II

104TH CONGRESS

1ST SESSION S. 672

To provide a fair and balanced resolution to the problem of multiple

imposition of punitive damages, and for the reform of the civil justice system.

IN THE SENATE OF THE UNITED STATES

APRIL 4 (legislative day, MARCH 27), 1995

Mr. HATCH (for himself, Mr. MCCONNELL, and Mr. THOMAS) introduced the

following bill; which was read twice and referred to the Committee on the

Judiciary

A BILL

To provide a fair and balanced resolution to the problem

of multiple imposition of punitive damages, and for the

reform of the civil justice system.

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 ‘‘Civil Justice Fairness

5 Act of 1995’’.

6 TITLE I—PUNITIVE DAMAGES

7 REFORM

8 SEC. 101. DEFINITIONS.

9 For purposes of this title, the term—
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1 (1) ‘‘claimant’’ means any person who brings a

2 civil action and any person on whose behalf such an

3 action is brought; if such an action is brought

4 through or on behalf of an estate, the term includes

5 the claimant’s decedent; if such action is brought

6 through or on behalf of a minor or incompetent, the

7 term includes the claimant’s legal guardian;

8 (2) ‘‘clear and convincing evidence’’ is that

9 measure or degree of proof that will produce in the

10 mind of the trier of fact a firm belief or conviction

11 as to the truth of the allegations sought to be estab12 lished; the level of proof required to satisfy such

13 standard is more than that required under prepon14 derance of the evidence, but less than that required

15 for proof beyond a reasonable doubt;

16 (3) ‘‘harm’’ means any legally cognizable wrong

17 or injury for which punitive damages may be im18 posed;

19 (4) ‘‘economic damages’’ means objectively veri20 fiable monetary losses including medical expenses,

21 loss of earnings, burial costs, loss of use of property,

22 costs of repair or replacement, costs of obtaining

23 substitute domestic services, loss of employment and

24 loss of business or employment opportunities, to the
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1 extent such recovery is allowed under applicable

2 Federal or State law;

3 (5) ‘‘nominal damages’’ means damages less

4 than or equal to $500;

5 (6) ‘‘person’’ means any individual, corporation,

6 company, association, firm, partnership, society,

7 joint stock company, or any other entity (including

8 any governmental entity);

9 (7) ‘‘punitive damages’’ means damages award10 ed against any person or entity to punish or deter

11 such person or entity, or others, from engaging in

12 similar behavior in the future;

13 (8) ‘‘specific findings of fact’’ means findings in

14 written form focusing on specific behavior of a de15 fendant; and

16 (9) ‘‘State’’ means any State of the United

17 States, the District of Columbia, Puerto Rico, the

18 Northern Mariana Islands, the Virgin Islands,

19 Guam, American Samoa, and any other territory or

20 possession of the United States, or any political sub21 division thereof.

22 SEC. 102. MULTIPLE PUNITIVE DAMAGES FAIRNESS.

23 (a) FINDINGS.—The Congress finds that—

24 (1) multiple or repetitive imposition of punitive

25 damages for harms arising out of a single act or
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1 course of conduct may deprive a defendant of all the

2 assets or insurance coverage of the defendant, and

3 may endanger the ability of future claimants to re4 ceive compensation for basic out-of-pocket expenses

5 and damages for pain and suffering;

6 (2)(A) the detrimental impact of multiple puni7 tive damages exists even in cases that are settled,

8 rather than tried, because the threat of punitive

9 damages being awarded results in a higher settle10 ment than would ordinarily be obtained; and

11 (B) to the extent this premium exceeds what

12 would otherwise be a fair and reasonable settlement

13 for compensatory damages, assets that could be

14 available for satisfaction of future compensatory

15 claims are dissipated;

16 (3) fundamental unfairness results when anyone

17 is punished repeatedly for what is essentially the

18 same conduct;

19 (4) Federal and State appellate and trial

20 judges, and well-respected commentators, have ex21 pressed concern that multiple imposition of punitive

22 damages may violate constitutionally protected due

23 process rights;
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1 (5) multiple imposition of punitive damages

2 may be a significant obstacle to comprehensive set3 tlement negotiations in repetitive litigation;

4 (6) limiting the imposition of multiple punitive

5 damages awards would facilitate resolution of mass

6 tort claims involving thousands of injured claimants;

7 (7) Federal and State trial courts have not pro8 vided adequate solutions to problems caused by the

9 multiple imposition of punitive damages because of

10 a concern that such courts lack the power or author11 ity to prohibit subsequent awards in other courts;

12 and

13 (8) individual State legislatures can create only

14 a partial remedy to address problems caused by the

15 multiple imposition of punitive damages, because

16 each State lacks the power to control the imposition

17 of punitive damages in other States.

18 (b) GENERAL RULE.—Except as provided in sub19 section (c), punitive damages shall be prohibited in any

20 civil action in any State or Federal court in which such

21 damages are sought against a defendant based on the

22 same act or course of conduct for which punitive damages

23 have already been sought or awarded against such defend24 ant.
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1 (c) CIRCUMSTANCES FOR AWARD.—If the court de2 termines in a pretrial hearing that the claimant will offer

3 new and substantial evidence of previously undiscovered,

4 additional wrongful behavior on the part of the defendant,

5 other than the injury to the claimant, the court may award

6 punitive damages in accordance with subsection (d).

7 (d) LIMITATIONS ON AWARD.—A court awarding pu8 nitive damages pursuant to subsection (c) shall—

9 (1) make specific findings of fact on the record

10 to support the award;

11 (2) reduce the amount of the punitive portion

12 of the damage award by the sum of the amounts of

13 punitive damages previously paid by the defendant

14 in prior actions based on the same act or course of

15 conduct; and

16 (3) prohibit disclosure to the jury of the court’s

17 determination and action under this subsection.

18 (e) APPLICABILITY AND PREEMPTION.—

19 (1) IN GENERAL.—Except as provided in para20 graph (3), this section shall apply to any civil action

21 brought on any theory where punitive damages are

22 sought based on the same act or course of conduct

23 for which punitive damages have already been

24 sought or awarded against the defendant.
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1 (2) APPLICATION TO TRIALS.—Except as pro2 vided in paragraph (3), this section shall apply to all

3 civil actions in which the trial has not commenced

4 before the effective date of this Act.

5 (3) DAMAGES UNDER OTHER FEDERAL OR

6 STATE STATUTE.—This section shall not apply to

7 any civil action involving damages awarded under

8 any Federal or State statute that prescribes the pre9 cise amount of punitive damages to be awarded.

10 (4) PREEMPTION.—This section shall not pre11 empt or supersede any existing Federal or State law

12 limiting or otherwise restricting the recovery for pu13 nitive damages to the extent that such law is incon14 sistent with the provisions of this section.

15 SEC. 103. UNIFORM STANDARDS FOR AWARD OF PUNITIVE

16 DAMAGES.

17 (a) FINDINGS.—The Congress finds that—

18 (1) punitive damages are imposed pursuant to

19 vague, subjective, elastic and often retrospective

20 standards of liability, and these standards vary from

21 State to State;

22 (2) the magnitude and unpredictability of puni23 tive damage awards in civil actions have increased

24 dramatically over the last 30 years, unreasonably in-
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1 flating the cost of settling litigation, and discourag2 ing socially useful and productive activity;

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

4 recognized that punitive damages can produce gross5 ly excessive, wholly unreasonably and often arbitrary

6 punishment, and therefore raise serious constitu7 tional due process problems; and

8 (4) excessive, arbitrary and unpredictable puni9 tive damage awards disrupt, impair and burden

10 interstate commerce, imposing unreasonable and un11 justified costs on consumers, taxpayers, govern12 mental entities, large and small businesses, volunteer

13 organizations, and nonprofit entities.

14 (b) GENERAL RULE.—

15 (1) LIMITATION ON AWARD OF PUNITIVE DAM16 AGES.—Punitive damages may, to the extent per17 mitted by applicable Federal or State law, be award18 ed in any civil action in any Federal or State court

19 against a defendant if the claimant establishes by

20 clear and convincing evidence that the harm suffered

21 was the result of conduct that is either—

22 (A) specifically intended to cause harm; or

23 (B) carried out with conscious, flagrant

24 disregard for the rights or safety of other per25 sons.
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1 (2) PROHIBITION OF PUNITIVE DAMAGES.—Pu2 nitive damages may not be awarded in the absence

3 of an award of compensatory damages exceeding

4 nominal damages.

5 (c) LIMITATION CONCERNING CERTAIN DRUGS AND

6 MEDICAL DEVICES.—

7 (1) IN GENERAL.—Punitive damages shall not

8 be awarded pursuant to this section against a manu9 facturer or product seller of a drug (as defined in

10 section 201(g)(1) of the Federal Food, Drug, and

11 Cosmetic Act (21 U.S.C. 321(g)(1))) or medical de12 vice (as defined in section 201(h) of the Federal

13 Food, Drug, and Cosmetic Act (21 U.S.C. 321(h)))

14 which caused the claimant’s harm where—

15 (A) such drug or device was subject to pre16 market approval by the Food and Drug Admin17 istration with respect to the safety of the for18 mulation or performance of the aspect of such

19 drug or device which caused the claimant’s

20 harm or the adequacy of the packaging or label21 ing of such drug or device, and such drug or

22 device was in fact approved by the Food and

23 Drug Administration; or

24 (B) the drug or device is generally recog25 nized as safe and effective pursuant to condi-
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1 tions established by the Food and Drug Admin2 istration and applicable regulations, including

3 packaging and labeling regulations.

4 (2) NONAPPLICABILITY.—The provisions of

5 paragraph (1) shall not apply in any case in which—

6 (A) the defendant, before or after pre-mar7 ket approval of a drug or device, withheld from

8 or misrepresented to the Food and Drug Ad9 ministration or any other agency or official of

10 the Federal Government required information

11 that is material and relevant to the perform12 ance of such drug or device and is causally re13 lated to the harm which the claimant allegedly

14 suffered; or

15 (B) the defendant made an illegal payment

16 to an official of the Food and Drug Administra17 tion for the purpose of either securing or main18 taining approval of such drug or device.

19 (d) PLEADING OF PUNITIVE DAMAGES.—No com20 plaint or other such pleading shall be filed containing a

21 prayer for relief seeking punitive damages in any civil ac22 tion subject to this section. A claimant may, however, pur23 suant to a pretrial motion and after a hearing before the

24 court, amend the complaint or other such pleading to in25 clude a prayer for relief seeking punitive damages. The
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1 court shall allow such motion to amend if the claimant

2 establishes at the hearing a reasonable likelihood of prov3 ing facts at trial sufficient to support an award of punitive

4 damages. Any such motion to amend shall be made not

5 later than 30 days after the close of discovery. A prayer

6 for relief added pursuant to this subsection shall not be

7 barred by lapse of time under any statute prescribing or

8 limiting the time within which an action may be brought

9 or right asserted if the time prescribed or limited had not

10 expired when the original pleading was filed.

11 (e) BIFURCATION AT DEFENDANT’S REQUEST.—

12 (1) SEPARATE PROCEEDING.—At the request of

13 the defendant, the trier of fact shall consider in a

14 separate proceeding whether punitive damages are to

15 be awarded and the amount of such award.

16 (2) ADMISSIBILITY OF EVIDENCE.—If a sepa17 rate proceeding is requested, evidence relevant only

18 to the claim of punitive damages, as determined by

19 applicable State law, shall be inadmissible in any

20 proceeding to determine whether compensatory dam21 ages are to be awarded. Evidence admissible in the

22 separate proceeding for punitive damages may in23 clude evidence of the defendant’s profits, if any,

24 from its alleged wrongdoing, but shall not include

25 evidence of the defendant’s overall wealth.
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1 (f) PROPORTIONAL AWARDS.—The amount of puni2 tive damages that may be awarded to a claimant in any

3 civil action subject to this title shall not exceed 3 times

4 the amount of damages awarded to the claimant for the

5 economic damages, or $250,000, whichever is greater.

6 This provision shall be applied by the court and shall not

7 be disclosed to the jury.

8 (g) APPLICABILITY AND PREEMPTION.—

9 (1) APPLICABILITY.—This section shall apply

10 to—

11 (A) any civil action brought in any Federal

12 or State court on any theory where punitive

13 damages are sought; and

14 (B) all civil actions in which the trial has

15 not commenced before the effective date of this

16 Act.

17 (2) PREEMPTION.—This section supersedes

18 State law only to the extent that State law applies

19 to an issue covered by this section. Any issue that

20 is not governed by this section shall be governed by

21 applicable State or Federal law.

22 SEC. 104. EFFECT ON OTHER LAW.

23 Nothing in this title shall be construed to—

24 (1) waive or affect any defense of sovereign im25 munity asserted by any State under any law;
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1 (2) supersede any Federal law;

2 (3) waive or affect any defense of sovereign im3 munity asserted by the United States;

4 (4) affect the applicability of any provision of

5 chapter 97 of title 28, United States Code;

6 (5) preempt State choice-of-law rules with re7 spect to claims brought by a foreign nation or a citi8 zen of a foreign nation;

9 (6) affect the right of any court to transfer

10 venue or to apply the law of a foreign nation or to

11 dismiss a claim of a foreign nation or of a citizen

12 of a foreign nation on the ground of inconvenient

13 forum; or

14 (7) create a cause of action for punitive dam15 ages.

16 TITLE II—JOINT AND SEVERAL

17 LIABILITY REFORM

18 SEC. 201. SEVERAL LIABILITY FOR NONECONOMIC LOSS.

19 (a) FINDINGS.—The Congress finds that—

20 (1) because of the joint and several liability

21 doctrine, municipalities, volunteer groups, nonprofit

22 entities, property owners, and large and small busi23 nesses are often brought into litigation despite the

24 fact that their conduct often had little or nothing to
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1 do with the accident or transaction giving rise to the

2 lawsuit;

3 (2) noneconomic damages are not assessed pur4 suant to any objective criteria and are therefore im5 possible to quantify, leading to unpredictable, highly

6 subjective and often excessive awards;

7 (3) the imposition of joint and several liability

8 for noneconomic damages frequently results in the

9 assessment of unfair and disproportionate damages

10 against defendants that bear no relationship to their

11 fault or responsibility; and

12 (4) the unfair allocation of noneconomic dam13 ages under the joint and several liability doctrine

14 disrupts, impairs, and burdens interstate commerce,

15 imposing unreasonable and unjustified costs on con16 sumers, taxpayers, governmental entities, large and

17 small businesses, volunteer organizations, and non18 profit entities.

19 (b) DEFINITIONS.—For purposes of this section, the

20 term—

21 (1) ‘‘economic damages’’ means objectively veri22 fiable monetary losses including medical expenses,

23 loss of earnings, burial costs, loss of use of property,

24 costs of repair or replacement, costs of obtaining
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1 substitute domestic services, loss of employment and

2 loss of business or employment opportunities; and

3 (2) ‘‘noneconomic damages’’ means subjective,

4 nonmonetary losses including, but not limited to,

5 pain, suffering, inconvenience, mental suffering,

6 emotional distress, loss of society and companion7 ship, loss of consortium, injury to reputation and

8 humiliation.

9 (c) IN GENERAL.—In any civil action for personal in10 jury, wrongful death, or based upon principles of compara11 tive fault, the liability of each defendant for noneconomic

12 damages shall be several only and shall not be joint. Each

13 defendant shall be liable only for the amount of non14 economic damages allocated to such defendant in direct

15 proportion to such defendant’s percentage of responsibility

16 as determined under subsection (d). A separate judgment

17 shall be rendered against such defendant for that amount.

18 (d) PROPORTION OF RESPONSIBILITY.—For pur19 poses of this section, the trier of fact shall determine the

20 proportion of responsibility of each person for the claim21 ant’s harm whether or not such person is a party to the

22 action.

23 (e) APPLICABILITY AND PREEMPTION.—This title

24 shall not preempt or supersede any Federal or State law
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1 to the extent that such law would further limit the applica2 tion of joint liability to any kind of damages.

3 TITLE III—CIVIL PROCEDURAL

4 REFORM

5 SEC. 301. SANCTIONS FOR ABUSIVE LITIGATION PRAC6 TICES.

7 Rule 11 of the Federal Rules of Civil Procedure is

8 amended to read as follows:

9 ‘‘Rule 11. Signing of Pleadings, Motions, and Other

10 Papers; Representations to Court; Sanc11 tions

12 ‘‘(a) SIGNATURE.—Every pleading, written motion,

13 and other paper shall be signed by at least one attorney

14 of record in the attorney’s individual name, or, if the party

15 is not represented by an attorney, shall be signed by the

16 party. Each paper shall state the signer’s address and tele17 phone number, if any. Except when otherwise specifically

18 provided by rule or statute, pleadings need not be verified

19 or accompanied by affidavit. An unsigned paper shall be

20 stricken unless omission of the signature is corrected

21 promptly after being called to the attention of the attorney

22 or party.

23 ‘‘(b) REPRESENTATIONS TO COURT.—By presenting

24 to the court (whether by signing, filing, submitting, or

25 later advocating) a pleading, written motion, or other
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1 paper, an attorney or unrepresented party is certifying

2 that to the best of the person’s knowledge, information,

3 and belief, formed after an inquiry reasonable under the

4 circumstances—

5 ‘‘(1) it is not being presented for any improper

6 purpose, such as to harass or to cause unnecessary

7 delay or needless increase in the cost of litigation;

8 ‘‘(2) the claims, defenses, and other legal con9 tentions therein are warranted by existing law or by

10 a nonfrivolous argument for the extension, modifica11 tion, or reversal of existing law or the establishment

12 of new law;

13 ‘‘(3) the allegations and other factual conten14 tions have evidentiary support; and

15 ‘‘(4) the denials of factual contentions are war16 ranted on the evidence or, if specifically so identi17 fied, are reasonably based on a lack of information

18 or belief.

19 ‘‘(c) SANCTIONS.—If, after notice and a reasonable

20 opportunity to respond, the court determines that subdivi21 sion (b) has been violated, the court shall, subject to the

22 conditions stated below, impose an appropriate sanction

23 upon the attorneys, law firms, or parties that have violated

24 subdivision (b) or are responsible for the violation.

25 ‘‘(1) HOW INITIATED.—
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1 ‘‘(A) BY MOTION.—A motion for sanctions

2 under this rule shall be made separately from

3 other motions or requests and shall describe the

4 specific conduct alleged to violate subdivision

5 (b). It shall be served as provided in rule 5.

6 ‘‘(B) ON COURT’S INITIATIVE.—On its own

7 initiative, the court may enter an order describ8 ing the specific conduct that appears to violate

9 subdivision (b) and directing an attorney, law

10 firm, or party to show cause why it has not vio11 lated subdivision (b) with respect thereto.

12 ‘‘(2) NATURE OF SANCTION; LIMITATIONS.—A

13 sanction imposed for violation of this rule shall be

14 sufficient to deter repetition of such conduct or com15 parable conduct by others similarly situated, and to

16 compensate the parties that were injured by such

17 conduct. Subject to the limitations in subparagraphs

18 (A) and (B), the sanction may consist of, or include,

19 directives of a nonmonetary nature, an order to pay

20 a penalty into court, or, if imposed on motion, an

21 order directing payment to the movant of the rea22 sonable attorneys’ fees and other expenses incurred

23 as a direct result of the violation.
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1 ‘‘(A) Monetary sanctions may not be

2 awarded against a represented party for a viola3 tion of subdivision (b)(2).

4 ‘‘(B) Monetary sanctions may not be

5 awarded on the court’s initiative unless the

6 court issues its order to show cause before a

7 voluntary dismissal or settlement of the claims

8 made by or against the party which is, or whose

9 attorneys are, to be sanctioned.

10 ‘‘(3) ORDER.—When imposing sanctions, the

11 court shall describe the conduct determined to con12 stitute a violation of this rule and explain the basis

13 for sanctions imposed.

14 ‘‘(d) INAPPLICABILITY TO DISCOVERY.—Subdivisions

15 (a) through (c) of this rule do not apply to disclosures

16 and discovery requests, responses, objections, and motions

17 that are subject to the provisions of rules 26 through 37.

18 ‘‘(e) NONLIMITATION ON INHERENT POWER OF THE

19 COURT.—Nothing in this rule limits the inherent power

20 of the Federal courts to sanction misconduct of attorneys

21 or parties appearing before such courts.’’.

22 SEC. 302. TRIAL LAWYER ACCOUNTABILITY.

23 (a) SENSE OF THE CONGRESS.—It is the sense of the

24 Congress that each State should require, under penalty

25 of law, each attorney admitted to practice law in such
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1 State to disclose in writing, to any client with whom such

2 attorney has entered into a contingency fee agreement—

3 (1) the actual services performed for such client

4 in connection with such agreement;

5 (2) the precise number of hours actually ex6 pended by such attorney in the performance of such

7 services; and

8 (3) whether a referral fee was paid to any other

9 person.

10 (b) STUDY AND DEVELOPMENT OF MODEL LEGISLA11 TION.—The Attorney General shall—

12 (1) study and evaluate contingent fee awards

13 and their abuses in cases arising in State and Fed14 eral court, with particular emphasis on cases in

15 which the resulting fees received by attorneys are

16 grossly disproportionate to the fees such attorneys

17 would command if they offered identical services on

18 an hourly rate competitive with that available in the

19 relevant legal market;

20 (2) develop model State legislation—

21 (A) described in subsection (a) of this sec22 tion; and

23 (B) based on the study conducted under

24 paragraph (1), to curb abuses of contingent fee

25 awards, taking into particular account—
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1 (i) the risk that individual clients may

2 end up in an unduly weak bargaining posi3 tion where they, for lack of available funds

4 up front, are unable to pay an hourly rate

5 and must enter into a contingent fee

6 agreement if they are to obtain legal serv7 ices;

8 (ii) the danger that such clients may

9 ultimately pay what are effectively fla10 grantly excessive hourly rates;

11 (iii) the ways in which requiring attor12 neys to disclose to clients the hours ex13 pended on a contingent fee case may im14 prove civil justice, enhance the recovery re15 ceived by injured persons, and eliminate

16 abusive practices by attorneys who take

17 advantage of vulnerable clients;

18 (iv) the possibility that similar bene19 ficial effects may accrue from requiring, in

20 contingent fee cases, pre-agreement disclo21 sure of an attorney’s best estimate of the

22 hours that a case will require if it proceeds

23 to various stages, the likelihood and

24 amount of an award expected at various
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1 stages, and the attorney’s hourly rate for

2 the legal services required;

3 (v) the further possibility that other

4 disclosure requirements or restrictions on

5 contingent fee awards may enhance civil

6 justice; and

7 (vi) the possibility that any other in8 equities in attorney fee payment in contin9 gent fee cases may appropriately be ad10 dressed through legislation, such as inequi11 ties that might result where an attorney

12 receives a fee award from a court but still

13 receives a full contingent fee award such

14 that the client receives no benefit whatso15 ever from court-awarded fees; and

16 (3) prepare and disseminate to State authorities

17 the findings made and model legislation developed as

18 a result of the study and evaluation.

19 (c) REPORTING REQUIREMENTS.—Not later than the

20 date that is 1 year after the effective date of this Act,

21 the Attorney General shall report to the Congress—

22 (1) the findings of the study and the model leg23 islation required by this section; and
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1 (2) recommendations based on the findings on

2 the need for and appropriateness of further action

3 by the Federal Government.

4 SEC. 303. HONESTY IN EVIDENCE.

5 (a) OPINION TESTIMONY BY EXPERTS.—Rule 702 of

6 the Federal Rules of Evidence is amended—

7 (1) by inserting ‘‘(a) IN GENERAL.—’’ before

8 ‘‘If’’, and

9 (2) by adding at the end the following:

10 ‘‘(b) ADEQUATE BASIS FOR OPINION.—

11 ‘‘(1) Testimony in the form of an opinion by a

12 witness that is based on scientific, technical or medi13 cal knowledge shall be inadmissible in evidence un14 less the court determines that such opinion—

15 ‘‘(A) is based on scientifically valid reason16 ing;

17 ‘‘(B) is sufficiently reliable so that the pro18 bative value of such evidence outweighs the

19 dangers specified in rule 403; and

20 ‘‘(C) the techniques, methods, and theories

21 used to formulate that opinion are generally ac22 cepted within the relevant scientific, medical, or

23 technical field.
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1 ‘‘(2) In determining whether an opinion satis2 fies conditions in paragraph (1), the court shall con3 sider—

4 ‘‘(A) whether the opinion and any theory

5 on which it is based have been experimentally

6 tested;

7 ‘‘(B) whether the opinion has been pub8 lished in peer-review literature; and

9 ‘‘(C) whether the theory or techniques sup10 porting the opinion are sufficiently reliable and

11 valid to warrant their use as support for the

12 proffered opinion.

13 ‘‘(c) EXPERTISE IN THE FIELD.—Testimony in the

14 form of an opinion by a witness that is based on scientific,

15 technical, or medical knowledge shall be inadmissible in

16 evidence unless the witness’s knowledge, skill, experience,

17 training, education, or other expertise lies in the particular

18 field about which such witness is testifying.

19 ‘‘(d) DISQUALIFICATION.—Testimony by a witness

20 who is qualified as described in subsection (a) is inadmis21 sible in evidence if such witness is entitled to receive any

22 compensation contingent on the legal disposition of any

23 claim with respect to which such testimony is offered.’’.
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1 SEC. 304. FAIR SHIFTING OF COSTS AND REASONABLE AT2 TORNEY FEES.

3 (a) IN GENERAL.—Rule 68 of the Federal Rules of

4 Civil Procedure is amended to read as follows:

5 ‘‘Rule 68. Offer of judgment or settlement

6 ‘‘(a) OFFER OF JUDGMENT OR SETTLEMENT.—At

7 any time, any party may serve upon an adverse party a

8 written offer to allow judgment to be entered against the

9 offering party or to settle a case for the money, property,

10 or to such effect as the offer may specify, with costs then

11 accrued.

12 ‘‘(b) ACCEPTANCE OR REJECTION OF OFFERS.—If

13 within 21 days after service of the offer, or such additional

14 time as the court may allow, the adverse party serves writ15 ten notice that the offer is accepted, either party may then

16 file the offer and notice of acceptance together with proof

17 of service thereof and thereupon the clerk, or the court

18 if so required, shall enter judgment. An offer not accepted

19 shall be deemed withdrawn and evidence thereof is not ad20 missible except in a proceeding to determine costs and rea21 sonable attorney fees.

22 ‘‘(c) DETERMINATION OF FINAL JUDGMENTS.—If

23 the judgment finally obtained is not more favorable to the

24 offeree than the offer, then the offeree must pay the actual

25 costs and reasonable attorney fees incurred after the expi26 ration of the time for accepting the offer, but only to the
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1 extent necessary to make the offeror whole for actual costs

2 and reasonable attorney fees incurred as a consequence

3 of the rejection of the offer. When comparing the amount

4 of any offer of settlement to the amount of a final judg5 ment actually awarded, any amount of the final judgment

6 representing interest subsequent to the date of the offer

7 in settlement shall not be considered.

8 ‘‘(d) DETERMINATION OF COSTS.—(1) Upon the mo9 tion of either party, the court shall hold a hearing at which

10 the parties may prove costs and reasonable attorney fees,

11 and, upon hearing the evidence, the court shall enter an

12 appropriate order or judgment under this section.

13 ‘‘(2) Allowable costs under this rule shall include—

14 ‘‘(A) filing, motion, and jury fees;

15 ‘‘(B) juror food and lodging while the jury is

16 kept together during trial and after the jury retires

17 for deliberation;

18 ‘‘(C) taking, videotaping, and transcribing nec19 essary depositions including an original and one

20 copy of those taken by the claimant and one copy of

21 depositions taken by the party against whom costs

22 are allowed, and travel expenses to attend deposi23 tions;

24 ‘‘(D) service of process by a public officer, reg25 istered process server, or other means;
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1 ‘‘(E) expenses of attachment;

2 ‘‘(F) premiums on necessary surety bonds;

3 ‘‘(G) ordinary witness fees;

4 ‘‘(H) fees of expert witnesses who are not regu5 lar employees of any party;

6 ‘‘(I) transcripts of court proceedings;

7 ‘‘(J) attorney fees, when authorized by contract

8 or law;

9 ‘‘(K) court reporters’ fees;

10 ‘‘(L) models and blowups of exhibits and photo11 copies of exhibits may be allowed if they were rea12 sonably helpful to aid the trier of fact; and

13 ‘‘(M) any other item that is required to be

14 awarded to the prevailing party pursuant to statute

15 as an incident to prevailing in the action at trial or

16 on appeal.

17 ‘‘(3) Unless expressly authorized by law, allowable

18 costs under this rule shall not include—

19 ‘‘(A) investigation expenses in preparing the

20 case for trial;

21 ‘‘(B) postage, telephone, facsimile, and

22 photocopying charges, except for exhibits;

23 ‘‘(C) costs in investigation of jurors or in prepa24 ration for voir dire; and
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1 ‘‘(D) transcripts of court proceedings not or2 dered by the court.

3 ‘‘(e) DETERMINATION OF LIABILITY.—When the li4 ability of one party to another has been determined by

5 verdict of order or judgment, but the amount or extent

6 of the liability remains to be determined by further pro7 ceedings, any party may make an offer of judgment, which

8 shall have the same effect as an offer made before trial,

9 except that a court may shorten the period of time an

10 offeree may have to accept an offer, but in no case to less

11 than 10 days.

12 ‘‘(f) SUBSEQUENT OFFERS.—The fact that an offer

13 is made but not accepted does not preclude a subsequent

14 offer. An offeror shall not be deprived of the benefits of

15 an offer by a subsequent offer, unless and until the offeror

16 fails to accept an offer more favorable than the judgment

17 obtained.

18 ‘‘(g) NONMONETARY AWARDS.—If the judgment ob19 tained includes nonmonetary relief, a determination that

20 it is more favorable to the offeree than was the offer shall

21 be made only when the terms of the offer included such

22 nonmonetary relief.

23 ‘‘(h) REDUCTION OF AWARD TO AVOID UNDUE

24 HARDSHIP.—A court may reduce an award of costs and

25 reasonable attorney fees by up to 50 percent of the award
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1 if the court finds special circumstances that make a full

2 award of attorney fees and costs unjust.

3 ‘‘(i) REASONABLE ATTORNEY’S FEES.—For pur4 poses of this rule, a reasonable attorney’s fee shall be cal5 culated on the basis of an hourly rate which shall not ex6 ceed that which is considered acceptable in the community

7 in which the attorney practices, considering the attorney’s

8 qualifications and experience and the complexity of the

9 case.

10 ‘‘(j) APPLICABILITY.—This rule shall not apply to

11 class and derivative actions under rules 23, 23.1, and

12 23.2.’’.

13 (b) APPLICATION.—The provisions of rule 68 of the

14 Federal Rules of Civil Procedure (as amended by sub15 section (a) of this section) shall supersede any statute

16 that—

17 (1) provides for the shifting of costs by which

18 a specified party makes payment; and

19 (2) does not provide for the shifting of costs by

20 which such party may receive payment.
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1 TITLE IV—HEALTH CARE

2 LIABILITY REFORM

3 SEC. 401. LIMITATION ON NONECONOMIC DAMAGES IN

4 HEALTH CARE LIABILITY ACTIONS.

5 (a) MAXIMUM AWARD OF NONECONOMIC DAM6 AGES.—

7 (1) IN GENERAL.—In any health care liability

8 action, in addition to actual damages or punitive

9 damages, or both, a claimant may also be awarded

10 noneconomic damages (including damages awarded

11 to compensate injured feelings, such as pain and

12 suffering and emotional distress) in an amount not

13 to exceed the maximum amount described in para14 graph (2).

15 (2) MAXIMUM AMOUNT.—The maximum

16 amount described in this paragraph is $250,000, re17 gardless of—

18 (A) the number of parties against whom

19 the health care liability action is brought; or

20 (B) the number of claims or actions

21 brought with respect to the health care injury.

22 (3) NO DISCOUNTING TO PRESENT VALUE.—An

23 award for future noneconomic damages in a health

24 care liability action shall not be discounted to

25 present value.
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1 (4) REDUCTION IN JURY AWARD.—

2 (A) With respect to a health care liability

3 action heard by a jury, the jury shall not be in4 formed about the limitation on noneconomic

5 damages, but any award for noneconomic dam6 ages in excess of $250,000 shall be reduced ei7 ther before the entry of judgment or by amend8 ment of the judgment after entry.

9 (B)(i) An award of damages for non10 economic losses in excess of $250,000 shall be

11 reduced to $250,000 before accounting for any

12 other reduction in damages required by law.

13 (ii) If separate awards of damages for past

14 and future noneconomic damages are rendered

15 and the combined award exceeds $250,000, the

16 award of damages for future noneconomic

17 losses shall be reduced first.

18 (b) APPLICABILITY.—This section—

19 (1) shall apply to any health care liability action

20 brought in any Federal or State court on any theory

21 where noneconomic damages are sought;

22 (2) does not create a cause of action for non23 economic damages;
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1 (3) does not preempt or supersede any Federal

2 or State law to the extent that such law would fur3 ther limit the award of noneconomic damages; and

4 (4) does not preempt any State law enacted be5 fore the date of the enactment of this Act that

6 places a cap on the total liability in a health care li7 ability action.

8 SEC. 402. STATUTE OF LIMITATIONS.

9 (a) IN GENERAL.—Except as provided in subsection

10 (b), no health care liability action may be initiated after

11 the expiration of the 2-year period that begins on the date

12 on which the alleged injury and its cause was or should

13 reasonably have been discovered, but in no event later

14 than 6 years after the date of the alleged occurrence of

15 the injury.

16 (b) EXCEPTION FOR MINORS.—In the case of an al17 leged injury suffered by a minor who has not attained 6

18 years of age, no health care liability action may be initi19 ated after the expiration of the 2-year period that begins

20 on the date on which the alleged injury and its cause was

21 or should reasonably have been discovered, but in no event

22 later than 6 years after the date of the alleged occurrence

23 of the injury and its cause or the date on which the minor

24 attains 12 years of age, whichever is later.
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1 SEC. 403. PERIODIC PAYMENT OF FUTURE DAMAGES.

2 (a) NEGOTIATED AGREEMENT FOR PERIODIC PAY3 MENT OF FUTURE DAMAGES.—In any health care liability

4 action in which the damages awarded for any losses to

5 be incurred after the date on which the decision or judg6 ment is entered (hereafter in this section referred to as

7 ‘‘future damages’’) exceeds $100,000, the court shall pro8 vide that the parties to the action shall have 60 days to

9 negotiate and consent to an agreement to provide for the

10 payment of such damages in a lump sum, periodic install11 ment payments, or a combination of both.

12 (b) COURT DETERMINED PERIODIC PAYMENT OF

13 FUTURE DAMAGES.—If the parties to health care liability

14 action described in subsection (a) fail to agree on the

15 terms and amount of payments of future damages pursu16 ant to such subsection, a defendant may elect to pay the

17 future damages on a periodic basis instead of a single

18 lump-sum payment. If the defendant elects to make peri19 odic payments, the periods for such payments and the

20 amount of such payments shall be determined by the

21 court, based upon projections of such future losses and

22 costs. For purposes of determining the total amount of

23 future damages, the court shall reduce the amounts to be

24 paid to present value for purposes of determining the

25 funding obligation of the individual required to make such

26 periodic payments.
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1 (c) CONDITIONS FOR THE TERMINATION OF FUTURE

2 DAMAGES PAYMENTS.—

3 (1) IN GENERAL.—Except as provided in para4 graph (2), periodic payments for future damages

5 shall terminate in the event of the death of the

6 claimant or in the event of the claimant’s recovery

7 or return to work.

8 (2) EXCEPTION FOR INDIVIDUALS WHO ARE

9 OWED A DUTY OF SUPPORT.—The portion of any

10 periodic payment allocable to loss of future earnings

11 shall be paid to any individual to whom the claimant

12 owed a duty of support immediately prior to the

13 claimant’s death to the extent such duty of support

14 exists under applicable law at the time of death.

15 Such payments shall terminate at the earlier of the

16 death of the last person to whom a duty of support

17 is owed or the expiration of the payment obligation

18 pursuant to the judgment for periodic payments.

19 SEC. 404. STATE NO-FAULT DEMONSTRATION PROJECTS.

20 (a) DEFINITIONS.—For purposes of this section:

21 (1) MEDICAL ADVERSE EVENT.—The term

22 ‘‘medical adverse event’’ means an injury that is the

23 result of medical management as opposed to a dis24 ease process that creates disability lasting at least 1

25 month after discharge, or that prolongs a hos-
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1 pitalization for more than 1 month, and for which

2 compensation is available under a no-fault medical

3 liability system established under this section.

4 (2) NO-FAULT MEDICAL LIABILITY SYSTEM.—

5 The terms ‘‘no-fault medical liability system’’ and

6 ‘‘system’’ mean a system established by a State con7 ducting a demonstration project under this section

8 that replaces the common law tort liability system

9 for medical injuries with respect to certain qualified

10 health care organizations and qualified insurers and

11 which meets the requirements of this section.

12 (3) PROVIDER.—The term ‘‘provider’’ means

13 physician, physician assistant, or other individual

14 furnishing health care services in affiliation with a

15 qualified health care organization.

16 (4) QUALIFIED HEALTH CARE ORGANIZA17 TION.—The term ‘‘qualified health care organiza18 tion’’ means a hospital, a hospital system, a man19 aged care network, or other entity determined appro20 priate by the Secretary that elects in a State con21 ducting a demonstration project under this section

22 to participate in a no-fault medical liability system

23 and meets the requirements of this section.

24 (5) QUALIFIED INSURER.—The term ‘‘qualified

25 insurer’’ means a health care malpractice insurer,
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1 including a self-insured qualified health care organi2 zation, that elects in a State conducting a dem3 onstration project under this section to participate

4 in a no-fault medical liability system and meets the

5 requirements of this section.

6 (b) ESTABLISHMENT.—The Secretary of Health and

7 Human Services (hereafter in this section referred to as

8 the ‘‘Secretary’’) shall award grants to 1 or more States

9 to establish demonstration projects under which the State

10 establishes a no-fault medical liability system in accord11 ance with this section.

12 (c) APPLICATIONS BY STATES.—

13 (1) IN GENERAL.—To be eligible to receive a

14 grant under this section, a State shall prepare and

15 submit to the Secretary an application at such time,

16 in such manner, and containing such information as

17 the Secretary may require, including the following

18 information:

19 (A) Identification of the State agency or

20 agencies that will administer the no-fault medi21 cal liability system and be the grant recipient of

22 funds for the State.

23 (B) Identification of each qualified health

24 care organization selected by the State to par25 ticipate in the system, including—
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1 (i) the location of each organization;

2 (ii) the number of patients generally

3 served by each organization;

4 (iii) the types of patients generally

5 served by each organization;

6 (iv) an analysis of any characteristics

7 of each organization that makes the orga8 nization appropriate for participation in

9 the system;

10 (v) whether the organization is self-in11 sured for malpractice liability; and

12 (vi) such other information as the

13 Secretary determines appropriate.

14 (C) Identification of each qualified insurer

15 selected by the State to participate in the sys16 tem including—

17 (i) a schedule of the malpractice in18 surance premiums generally charged by

19 each insurer under the common law tort li20 ability system; and

21 (ii) such other information as the Sec22 retary determines appropriate.

23 (D) A description of the procedure under

24 which qualified health care organizations and

25 insurers elect to participate in the system.
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1 (E) A description of the system established

2 by the State to assure compliance with the re3 quirements of this section by each qualified

4 health care organization and insurer.

5 (F) A description of how funds granted to

6 a State will be expended and a description of

7 fiscal control, accounting, and audit procedures

8 to assure the proper disbursement of and ac9 counting for funds received under this section.

10 (G) A description of procedures for the

11 preparation and submission to the State of an

12 annual report by each qualified health care or13 ganization and qualified insurer participating in

14 a system that shall include—

15 (i) a description of activities con16 ducted under the system during the year;

17 and

18 (ii) the extent to which the system ex19 ceeded or failed to meet relevant perform20 ance standards including compensation for

21 and deterrence of medical adverse events.

22 (2) CONSIDERATION OF APPLICATIONS.—In re23 viewing all applications received from States desiring

24 to establish demonstration projects under this sec25 tion, the Secretary shall consider—
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1 (A) data regarding medical malpractice

2 litigation patterns in each State;

3 (B) the contributions that any system shall

4 make toward reducing costs associated with

5 health care injuries;

6 (C) diversity among the populations served

7 by the systems;

8 (D) geographic distribution; and

9 (E) such other criteria as the Secretary de10 termines appropriate.

11 (d) WAIVER.—The Secretary may waive compliance

12 with any requirement of this title applicable to health care

13 negligence to permit the operation of a demonstration

14 project established under this section.

15 (e) DURATION.—A demonstration project under this

16 section shall be conducted for a period of not more than

17 5 years.

18 (f) EVALUATION AND REPORTS.—

19 (1) BY THE STATES.—Each State conducting a

20 demonstration project under this section shall con21 duct ongoing evaluations of the effectiveness of any

22 no-fault medical liability system established in such

23 State and shall submit an annual report to the Sec24 retary concerning the results of such evaluations at
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1 such times and in such manner as the Secretary

2 shall require. The report shall—

3 (A) incorporate information from annual

4 reports submitted to the State by qualified

5 health care organizations and insurers partici6 pating in the system;

7 (B) include an analysis of the feasibility

8 and desirability of developing and implementing

9 a no-fault medical liability program; and

10 (C) include a recommendation for legisla11 tion on the development and implementation of

12 no-fault medical liability programs.

13 (2) BY THE SECRETARY.—The Secretary shall

14 submit an annual report to the Congress concerning

15 the effectiveness of the demonstration projects con16 ducted under this section. Such report shall analyze

17 the reports received by the Secretary under para18 graph (1).

19 (g) LIMITATIONS ON USE OF GRANTS.—

20 (1) ADMINISTRATIVE EXPENSES.—Not more

21 than 10 percent of the amount of each grant award22 ed to a State under this section may be used for ad23 ministrative expenses.
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1 (2) WAIVER OF LIMITATION.—The limitation

2 under paragraph (1) may be waived as determined

3 appropriate by the Secretary.

4 (h) AUTHORIZATION OF APPROPRIATIONS.—There

5 are authorized to be appropriated such sums as may be

6 necessary to carry out the purposes of this section.

7 SEC. 405. DEFINITIONS.

8 For purposes of this title:

9 (1) CLAIMANT.—The term ‘‘claimant’’ means

10 any person who asserts a health care liability claim

11 or who files a health care liability action, including

12 a person who asserts or claims a right to legal or eq13 uitable contribution, indemnity or subrogation, aris14 ing out of a health care liability claim or action, and

15 any person on whose behalf such a claim is asserted

16 or such an action is brought, whether deceased, in17 competent, or a minor.

18 (2) ECONOMIC DAMAGES.—The term ‘‘economic

19 damages’’ has the same meaning as defined under

20 section 101(4).

21 (3) HEALTH CARE LIABILITY ACTION.—The

22 term ‘‘health care liability action’’ means a civil ac23 tion brought in a Federal or State court, against a

24 health care provider, an entity which is obligated to

25 provide or pay for health benefits under any health
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1 plan (including any person or entity acting under a

2 contract or arrangement to provide or administer

3 any health benefit), or the manufacturer, distributor,

4 supplier, marketer, promoter, or seller of a medical

5 product, in which the claimant alleges a claim (in6 cluding third party claims, cross claims, counter

7 claims, or distribution claims) based upon the provi8 sion of (or the failure to provide or pay for) health

9 care services or the use of a medical product, re10 gardless of the theory of liability on which the claim

11 is based, or the number of plaintiffs, or defendants

12 or causes of action.

13 TITLE V—CONTROL OF ABUSIVE

14 PRISONER LITIGATION PRAC15 TICES

16 SEC. 501. REFORM OF IN FORMA PAUPERIS DETERMINA17 TIONS.

18 (a) PARTIAL PAYMENT OF FEES.—Section 1915(a)

19 of title 28, United States Code, is amended in the first

20 sentence—

21 (1) by inserting ‘‘or with payment of a partial

22 fee or with payment of the total fees and costs in

23 installment payments,’’ after ‘‘security therefor,’’;

24 and
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1 (2) by inserting ‘‘the full amount of’’ after ‘‘un2 able to pay’’.

3 (b) PRISONER’S STATEMENT OF ASSETS.—Section

4 1915 of title 28, United States Code, is amended by add5 ing at the end the following:

6 ‘‘(f) If a prisoner in a correctional institution files

7 an affidavit in accordance with subsection (a), such pris8 oner shall include in the affidavit a statement of all assets

9 the prisoner possesses. The court shall make inquiry of

10 the correctional institution in which the prisoner is incar11 cerated for information available to such institution relat12 ing to the extent of the prisoner’s assets. The court shall

13 require full or partial payment of filing fees according to

14 the prisoner’s ability to pay.’’.

15 SEC. 502. IMPROVING COURTS’ ABILITIES TO DISMISS

16 NONMERITORIOUS IN FORMA PAUPERIS

17 CLAIMS.

18 Section 1915(d) of title 28, United States Code, is

19 amended—

20 (1) by striking ‘‘and may’’ and inserting ‘‘at

21 any time and shall’’; and

22 (2) by inserting ‘‘, or fails to state a claim on

23 which relief can be granted, or the claim is insub24 stantial in that the plaintiff suffered no injury or an
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1 insubstantial injury, even if partial filing fees have

2 been imposed by the court’’ before the period.

3 SEC. 503. EXHAUSTION OF ADMINISTRATIVE REMEDIES IN

4 PRISONER LITIGATION.

5 (a) EXHAUSTION REQUIREMENT.—Section 7(a) of

6 the Civil Rights of Institutionalized Persons Act (42

7 U.S.C. 1997e) is amended—

8 (1) in paragraph (1)—

9 (A) by striking ‘‘in any action brought’’

10 and inserting ‘‘no action shall be brought’’;

11 (B) by striking ‘‘the court shall’’ and all

12 that follows through ‘‘require exhaustion of’’

13 and insert ‘‘until’’; and

14 (C) by inserting ‘‘are exhausted’’ after

15 ‘‘available’’; and

16 (2) in paragraph (2) by inserting ‘‘or are other17 wise fair and effective’’ before the period at the end.

18 (b) MODIFICATION OF REQUIRED MINIMUM STAND19 ARDS.—Section 7(b)(2) of the Civil Rights of Institu20 tionalized Persons Act (42 U.S.C. 1997e(b)(2)) is amend21 ed—

22 (1) by striking subparagraph (A); and

23 (2) by redesignating subparagraphs (B)

24 through (E) as subparagraphs (A) through (D), re25 spectively.
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1 (c) REVIEW AND CERTIFICATION PROCEDURE

2 CHANGES.—Section 7(c) of the Civil Rights of Institu3 tionalized Persons Act (42 U.S.C. 1997e(c)) is amended—

4 (1) in paragraph (1), by inserting ‘‘or are oth5 erwise fair and effective’’ before the period at the

6 end; and

7 (2) in paragraph (2), by inserting ‘‘or is no

8 longer fair and effective’’ before the period at the

9 end.

10 TITLE VI—MISCELLANEOUS

11 PROVISIONS

12 SEC. 601. FEDERAL CAUSE OF ACTION PRECLUDED.

13 This Act shall not provide a basis for Federal court

14 jurisdiction pursuant to section 1331 or 1337 of title 28,

15 United States Code.

16 SEC. 602. EFFECTIVE DATE.

17 Except as otherwise provided in this Act, this Act

18 shall take effect 30 days after the date of its enactment

19 and shall apply to all civil actions commenced on or after

20 such date, including any action in which the harm or the

21 conduct which caused the harm occurred before the effec22 tive date of this Act.

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