I 

111TH CONGRESS 

1ST SESSION H. R. 440 

To provide small businesses certain protections from litigation excesses. 

IN THE HOUSE OF REPRESENTATIVES 

JANUARY 9, 2009 

Mr. REHBERG introduced the following bill; which was referred to the 

Committee on the Judiciary 

A BILL 

To provide small businesses certain protections from 

litigation excesses. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Small Business Liabil5 ity Reform Act of 2009’’. 

6 SEC. 2. FINDINGS. 

7 Congress finds that— 

8 (1) the defects in the United States civil justice 

9 system have a direct and undesirable effect on inter10 state commerce by decreasing the availability of 

11 goods and services in commerce; 


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1 (2) the spiraling costs of litigation and the 

2 magnitude and unpredictability of punitive damage 

3 awards and noneconomic damage awards have con4 tinued unabated for at least the past 30 years; 

5 (3) the Supreme Court of the United States has 

6 recognized that a punitive damage award can be un7 constitutional if the award is grossly excessive in re8 lation to the legitimate interest of the government in 

9 the punishment and deterrence of unlawful conduct; 

10 (4) just as punitive damage awards can be 

11 grossly excessive, so can it be grossly excessive in 

12 some circumstances for a party to be held respon13 sible under the doctrine of joint and several liability 

14 for damages that party did not cause; 

15 (5) as a result of joint and several liability, en16 tities including small businesses are often brought 

17 into litigation despite the fact that their conduct 

18 may have little or nothing to do with the accident 

19 or transaction giving rise to the lawsuit, and may 

20 therefore face increased and unjust costs due to the 

21 possibility or result of unfair and disproportionate 

22 damage awards; 

23 (6) due to high liability costs and unwarranted 

24 litigation costs, small businesses face higher costs in 


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1 purchasing insurance through interstate insurance 

2 markets to cover their activities; and 

3 (7) legislation to address these concerns is an 

4 appropriate exercise of the powers of Congress under 

5 clauses 3, 9, and 18 of section 8 of article I of the 

6 Constitution of the United States, and the 14th 

7 amendment to the Constitution of the United States. 

8 SEC. 3. DEFINITIONS. 

9 In this Act: 

10 (1) CRIME OF VIOLENCE.—The term ‘‘crime of 

11 violence’’ has the same meaning as in section 16 of 

12 title 18, United States Code. 

13 (2) DRUG.—The term ‘‘drug’’ means any con14 trolled substance (as defined in section 102 of the 

15 Controlled Substances Act (21 U.S.C. 802)) that 

16 was not legally prescribed for use by the defendant 

17 or that was taken by the defendant other than in ac18 cordance with the terms of a lawfully issued pre19 scription. 

20 (3) ECONOMIC LOSS.—The term ‘‘economic 

21 loss’’ means any pecuniary loss resulting from harm 

22 (including the loss of earnings or other benefits re23 lated to employment, medical expense loss, replace24 ment services loss, loss due to death, burial costs, 

25 and loss of business or employment opportunities) to 


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1 the extent recovery for such loss is allowed under ap2 plicable State law. 

3 (4) HARM.—The term ‘‘harm’’ means any phys4 ical injury, illness, disease, or death or damage to 

5 property. 

6 (5) INTERNATIONAL TERRORISM.—The term 

7 ‘‘international terrorism’’ has the same meaning as 

8 in section 2331 of title 18, United States Code. 

9 (6) NONECONOMIC LOSS.—The term ‘‘non10 economic loss’’ means loss for physical or emotional 

11 pain, suffering, inconvenience, physical impairment, 

12 mental anguish, disfigurement, loss of enjoyment of 

13 life, loss of society and companionship, loss of con14 sortium (other than loss of domestic service), injury 

15 to reputation, or any other nonpecuniary loss of any 

16 kind or nature. 

17 (7) PERSON.—The term ‘‘person’’ means any 

18 individual, corporation, company, association, firm, 

19 partnership, society, joint stock company, or any 

20 other entity (including any governmental entity). 

21 (8) PUNITIVE DAMAGES.—The term ‘‘punitive 

22 damages’’ means damages awarded against any per23 son or entity to punish or deter such person, entity, 

24 or others from engaging in similar behavior in the 

25 future. Such term does not include any civil penVerDate Nov 24 2008 07:00 Jan 12, 2009 Jkt 079200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H440.IH H440

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1 alties, fines, or treble damages that are assessed or 

2 enforced by an agency of State or Federal govern3 ment pursuant to a State or Federal statute. 

4 (9) SMALL BUSINESS.— 

5 (A) IN GENERAL.—The term ‘‘small busi6 ness’’ means any unincorporated business, or 

7 any partnership, corporation, association, unit 

8 of local government, or organization that has 

9 fewer than 50 full-time employees as deter10 mined on the date the civil action involving the 

11 small business is filed. 

12 (B) CALCULATION OF NUMBER OF EM13 PLOYEES.—For purposes of subparagraph (A), 

14 the number of employees of a subsidiary of a 

15 wholly owned corporation includes the employ16 ees of— 

17 (i) a parent corporation; and 

18 (ii) any other subsidiary corporation 

19 of that parent corporation. 

20 (10) STATE.—The term ‘‘State’’ means each of 

21 the several States, the District of Columbia, the 

22 Commonwealth of Puerto Rico, the Virgin Islands, 

23 Guam, American Samoa, the Northern Mariana Is24 lands, any other territory or possession of the 


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1 United States, or any political subdivision of any 

2 such State, commonwealth, territory, or possession. 

3 SEC. 4. LIMITATION ON PUNITIVE DAMAGES FOR SMALL 

4 BUSINESSES. 

5 Except as provided in section 6, in any civil action 

6 against a small business, punitive damages may, to the 

7 extent permitted by applicable Federal or State law, be 

8 awarded against the small business only if the claimant 

9 establishes by clear and convincing evidence that conduct 

10 carried out by that defendant with a conscious, flagrant 

11 indifference to the rights or safety of others was the proxi12 mate cause of the harm that is the subject of the action. 

13 SEC. 5. LIMITATION ON JOINT AND SEVERAL LIABILITY 

14 FOR NONECONOMIC LOSS FOR SMALL BUSI15 NESSES. 

16 (a) GENERAL RULE.—Except as provided in section 

17 6, in any civil action against a small business, the liability 

18 of each defendant that is a small business, or the agent 

19 of a small business, for noneconomic loss shall be deter20 mined in accordance with subsection (b). 

21 (b) AMOUNT OF LIABILITY.— 

22 (1) IN GENERAL.—In any civil action described 

23 in subsection (a)— 

24 (A) each defendant described in that sub25 section shall be liable only for the amount of 


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1 noneconomic loss allocated to that defendant in 

2 direct proportion to the percentage of responsi3 bility of that defendant (determined in accord4 ance with paragraph (2)) for the harm to the 

5 claimant with respect to which that defendant 

6 is liable; and 

7 (B) the court shall render a separate judg8 ment against each defendant described in that 

9 subsection in an amount determined under sub10 paragraph (A). 

11 (2) PERCENTAGE OF RESPONSIBILITY.—For 

12 purposes of determining the amount of noneconomic 

13 loss allocated to a defendant under this section, the 

14 trier of fact shall determine the percentage of re15 sponsibility of each person responsible for the harm 

16 to the claimant, regardless of whether or not the 

17 person is a party to the action. 

18 SEC. 6. EXCEPTIONS TO LIMITATIONS ON LIABILITY. 

19 The limitations on liability under sections 4 and 5 

20 do not apply— 

21 (1) to any defendant whose misconduct— 

22 (A) constitutes— 

23 (i) a crime of violence; or 

24 (ii) an act of international terrorism; 


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1 (B) results in liability for damages relating 

2 to the injury to, destruction of, loss of, or loss 

3 of use of, natural resources described in— 

4 (i) section 1002(b)(2)(A) of the Oil 

5 Pollution Act of 1990 (33 U.S.C. 

6 2702(b)(2)(A)); or 

7 (ii) section 107(a)(4)(C) of the Com8 prehensive Environmental Response, Com9 pensation, and Liability Act of 1980 (42 

10 U.S.C. 9607(a)(4)(C)); 

11 (C) involves— 

12 (i) a sexual offense, as defined by ap13 plicable State law; or 

14 (ii) a violation of a Federal or State 

15 civil rights law; 

16 (D) occurred at the time the defendant 

17 was under the influence (as determined under 

18 applicable State law) of intoxicating alcohol or 

19 a drug, and the fact that the defendant was 

20 under the influence was the cause of any harm 

21 alleged by the plaintiff in the subject action; or 

22 (2) to any cause of action which is brought 

23 under the provisions of title 31, United States Code, 

24 relating to false claims (31 U.S.C. 3729–3733) or to 


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1 any other cause of action brought by the United 

2 States relating to fraud or false statements. 

3 SEC. 7. PREEMPTION AND ELECTION OF STATE NON4 APPLICABILITY. 

5 (a) PREEMPTION.—Subject to subsection (b), this 

6 title preempts the laws of any State to the extent that 

7 State laws are inconsistent with this title. 

8 (b) ELECTION OF STATE REGARDING NONAPPLICA9 BILITY.—This title does not apply to any action in a State 

10 court against a small business in which all parties are citi11 zens of the State, if the State enacts a statute— 

12 (1) citing the authority of this subsection; 

13 (2) declaring the election of such State that this 

14 title does not apply as of a date certain to such ac15 tions in the State; and 

16 (3) containing no other provision. 

17 SEC. 8. EFFECTIVE DATE. 

18 This Act shall take effect with respect to any civil 

19 action commenced after the date of the enactment of this 

20 Act without regard to whether the harm that is the subject 

21 of the action occurred before such date. 

Æ 


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