STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR FROM 

THE STATE OF ALABAMA 

Senator SESSIONS. Thank you, Mr. Chairman, and you have done 

a good job with immigration. It is a very difficult, difficult issue 

and people have some various views about it and it is important. 

You have also moved the asbestos bill, which is also hugely imporVerDate 0ct 09 2002 08:41 Jun 16, 2006 Jkt 027707 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\27707.TXT SJUD4 PsN: CMORC
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tant. Some of these witnesses are aware of that or have even testified with regard to that. 

We have had the PATRIOT Act, a Supreme Court Justice, and 

what else this year? 

Chairman SPECTER. Class action. 

Senator SESSIONS. Class action. 

Chairman SPECTER. Bankruptcy. 

Senator SESSIONS. Bankruptcy. 

Chairman SPECTER. Chief Justice Roberts, Justice Alito. I could 

go on and on. 

Senator SESSIONS. I don’t think there has been a Committee that 

has been this busy—and then he had the gall to tell us yesterday 

that if we didn’t want to show up at the hearing, we ought not to 

be on the Committee. I was glad I was there, so I knew you weren’t 

talking about me. 

Chairman SPECTER. Well, that kind of talk is very seldom engaged in in the Senate. But you can’t transact business—you need 

a quorum—unless Senators are present. It is a high-visibility Committee, a very popular Committee, and as Chairman I want the 

members present if they want to be on the Committee. 

Senator SESSIONS. Well, it was a correct comment. 

Mr. Chairman, I would just——

Chairman SPECTER. Would you begin Senator Sessions’s time 

again at 10 minutes? Thank you. 

Senator SESSIONS. I would just note that as a person who spent 

the better part of my political or governmental career as a prosecutor, almost all of that as a Federal prosecutor, and 2 years as 

attorney general, I have become somewhat uneasy about the vague 

criminal laws that we are passing. I think that is a legitimate criticism of what Congress and State legislatures are doing. 

You remember the old burglary statute, you know, breaking and 

entering. You had to break in the door, then you enter with intent 

to commit a felony therein. Robbery was the taking by force and 

violence of a thing of value from a person. These were the elements, and you knew what the elements were and you knew what 

you had to prove. And this is where you are talking about a person’s liberty, where you are going to put them in the slammer and 

send them off to the big house. 

Now, we have not been quite so scrupulous about taking people’s 

money, you know. You need less proof to take people’s money, and 

Mr. Panish has probably done that more than once. I have tried to 

a few times, but probably haven’t been as successful as he has been 

in suing people for money. It is a different deal, so I just want to 

point that out. 

I would note that the bill itself uses the words ‘‘knowing and 

reckless introduction of a defective product.’’ My understanding of 

current law in most States—and I missed most of the colloquy you 

had over manslaughter or other type things—most States do have 

laws that deal with reckless misconduct. But if you read the legislation that has been introduced, ‘‘reckless’’ is in the description of 

the bill, but not in the words of the statute. In fact, it just says 

any person who introduces into commerce a product known by that 

person to be defective and capable of causing death shall be fined. 

So it is getting pretty scary here a little bit. 

22

And you mentioned corporate executives come and go. You come 

in and you are president of a corporation and somebody sends you 

a memo, and then the next thing you know, you have been indicted 

by a Federal prosecutor under this new law. So I do think we have 

a responsibility to draw the statute clearly before we put somebody 

in jail, particularly in light of the fact that they can be sued for 

punitive damages today. 

Mr. Vandall, I think you raised a very valid point about the likelihood or the ability to prosecute. I think we can have a very, very 

uneven, aberrational type of prosecution depending on the mood of 

their prosecutor or their predilection almost entirely. It is hard to 

have a basic standard, it seems to me, with regard to these cases. 

I got a note from George Terwilliger that you had invited him, 

former Deputy Attorney General of the United States and a longtime prosecutor, who was going to be a witness on this panel and 

couldn’t come for personal reasons. I got his statement during the 

hearing, so I haven’t read it, but I think he expressed some of those 

same concerns, in general. 

With regard to a civil case, Mr. Panish, what do you have to have 

before you can file that complaint and ethically maintain a cause 

of action? What are your standards there? 

Mr. PANISH. Well, Senator, you need to have some evidence that 

support the various elements. As you mentioned in your criminal 

example, you need to have evidence that supports your elements 

that you need to prove for your case. 

Senator SESSIONS. You are not totally free to sue somebody. 

Mr. PANISH. No, sir. 

Senator SESSIONS. I mean, you, as a lawyer, can be sued if you 

over-reach. What is the basic standard for a plaintiff lawyer in a 

defective suit, preponderance of the evidence? 

Mr. PANISH. In a court of law, depending on the various elements, preponderance is one standard. In California, the standard——

Senator SESSIONS. You can file a suit for less than preponderance 

of the evidence, can’t you? 

Mr. PANISH. Anyone can file any lawsuit they want, but in a 

product liability case, when you are a lawyer taking on a case like 

that against the manufacturer, you better have your ducks lined up 

if you think you are going to be successful for your client. The manufacturers are not going to roll over. It is going to be a——

Senator SESSIONS. Well, I know that, but I guess I would just 

make the obvious point that you can file and commence an action, 

a civil action, easier than a prosecutor can commence a criminal action, assuming there is a responsible prosecutor. 

Second, with regard to obtaining information, when you file a 

suit, Professor Schwartz, you can take the deposition of the person 

and compel them to testify and provide evidence, can you not? 

Mr. SCHWARTZ. Yes, you can, extensively. 

Senator SESSIONS. And in a criminal case, of course, you can’t. 

If the defendant is a target of the grand jury, they are able to 

refuse to answer and refuse to produce any documents in their personal control. But if you are suing someone civilly, you can obtain 

all kinds of documents from them in an easier fashion, isn’t that 

correct? 

23

Mr. SCHWARTZ. Sure, warehouses full. 

Senator SESSIONS. Warehouses full. And it is out of this that 

good plaintiff lawyers have found the Ivey memo, have found the 

memo in asbestos that proved that asbestos companies knew that 

this was a dangerous product and people shouldn’t be exposed to 

it. Yet, they took no action. This was 50 years ago. I think you 

have a lot less of it today than you used to have. But 50 years ago, 

they had this information and they didn’t tell people and people 

died as a result of it. So we kind of know how that all plays out. 

But it is a much easier thing to pursue a civil suit and we have 

set it up that way. When it goes to the jury, the question is do you 

believe by a preponderance of the evidence that they violated the 

standards of care that are called for, and therefore how much damages do you want to give them, an award. That is how it works. 

In a criminal case, you have got to take a case before a grand 

jury. You can’t get as much evidence and you have to prove the 

case beyond a reasonable doubt, and the leeway for a prosecutor to 

try a case at trial is much more difficult. So I say that, as a practical matter, if you are going to take out after a corporation who 

you may have some reason to believe through the Vioxx deal is 

doing something wrong, you are committing yourself to a very long 

period of time with many more roadblocks than a good civil lawyer 

would have in pursuing the same case. So I don’t think you are 

going to have a whole lot of them. 

Now, Professor Schwartz, you are the author of the most widely 

used torts textbook in America today. Is the descendent of Prosser 

on Torts that I had, I guess. You may have been on the book then, 

I think—perhaps you were—when I was in school. 

So I guess I would ask you about your Vioxx example. That was 

curious to me that you had such aberrational verdicts. It is one 

thing to have aberrational verdicts when a person might have to 

pay some money out of his pocket. It is another to have aberrational verdicts when it comes down to putting somebody in jail for 

15 years. 

Would you agree? 

Mr. SCHWARTZ. Absolutely. That is at the core of my testimony. 

You don’t want to import the tort casino over to criminal law. The 

risks of being wrong are too great. Somebody is going to prison, or 

even an indictment where there is no real good basis for it. 

I mean, Mr. Panish knows, and we all know who practice that 

if there were an indictment against a particular product, that company would probably not be around very long because it would be 

followed by product liability suits because of the publicity that 

would be on television. People watch, oh, ‘‘x’’ company is being indicted for selling a product. I wouldn’t want to have to defend a 

case, frankly, on behalf of a company after that flashed over all 

three networks. 

So it is not even the conviction. It is the weapon, and the weapon 

has many effects. And as you have said—I am restating—tort law 

in a way has a right to be wrong. The Vioxx cases still are playing 

out, but that is not unusual to have a case won, a case lost, a case 

won, a case lost. And sometimes they go away and sometimes they 

don’t, but it takes years to sort out whether or not the product really was defective. And in part that is because people at a higher 

24

level than I am—Bill Prosser thought he knew what ‘‘defect’’ was. 

Dean Wade thought that it was less likely that he knew, and as 

the low person on the totem pole I find it even vaguer than they 

did. 

Senator SESSIONS. Well, that would be a concern to me, Mr. 

Chairman, whether we would be carrying over into the criminal 

justice system an area that is awfully disputable about whether an 

indictment should ever be brought, whether a verdict should be 

rendered, whether a person should be sent to jail. The more you 

get into these complex areas, the more potential for abuse I think 

we can see. 

Thank you. 

Chairman SPECTER. Thank you very much, Senator Sessions. 

Your introductory comments about being as precise as we can on 

tightening the language, I think, is very, very valid. That is something that at markup we really work that over, and we have a lot 

of experienced people. Senator Sessions was a U.S. Attorney and an 

attorney general, and Senator Leahy was a district attorney in 

Vermont and I was district attorney in Philadelphia. 

One of the grave, difficult problems in evaluating this issue is to 

what extent this is a prevalent problem, to what extent it exists, 

how much of it there is. I am going to ask Governor Engler and 

Mr. Panish and others on the panel, but I will start with Governor 

Engler and Mr. Panish on this issue as to whether cases we have 

examined are anecdotal, just random occurrences, or whether there 

is really a prevalent problem in the commercial world. 

There have been a number of references made to the FirestoneFord situation. There were some 271 deaths and more than 700 injuries on the defective tires that were put on the Ford from Firestone, and concealed. Finally, we legislated on it and it was my 

amendment which imposed criminal liability there, so that we do 

have precedent for criminal liability where there are defects which 

were known to both the manufacturer and the automobile company 

which put the tires on the cars. 

We have a situation with Zylon bullet-proof vests where the company knew as early as 1997 that the material had failed to comply 

with quality tests and deteriorated. And the company made a decision, and these are documented in internal memoranda, that they 

would continue to operate as though nothing was wrong until one 

of their customers was killed or some agency disclosed the defect 

publicly, but the company decided not to. Then in June of 2003, a 

police officer was shot to death wearing one of these so-called bullet-proof vests which had, in fact, deteriorated. 

There are the famous cases involving Oraflex anti-arthritis drug 

where Eli Lilly failed to tell the FDA that it knew of over 25 deaths 

in different countries that were linked to the drug. Then there were 

the Playtex and Tambrands cases where there was a substance 

known as polyacrylate which caused toxic shock syndrome. And 

here again it was well-known to the company and more than one 

hundred women died from the exposure there. 

Then we had the Ford Mustang case, where again it was a design defect and it was a cost/benefit analysis. And it wasn’t really 

brought to light or it wasn’t emphasized until there was a taped 

conversation between President Nixon and the president of Ford 

25

which disclosed that Ford had saved almost $20 million over 3 

years by delaying the safety modifications to the Mustang. 

Governor Engler, you are the head of the National Association of 

Manufacturers, and I would say a very effective president in articulating the views, and it is a judgment call. You don’t know what 

goes on in all the corporate board rooms, all the research and development, so it is a matter of an evaluation. 

Are we dealing here with an issue which comes up now and then, 

or do we have a problem which really is serious enough to call for 

Congressional action? 

Governor ENGLER. Mr. Chairman, I think it is a very good question. You know, being here under oath, the obvious answer is I 

don’t know. The speculation is a little bit like with Sarbanes-Oxley. 

I mean, we had a few companies that through their behavior resulted in a sweeping law being passed which many would say, particularly the smaller and medium-sized manufacturers, has been 

overkill. 

When it comes to defective products or allegations of defects in 

products, you have got the collision of innovation trying to bring especially in the pharmaceutical example some of the supplies that 

we would like to see into commerce. I mean, I think you push the 

envelope to try to bring those out, and you try to understand what 

it takes to make them better. 

The examples you use, I think, are small in number, but any 

time there is a single death that one can point to, one can say, 

well, was that avoidable? It is impossible, I think, to de-risk our 

society. There are in all of these cases, I think, pretty heavy penalties that have been paid by these companies. Some of these companies that were involved have changed dramatically. In some 

cases, management has lost their jobs and their careers. In other 

cases, the publicity has led to dramatic reforms. 

But, again, the question here is, you know, given all of what may 

have happened in the past, do we have a cure? Would anything be 

different in the future? I think there is some question about is this 

the solution. I think that we probably as a Nation spend more on 

safety and more on prevention and trying to get it right than anyplace in the world. I think we do a pretty good job of that. 

Would this bill in some way help us do a better job? Would it 

focus the attention of an executive, or in this case all the way down 

the line, because I assume a middle management employee touching a product who is part of that production might herself or himself have to ask do I let this go forward? 

So the ambiguity is very difficult to deal with. There are certainly challenges, and you will hear a different perspective in just 

a moment, but I think that by and large the record of safety is commendable in this country and that what is a focus on every company’s mind today is how do we make the products we make better 

and can we afford to take new ideas to the market with whatever 

risk that might present to consumers. 

Chairman SPECTER. Well, thank you for that answer. What we 

are looking toward is the situation where there is solid proof and 

the kinds of cases we have cited here where there are internal documents which show a cost analysis that it would cost $8 to make 

26

a change in the location of the gas tank, as opposed to $2.40, where 

they calculate the payment on tort claims. 

A criminal penalty requires proof beyond a reasonable doubt, so 

there would have to be very specific proof that the corporate executive knew what was going on and had made the decision, participated in the decision, to reach that standard. 

I think you are right. There are enormous efforts at product safety, but we do have these cases come up where they have known 

about it for a long time, documented, and not disclosed in the interest of corporate profits, and many injuries and many deaths. 

Mr. Panish, how would you evaluate the question as to whether 

this is anecdotal, happens from time to time, or a real, major problem in our stream of commerce? 

Mr. PANISH. Well, Mr. Chairman, once again I would say that 

the problem does exist. It is the civil justice system that allows the 

attorneys that are able to uncover these memos and documents and 

knowledge of the corporate executives. 

Chairman SPECTER. Well, is that sufficient, a lot of able lawyers 

like you who are doing the job? You are motivated. Sometimes, you 

even get a good fee. 

Mr. PANISH. Well, we are motivated about helping our clients, 

No. 1, and our clients have been seriously injured by these defective products. 

Chairman SPECTER. I am not suggesting that it was a mercenary 

motive. It is a part of your work. 

Mr. PANISH. I understand, but the problem does exist. Safety is 

paramount in this country and all manufacturers know that. These 

situations of putting profits over safety do occur. It is not an isolated incident. You have just brought up five or more examples of 

specifics, from your bullet-proof vests to the Ford Pinto, all the way 

down the line. 

And in a way, personal accountability and having somebody on 

the line knowing that when they are making these decisions that 

they could be held personally accountable—they are going to think 

twice before they try to up the bottom line. That can act in and of 

itself as a deterrent. Both yourself and Senator Sessions being 

prosecutors know if you are prosecuting a case like this, you are 

not going to be filing every case. You are going to want to have a 

solid evidentiary case, you are going to want to have witnesses, and 

you are going to know the higher standard of proof that you have 

to meet to convict somebody in a criminal case. 

I don’t think the courts are going to be flooded with cases like 

this, but it is important for personal accountability for people to 

know that if they make the wrong choice, not to try to put out a 

more creative product or innovative product, but if they know that 

there is a problem and they do put profits over safety that they can 

be personally held accountable. I believe that that would act as a 

deterrent effect to corporate executives who, as the professor said, 

move from company to company and by the time this surfaces they 

are no longer with the company. 

It also penalizes the companies that are doing the right thing, 

that are spending the extra money for safety. And to allow these 

other companies that aren’t doing that to profit by that would be 

unfair to the companies that are actually doing the right thing. 

27

Chairman SPECTER. Senator Sessions. 

Senator SESSIONS. Well, you are correct about the challenge and 

responsibility of corporations to make their products safe, and 

there is no doubt about that. 

We are willing to take some risk in civil actions to get justice 

based on a preponderance of the evidence. I am thinking of the example of brakes, Professor Schwartz. Let’s say somewhere in the 

development of a new form of brakes for a vehicle an engineer does 

a memo that under certain circumstances there might be a problem 

and he sends that through the system. And the brakes go fine for 

5 years, and they are even maybe better than other brakes in most 

instances. But this very thing occurs and something happens and 

somebody gets killed. Then this document appears. Ah-hah, you 

knew this could happen; you go to jail 15 years. 

How does that strike you? You have been studying these cases 

and all the complexities of proof and defect that are so critical to 

American tort law. How would you evaluate it? 

Mr. SCHWARTZ. Well, your question goes to the two sides of the 

coin here. If that executive knew that he might be subject to a 

criminal penalty, he might not have written the memo and we 

wouldn’t have it. That is why this is not an easy area. 

In the TREAD Act which the Chairman referred to, in the beginning for a while there was a provision about defective products and 

there was debate about that. But ultimately when the bill passed, 

they eliminated that and they went to making false or misleading 

statements. Well, I can understand what that is, but as you go into 

this area one little change is like a child’s kaleidoscope. It may 

change the picture, but I don’t think anybody on the panel under 

oath can swear to what that new picture would be. 

And again we take that employee who has now the courage to 

write the memo, but if he says, boy, if I write something like this 

I could get in trouble—or he could write more memos if he knew 

about it. It is just not that easy in the context of the real world, 

it isn’t. 

Senator SESSIONS. On the question of recklessness, which is not 

in the statute but is only in the preamble or the heading, I do believe that most States have a standard for reckless disregard. The 

classic case is driving through a neighborhood where children are 

playing at high rates of speed in reckless disregard of the consequences. A person can be held criminally liable for that. I don’t 

see any prosecutors at the table here. 

Could not a person who introduces a product into the highway 

of life not be held to that reckless disregard standard? Would that 

standard not be available in criminal court for products liability 

cases? Does anybody want to comment on that? 

I mean, what normally happens is that they are sued and if they 

are actually in reckless disregard, then you are entitled to punitive 

damages, aren’t you, Mr. Panish? 

Mr. PANISH. In our State, California, there is a higher burden of 

proof for punitive damages. California requires a clear and convincing standard to be proved. It is conscious disregard for the 

rights and safety of others, and it is pretty narrowly drawn. 

Senator SESSIONS. Clear and convincing evidence, but it is a conscious disregard? 

28

Mr. PANISH. A conscious disregard for the rights and safety of 

others. And there are other provisions; there are three different 

prongs under which it can be awarded. 

Senator SESSIONS. So I guess my concern would be, or my point 

would be that there are ways now to prosecute criminally under 

the reckless disregard standard that we have classically had in 

criminal law for really egregious actions that were knowingly and 

deliberately done or done with reckless disregard. 

If you knowingly and deliberately drive into a crowd of people, 

then you are going to be held liable for first-degree murder, whether you actually intended anybody to be murdered or not. If you do 

it with reckless disregard, it may be second-degree murder, depending on the State law. But there are ways to do that under current 

law. 

I am concerned about the standards here and that we create now 

a Federal criminal action based on more vague standards that look 

more like civil lawsuit standards. 

Mr. SCHWARTZ. It does look like civil standards. That is the line 

between tort and crime, and law schools package this stuff separately. You know, you go to torts class and then you go over to 

criminal class, and they never have the two people together. I used 

to try. I used to bring the criminal law professor in and we would 

discuss the very things that are being discussed in this Committee 

today about the difference between tort and crime, the difference 

between standards. 

And there are criminal standards, just like what happened ultimately with the TREAD Act where a criminal standard which was 

easy to understand was incorporated. And there are criminal statutes about reckless disregard for life. Whether that is going to be 

used in the context of product liability, I don’t know. If the Chairman would ask me has it ever been used, I do think that they tried 

in Indiana, as the Chairman averted to, in the Pinto case, but the 

case fell apart. The article I submitted tells why. But there is a difference in drawing lines and how you express things in criminal 

law versus tort law, and there are good reasons for the differences. 

Senator SESSIONS. Professor Steinbuch, on your advertisement 

there, I am concerned about these advertisements. Some of them 

look like newspaper articles, No. 1. I don’t like that. No. 2, they 

make statements that I know are not true. So you could do that 

through giving some regulatory agency administrative authority to 

gain an injunction to shut down the advertisement, which I think 

we have done pretty aggressively, sue for damages, and/or you 

could put the person in jail. I am not against either one. I mean, 

I think all three are appropriate, depending on the clarity of the 

proof and the clarity of the standard. 

Would you agree that in a product production thing, whether the 

head man at Merck—did they do Vioxx, did you say, Professor? 

Mr. SCHWARTZ. Yes. 

Senator SESSIONS. Merck knew everything there was in every report that ever existed about—he might have been hired because of 

his financial expertise, and whoever gets held liable for something 

is in a more uncertain area. 

Mr. STEINBUCH. Well, I think, Senator, you raise an interesting 

point and a good point, and that is that on criminal law we must 

29

be confident of who we are prosecuting. But I think we may be paying too much attention to the marginal cases and are less concerned about the clear cases that you have heard about on this 

panel. 

It reminds me of a parable that my father once taught me, which 

was we can tell the difference between night and day easily even 

though the exact point that one changes to other is often not clear. 

Everybody knows that 11 p.m., is night. Everybody knows that 11 

a.m. is daytime. 5:48 a.m.—I don’t know if that is day or night; I 

don’t know exactly. But, we can still easily tell the difference between night and day. 

And so, yes, there will be marginal cases, but with limited resources and good prosecutors such as yourself and such as Chairman Specter, I am confident that a properly tailored statute would 

achieve the goals that the Chairman has sought. 

Senator SESSIONS. Professor Vandall? 

Mr. VANDALL. Yes. I would like to try to put some of the questions and comments into context, if I could, and responding back 

to the Chairman’s question of anecdotal and Professor Schwartz’s 

comment in regard to the Pinto prosecution. 

The Pinto prosecution failed because it was underfunded. This 

was a county D.A. He had $20,000 for the whole year. He spent 

$20,000 of his own money, so $40,000 total. When you read the 

book, and it is an excellent book on the Pinto case, it shows that 

Ford just blew him out of the water. 

Mr. Schwartz commented that the product liability system is 

over-heated. I think that is short of the problem. If it was overheated, we wouldn’t be here today. If it was over-heated, we 

wouldn’t have Guidant having the interest, the ability to do and 

say what they did. Punitive damages are thrown around here——

Chairman SPECTER. You can be tougher than ‘‘interest’’ and 

‘‘ability,’’ Professor Vandall, when you talk about Guidant. It is 

pretty blatant and it is pretty current. 

Mr. VANDALL. Exactly. 

Chairman SPECTER. No, wait a minute. You haven’t been tough 

enough. 

Senator SESSIONS. Do you want to advise him of the libel rules 

of the Senate? 

Chairman SPECTER. Don’t lead the witness, Senator Sessions. 

Go ahead, Professor Vandall. 

Senator SESSIONS. No. I mean in the sense that we can say it 

and not be sued. I don’t know about you. I was going to ask the 

Chairman. 

Chairman SPECTER. I didn’t want to interrupt you unduly, but 

when you talk about Guidant, you can be a little tougher than ‘‘interest.’’

Mr. VANDALL. Thank you. I will keep that in mind. 

In regard to punitives, the word has been thrown around. Professor Schwartz implies that we have a lively system of punitive 

damages. And as you all know, there have been several recent Supreme Court cases that have gutted the concept of punitive damages, and it is entirely unclear where punitive damages are going 

to go for personal injury. 

30

If these cases were superseded by the Senate, I don’t think we 

would be having the discussion today; that is, the corporations are 

all about profit, are all about making money, which is what they 

should be. I am not challenging that, but we know how to get their 

attention and that is with substantial, aggressive and appropriate 

punitive damages. 

Just to get back to Professor Schwartz’s comment and something 

that we have been talking about all day, and that is corporations 

deal with risk in everything they do. They deal with it in terms of 

marketing, they deal with it in regard to products. Products have 

a degree of risk for just about every product. Let’s talk about motorcycles at one end of the spectrum and white flour at the other 

end. We know motorcycles are dangerous. We all know someone 

who has been killed on a motorcycle. That doesn’t make them defective. Let’s put cars and drugs in the middle of the spectrum. 

Those are tough cases. 

So what are corporations about? They are about figuring out 

what the niche is, figuring out the cost of the product. The reason 

the Pinto was poorly designed was because it had to come in at 

$2,000. Honda had just introduced its wonderful car, the Civic. The 

Vega, the worst car ever designed by GM, was there at about 

$2,300. So Ford said we have got to make it priced in the showroom at not a penny over $2,000. That is why it was a cheap car. 

Now, we are talking about Federal prosecution. Let’s remember 

who the father of the Pinto was. The father of the Pinto was Lee 

Iacocca. How do you feel about going after him and locking him up? 

I think the Governor from Michigan might have something to say 

about that because Lee Iacocca single-handedly became president 

of Chrysler and appealed to Congress and brought Chrysler out of 

the depths that they were in with their unfortunate automobile 

line. So I do not think we want to talk about Lee Iacocca as the 

kind of person that we should be thinking about locking up. He 

was responsible; he signed off on the Pinto. 

Thank you. 

Chairman SPECTER. Professor Vandall, we impeach presidents of 

larger entities than motor companies. No one is immune, no one is 

exempt. 

Senator SESSIONS. I agree with that. In the course of these 

things, there oftentimes have to be many documents and statements filed. That is what we did on Sarbanes-Oxley, I guess, was 

say when you file a document, you have got to take some effort to 

make sure it is correct. You can’t just say, well, I didn’t have time 

to look at it. 

There are some legitimate problems out here. I thank the Chairman for raising them and I just think we need to be cautious and 

not over-reach. 

Mr. SCHWARTZ. I do find intriguing something that Professor 

Vandall said. Thank you for mentioning my name a few times; that 

is always good—but you suggested that the application of the Constitution of the United States gutted punitive damages. The application of the Constitution to criminal law occurred in Miranda. Did 

that gut criminal law? In punitive damages, they applied the Due 

Process Clause. It was more than a majority. The mixture of the 

Justices, Mr. Chairman, were not your usual conservative versus 

31

liberal. There was overkill in the punitive system under the Constitution of the United States, and the application of punitive damages has continued to ferret out wrongdoers. 

Mr. VANDALL. Could I respond to that? 

Chairman SPECTER. Of course, Professor Vandall. 

Mr. VANDALL. Justice Scalia wrote a dissent in that case and he 

said there is no constitutional issue. So I think it is a debatable 

question as to whether the restricting of punitive damages rests on 

constitutional principles. 

Chairman SPECTER. Well, that is a complex issue which we won’t 

be able to really explore here today. 

We are going to leave the record open for 1 week, which is our 

custom, and we very much appreciate your coming in. We have had 

a fair amount of response. One caller representing a big company 

said we have caught the attention of the American corporate community. 

Are you nodding in the affirmative, Mr. Schwartz? 

Mr. SCHWARTZ. Yes. You did catch their attention. 

Chairman SPECTER. I have caught their attention. 

The final question I have, but we are running a little late as it 

is, would be whether having a hearing, whether introducing a 

bill—the readership of the Congressional Record is not too heavy. 

Not too many people read the Congressional Record, so you put a 

bill in. There is a question whether anybody notices it. You have 

a hearing and you get a little more attention. I don’t know that 

anybody watches C–SPAN except for me when I get home. Our Judiciary Committee hearings have a favorite spot at about 3 a.m. We 

have a tremendous following among insomniacs in America. 

Do you think a hearing like this helps to catch attention and 

might have some deterrent effect, Mr. Schwartz? Last question, yes 

or no. 

Mr. SCHWARTZ. Yes, I do. 

Chairman SPECTER. Thank you all very much. 

[Whereupon, at 11:21 a.m., the Committee was adjourned.] 

[Questions and answers and submissions for the record follow.] 

[Additional material is be retained in the Committee files.]

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