S5874 CONGRESSIONAL RECORD — SENATE May 1, 1995

near in normal circumstances as possible with dignity. They ought not to

have to go to institutions when they

could live at home. We put real emphasis on home-based care with a wonderful program in Minnesota, a block

grant program not adequately funded.

But we are funding it. It is wonderful.

It makes all of the difference in the

world, and it enables someone who is

elderly to live at home. But we did not

take any action on that.

We were also talking about some legislation. I introduced the single payer

bill covering the catastrophic expenses.

Medicare does not cover the catastrophic expenses of what happens to

you when you are in a nursing home.

Nor does it cover prescription drugs.

My colleagues are not in any of these

proposals talking about any of that.

They are talking about cutting Medicare. And they want to make the argument it is not really a cut, that it is

just a lessening of the rate of increase.

Well, why is it such a big surprise to

my colleagues that a larger and larger

percentage of our population are 65

years of age and over, and a larger and

larger percentage of that population

tends to be in their eighties? Of course,

it costs money. That is what Medicare

is about; the commitment to elderly

citizens, and that we will fund a decent

level of health care for elderly people

in our country. This should not come

as any shock. And it is a benefits program. It is a contract. It is a commitment we made.

Mr. President, there are, I think,

steps that we can take. In some cities

and some States you find that the cost

of providing coverage is much greater

than, for example, what it is in Minnesota. I am sure there are ways that

we can move toward more efficiency.

But, Mr. President, I must say that

all of a sudden this discussion about

now what we are going to do is talk

about the trust fund, we are not going

to really say this is part of deficit reduction although it was always proposed before as part of deficit reduction. And in addition, we are going to

give people all of these kinds of options. So they are really not options

because managed care is the place in

which you can have the savings but in

many parts of the country, especially

outside your metro areas, it is not a

real option. And in addition, we say, if

there are any savings by enabling people to develop to purchase vouchers or

all the rest, then in fact we will be OK.

But, if they are not, then we are going

to have to make the deep cuts. There

are not going to be any because, if

there are savings, by definition they go

to those individuals. They do not go to

the Government. We are talking about

public expenditures here and how to

cut down on the public expenditures.

So I think that some of my colleagues are trying to dance at two weddings at the same time. There was all

this bold rhetoric about how we were

going to balance the budget by 2002, no

question about it. I saw projections of

quotes from colleagues that we were

going to be cutting Medicare by $400

billion between now and the year 2002.

That figure has gone down. But make

no bones about it. That is what is being

proposed.

Mr. President, I think what we ought

to do is move forward on good health

care reform, and there are three critical ingredients to that. First, universal

coverage; and I promise my colleague

from Arizona that I will be finished

within 2 minutes. Second, cost containment—and, by the way, the Congressional Budget Office said really the

way you can contain costs is you put

some sort of limit on what insurance

companies can charge. Third, we need

to deliver care in some of our underserved communities like, for example,

rural areas where we have to put much

more emphasis on primary care, on

family doctors, on advanced nurse

practitioners, on nurses, getting health

care out of the communities backed up

by specialization.

It is in that context that we contain

Medicare costs. But, if we just target

Medicare, you are going to have the

same irrational charge shifting. You

are going to have true rationing by

age, income, and disability. You are

going to be hurting a lot of citizens in

this country. And, we are going to be

moving away from a basic commitment

that we made in 1965.

So, I look forward to what I think is

going to be an extremely important debate but I did want to respond to my

colleague from New Hampshire. I am

sorry he had to leave.

COMMONSENSE PRODUCT LIABILITY AND LEGAL REFORM ACT

fThe Senate continued with the consideration of the bill.

Mr. KYL. I thank my colleague.

Mr. President, at this time, I ask

unanimous consent to lay aside the

pending amendment.

The PRESIDING OFFICER. Without

objection, it is so ordered.

AMENDMENT NO. 611 TO AMENDMENT NO. 603

(Purpose: To establish a limitation on

noneconomic damages)

Mr. KYL. Mr. President, I send an

amendment to the desk and ask for its

immediate consideration.

The PRESIDING OFFICER. The

clerk will report.

The bill clerk read as follows:

The Senator from Arizona [Mr. KYL] proposes an amendment numbered 611 to amendment No. 603.

Mr. KYL. Mr. President, I ask unanimous consent that reading of the

amendment be dispensed with.

The PRESIDING OFFICER. Without

objection, it is so ordered.

The amendment is as follows:

At the appropriate place, insert the following new section:

SEC. . LIMITATION ON NONECONOMIC DAMAGES.

(a) IN GENERAL.—With respect to any

health care liability action, in addition to

any award of economic or punitive damages,

a claimant may be awarded noneconomic

damages, including damages awarded to

compensate the claimant for injured feelings

such as pain and suffering, emotional distress, and loss of consortium.

(b) LIMITATION.—The amount of noneconomic damages that may be awarded to a

claimant under subsection (a) may not exceed $500,000. Such limitation shall apply regardless of the number of defendants in the

action and the number of claims or actions

brought with respect to the injury involved.

(c) NO DISCLOSURE TO TRIER OF FACT.—The

trier of the fact in an action described in

subsection (a) may not be informed of the

limitation contained in this section.

(d) AWARDS IN EXCESS OF LIMITATION.—An

award for noneconomic damages in an action

described in subsection (a), in excess of the

limitation contained in subsection (b) shall—

(1) be reduced to $500,000 either prior to

entry of judgment or by amendment of the

judgment after entry;

(2) be reduced to $500,000 prior to accounting for any other reduction in damages required under applicable law; and

(3) in the case of separate awards of damages for past and future noneconomic damages, be reduced to $500,000 with the initial

reductions being made in the award of damages for future noneconomic losses.

(e) PRESENT VALUE.—An award for future

noneconomic damages shall not be discounted to present value.

Mr. KYL. Mr. President, this is the

noneconomic damages limitation

amendment that many of us have been

talking about for some time. I indicated earlier this morning that I would

be introducing it. It works in tandem

with the limitation on lawyer’s fees to

ensure that the victims of negligence

are properly compensated and that neither the public needs to end up continuing to pay this tort tax that we

talked about earlier nor that lawyers

or others in the system become enriched at the expense of the victims of

negligence.

This particular amendment would

place a limitation of $500,000 on noneconomic damages that are awarded to

compensate a claimant for pain, suffering, emotional distress, and other related injuries.

Mr. President, every day in America,

physicians take care of over 9 million

patients. These are professionals who

are dedicated to the service of their fellow citizens. They do a tremendous job.

They serve in times of crisis and natural disasters often at great personal

risk. A good example is the heroic service of the doctors in the aftermath of

the bombing in Oklahoma City.

The medical profession is dedicated

to doing everything possible to ensure

that the practice of medicine conforms

at all times with both Government

rules and regulations and, of course,

with the high standards that are inherent in the profession itself.

But physicians are not God. They are

human like all the rest of us, and occasionally mistakes are made and sometimes patients suffer injuries as a result. When this occurs, injured patients

must be awarded full and fair compensation for their injuries should they

choose to pursue a legal remedy. But in

today’s litigious climate, roughly onethird of all physicians, 50 percent of all
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5875

surgeons, and 75 percent of all obstetricians will be sued in their careers.

Let me go through those figures

again: 50 percent of all surgeons and 75

percent of all obstetricians will be sued

in their careers.

Courts determine that roughly threefourths of these cases have no merit,

and they are ultimately dismissed with

no payment being made to the claimant, but the psychological and financial costs of defending these cases, oftentimes frivolous, but these unpredictable situations are staggering. Defending against meritless lawsuits has

in effect become an occupational hazard of practicing medicine and, of

course, these costs are passed on to all

the rest of us in the form of higher

medical costs, diminished quality, and

access to health care.

Mr. President, as we in the Congress

address legal reform, we should not

miss the opportunity to rationally address the overly litigious nature of

medical liability actions. The Kyl

amendment would limit noneconomic

damages to $500,000. The amendment

would apply only to noneconomic damages, known sometimes as pain and

suffering.

No other country compensates victims of health care injuries as generously as $500,000 for noneconomic damages. For example, in Canada, there is

a cap on noneconomic damages of

$180,000. In a 1994 report to Congress,

the Physician Payment Review Commission, which is the Federal Commission established to review Medicare

payments, said:

Much of the unpredictability and inconsistency that characterizes today’s malpractice awards is because of noneconomic

damages, which account for 50 percent of

total payments. Reducing the unpredictability and eliminating the potential for unreasonably high awards would improve decisionmaking during the course of a lawsuit

and would promote settlement.

In other words, Mr. President, in

order to encourage settlement rather

than litigation, we should address this

‘‘lottery mentality’’ of awarding arbitrary and unpredictable noneconomic

damages.

According to a September 1993 report

by the Office of Technology Assessment, and I am quoting now:

Limits on noneconomic damages is the single most effective reform in containing medical liability premiums.

Let me repeat that, because all of us

are concerned now about what kind of

health care reform we will be adopting

later this year, and in the context of

both legal reform and health care reform, this is a startling statement. It

is the OTA, 1993.

Limits on noneconomic damages is the single most effective reform in containing medical liability premiums.

Without a reasonable limitation on

these nonquantifiable losses, medical

liability insurance premiums and medical product liability costs will continue to skyrocket. Physicians are

forced to drop insurance coverage or, in

order to minimize the risk, to stop performing high-risk procedures such as

delivering babies.

According to a book published by the

respected Institute of Medicine called

‘‘Medical Professional Liability and

the Delivery of Obstetrical Care,’’ the

most comprehensive, authoritative

study of rural health care access, the

delivery of obstetrical care in all rural

areas of America is seriously threatened by professional liability concerns:

12.3 percent of the ob/gyn’s nationally

have given up obstetrics totally due to

liability pressures—12.3 percent; 22.8

percent of ob/gyn’s nationally have

drastically decreased the amount and

level of obstetric care they provide. In

some States, the problem is much

worse than nationally.

In rural Arizona, the most recent

study shows that 21 percent of the obgyn’s have totally stopped providing

obstetric care. The reason? The cost of

malpractice insurance and threats of

suits in Arizona.

Mr. President, how is this system enhancing medical care in our country?

Somehow, this system is protecting

people in need of medical care? It is

precluding physicians from serving the

patients, and in the rural areas in particular the kind of care that women delivering babies are getting is less than

it could be, less than it should be, because you do not have that obstetrician there helping with the delivery.

There is an impact on the minority

community. The National Council of

Negro Women believes that ‘‘a cap on

noneconomic damages is an essential

part of comprehensive legal reform legislation.’’ This is in a letter dated just

February 14 of this year, from Eleanor

Hinton Hoytt, director of national programs of the National Council of Negro

Women.

The council realizes that low-income

minority communities are facing increasing shortages of physicians who

can afford to pay liability insurance

premiums.

We know, Mr. President, of many examples of physicians who, on the very

first day of the year, January 1, either

have to have a liability insurance policy costing them anywhere from

$30,000, $40,000, $50,000, $60,000, and even

upward of $70,000 before they can see

their very first patient, much more

than most people in this country make

in a year.

The argument may be made that limiting noneconomic damages would restrict the right of an injured patient to

sue and collect for economic damages

and that, of course, is not true. My

amendment does not prevent filing suit

and recovering all economic damages

for past and future medical expenses,

loss of past and future earnings, loss of

consortium, loss of employment or any

other business opportunity, nor does

my amendment limit suits that seek

damages for malicious acts for which

punitive damages are warranted. A cap

on noneconomic damages such as the

Kyl amendment does not discourage

the filing of lawsuits. In California,

which has a cap just half the cap that

I am proposing here, a cap of $250,000 as

opposed to $500,000, there were 161⁄2 percent more cases filed in 1993 than in

1992, the year before the limit in California went into effect. So it did not

preclude the filing of actions.

Moreover, in California, the cost of

liability premiums has been reduced in

part because of this cap. Prior to imposition of the $250,000 cap in California,

the State had the highest liability premiums in the Nation. Premiums are

now one-third to one-half the rate in

States like New York, Florida, and

other States that have not established

a limit.

Mr. President, as part of the Contract With America, the House has

passed a more restrictive cap of $250,000

on noneconomic damages, the same

limit as in some other States, including California. Some in the Senate

said, in response to that, that the

$250,000 cap may be fine in most cases,

but there are always those few exceptional egregious cases that should have

a greater limit. So we doubled it. We

increased it 100 percent to $500,000. And

bear in mind, this would be on top of

all of the economic damages awarded,

in other words, all of the sums of

money required to make the victim

whole, to pay for all of the economic

losses, losses of future employment opportunities, whatever it might be, including all of the bills, of course. And,

as I said, in the case of punitive damage awards, those are not limited by

this particular amendment. So we are

only talking about the noneconomic

damages, those unquantifiable damages. No one can put a dollar amount

on how much pain and suffering it is

when someone is injured. What we are

saying is there should be a predictable

sum that at least represents the absolute top.

There is a lot of public support for

some kind of cap here. For example, a

very recent poll conducted by the

Health Care Liability Alliance indicated that 17 percent of the public supports a cap on common noneconomic

damages.

So we think, Mr. President, this is an

amendment which will strengthen the

bill. It will strengthen the KassebaumMcConnell-Lieberman amendment,

which has to do with medical malpractice, and therefore at the appropriate time, I guess sometime after 11

o’clock tomorrow, we are going to call

for a vote on this amendment, and I

hope it will pass.

I wish to conclude with two arguments that have been made in opposition to this amendment. The first is

that the people who are injured by

some kind of negligence need to keep

the lion’s share of the money they win,

and the point with respect to these

caps is do they not ordinarily keep

what they win? And the answer to that,

of course, is that that is not true.

According to the Rand Corp., plaintiffs keep only 43 cents of every dollar
S5876 CONGRESSIONAL RECORD — SENATE May 1, 1995

spent on medical liability. Over 50

cents goes to the lawyers.

So, Mr. President, what we are trying

to do here is to put two amendments in

tandem. There is already an amendment which I have offered which would

limit the attorney’s fees in these kinds

of cases. By limiting the attorney’s

fees, we enable the claimant to keep

more of the award. So, at the same

time that a cap would be placed on the

noneconomic damages, a cap of a half

million dollars, the claimants would be

able to keep more of that half million

dollars because of the limits on attorney’s fees.

So the net result is that the claimant

will not be hurt, will not have recovery

reduced by this cap on noneconomic

damages. The claimant will do as well,

if not better, by virtue of the fact that

we would also limit the attorney’s fees.

The loser will be the attorney who is

trying to get the great jackpot here,

the big bonanza, of earning something

like $300,000 for 1 hour of work. That

will be the loser, not the claimant,

with this particular cap.

The bottom line is that the claimants will do as well or better if we combine this with the limitation on attorney’s fees.

Second, there is a question that I

have heard: Is it not true that a $500,000

cap on noneconomic damages will keep

deserving patients from getting million-dollar settlements when they really need them? And the answer is, of

course, no.

One of the reasons for increasing the

cap to $500,000 rather than $250,000 is to

ensure that in that very exceptional

cases, in addition to all of the economic damages awarded, there will be

an opportunity to get up to a half million dollars.

But the point is that patients with

valid claims are today collecting millions of dollars in States with caps,

such as California, despite the cap on

noneconomic damages there of $250,000.

In California, the number of milliondollar verdicts and settlements has

hovered around 30 per year throughout

the 1990’s, with the average indemnity

in these cases over $2 million. These

million-dollar-plus cases included

awards for wrongful death, birth injuries diagnosed in related areas, failure

or delay in treatment, and substandard

post-surgical care.

So, Mr. President, despite the fact

there has been a limit on noneconomic

damages in California of only half the

amount we are suggesting here, there

have still been settlements and awards

that far exceed $1 million. So we are

not limiting those cases, and everyone

acknowledges they are the very small

exceptions to the rule here. But we are

not limiting those particular recoveries.

In conclusion, Mr. President, there

are two amendments that I have offered to the underlying medical malpractice amendment offered by Senators KASSEBAUM, LIEBERMAN, and

MCCONNELL. The first is a limitation

on attorney’s fees, essentially, at 25

percent, although there are some nuances to it, of any recovery. And second is the limitation on noneconomic

damages. The two of these amendments, working in tandem, ensure that

people will be able to bring claims,

that they will be able to recover more

of the award either in settlement or by

jury verdict themselves, that the attorney will receive less but attorneys will

still receive a perfectly adequate compensation, and there will be no disincentive for them to actually bring

the lawsuits because the attorney’s

fees cap is actually high enough so that

there is not a disincentive.

The combination of that with the cap

on noneconomic damages will enable

the plaintiffs to be fully compensated,

but also reduce the cost to society as a

whole in the form of increased medical

malpractice premiums and, therefore,

in the form of higher costs charged for

medical care generally because those

costs have to be passed on by the physicians and the hospitals that have to

acquire the insurance.

We believe these are two important

and necessary amendments to the underlying legislation. I ask my colleagues to support these amendments.

I yield back my time.

Mr. WELLSTONE addressed the

Chair.

The PRESIDING OFFICER (Mr.

GRAMS). The Senator from Minnesota.

Mr. WELLSTONE. I wonder whether

I would have time to ask a few questions that I would like to ask my colleague from Arizona.

I am not a lawyer, but as I understand it, the whole concept of compensation is to make the individual

whole, and there is the economic and

then the noneconomic. With this cap of

$500,000, how many of the plaintiffs, as

we project to the future, how many

plaintiffs would lose how much by way

of dollars in compensation to make

them whole again? What are the projections on what impact this is going

to have on those individuals that have

been injured in a malpractice?

Mr. KYL. Mr. President, I say to my

colleague that the information that we

have, according to a study that was recently done, is that less than 2 percent

of the cases would be affected by the

$500,000 cap. But, of course, because of

the large amount of money involved, it

would have a very large impact on constraining costs.

Mr. WELLSTONE. Mr. President, my

next question would be: If it is less

than 2 percent—and I gather that that,

as you say, may focus on a few cases

where there are large dollars involved—then I would ask my colleague

from Arizona, do you have any projections on what impact this will actually

have on more doctors? How many more

doctors would be practicing medicine

in underserved areas, be they rural or

inner city, as a result of this cap? Do

you have any projections?

Mr. KYL. I would be happy to continue to respond to my colleague, because they are very good questions.

They go right to the heart of the issue.

Obviously, by proposing the reform,

we are hoping to have an impact pact

on the problem. Part of the problem, as

I indicated, is the fact that, particularly in rural areas but not limited to

rural areas, and in particular ob-gyn’s

have either stopped practicing or have

cut back their practice just to the gynecological services rather than obstetrical services. If you go by the numbers

I cited, you have an indication at least

of what these physicians were able to

do before this litigation system got to

the point that it is today.

It is impossible, of course, to predict

precisely, but I will go back to the

numbers that I stated just a moment

ago, because the study was very recent.

I think it was either 1993 or 1994. Nationally, 12.3 percent of the ob-gyn’s

have given up obstetrics totally, due to

liability pressures. That is in a book,

as I said, that was written by the Institute of Medicine called Medical Professional Liability and the Delivery of Obstetrical Care. Nationally, 22.8 percent

of the ob-gyn’s have drastically decreased the amount of care they have

provided because of this.

So one could conclude that, if we

were able to put a cap on these damages, at least some of this problem

would go away. But, obviously, because

you would still be able to recover up to

$500,000 in noneconomic damages, I am

not contending that all of these physicians would go back to practicing. Of

course, this does not relate either to

the increases in costs of the medical

malpractice premiums for those physicians who do choose to stay in practice

or for those who are involved in other

areas of specialty.

So, it is impossible to say with precision, but I think it is safe to say that

at least it would reduce medical costs

and get some of these rural areas better covered by physician services.

Mr. WELLSTONE. By the way, in the

2 percent of the cases that the Senator

mentioned, how much does that translate to in terms of dollars?

Mr. KYL. Let me see if I can get that

for you. I do not have that in my prepared remarks.

Mr. WELLSTONE. I guess what I am

struggling with here, Mr. President, as

I try to figure out the logic of this, if

my colleague had said, ‘‘Look, there

are lots of cases that this would affect

all across the country,’’ then I would

have said, ‘‘Well, then I understand

what you are doing in terms of the negative impact on plaintiffs.’’ Many

times we are talking about people who

have been injured.

But my colleague’s response was, it

is a relatively small percentage, in

which case then the flip side of the coin

is, I am wondering—and I wrote it

down—if it is 12.3 percent, the figure on

ob-gyn’s who talked about the problems of excessive payments, I am not

at all sure that there would be—I

mean, by definition, if there are very

few cases, then why would any of us
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5877

have any reason to believe that, by

putting this cap on, this would have

any significant impact on the number

of ob-gyn, if you follow me, practitioners in these underserved communities?

Mr. KYL. I think my colleague raises

a good point. The mere fact that half of

the physicians will, half of the surgeons in the country will be sued for

medical malpractice has a great deal to

do with the malpractice premium problem as well.

So it is very difficult to tell how

much of the problem is due to the large

number of cases that will be filed and

have to be defended, regardless of

whether they have merit or not—threefourths of them actually being thrown

out—and how many problems, on the

other hand, are due to very large

awards. Because it is impossible to divide those numbers out, it is impossible to say precisely how much good

we will do with this amendment.

But this amendment is just one narrow piece of a much larger underlying

amendment, as my colleague knows,

that is being offered by Senators

LIEBERMAN, KASSEBAUM, and MCCONNELL, that hopefully will also deal with

the number of claims that are filed.

So we are trying to get at it in three

different ways: We are trying to limit

the circumstances under which these

cases are filed and trying to get them

into alternative dispute rather than

going all the way through trial, No. 1;

second, we are trying to limit the nonessential costs, and in this case, we are

saying some of the attorney’s costs are

just not necessary, we want to give

more of that money to the claimants;

and third—and I think this goes directly to the point of the Senator from

Minnesota—there may not be very

many cases where you have these astronomical awards but those few cases

do represent a lot of money and they

represent a lot of psychological horror

to the insurance companies and to the

physicians. They are the ones everybody knows about. That is the McDonald’s coffee that burned the claimant

and all of the other cases that we are

very familiar with.

Of course, that is not a medical malpractice case, but it is those kinds of

awards that get put into people’s minds

and it is that which probably, in the

case of the insurance companies, ends

up causing them to, in effect, dictate

to their insured, the physician, that a

case be settled, even though I heard a

lot of physicians saying, ‘‘I wanted to

fight that case because I knew I was

not negligent, I knew we didn’t cause

this damage, or at least it was not negligence,’’ but the insurance company

said it was cheaper to settle because of

the potential for one of these astronomical awards.

Because that is the sense of it, it is

probably impossible to tell precisely

what effect it will have. But I think a

combination of all three of those approaches together will have a significant impact on bringing the costs

down.

Mr. WELLSTONE. Mr. President,

there are two issues I will address, and

I would be very interested in the response of my colleague. One is, and,

again, I do not know what the exact

amount of money is, my colleague says

a small number of cases but there is a

significant amount of money involved.

If I do not know exactly how many

plaintiffs are going to be hurt or denied

what I think should be fair compensation, and I do not know exactly what

impact this is really going to have on

the problem that my colleague identifies—ob-gyn’s practicing in some of our

underserved communities—then I find

it difficult to support this, especially

since I struggle with two questions:

One—and I will present both to my

colleague so he can respond at once—I

can remember, for example, when I was

in North Carolina and we had our first

son, David, there was a guy I was very

close to, a graduate student, who had a

son and went in for what was supposed

to be regular surgery. Because of malpractice, his son was paralyzed in a

wheelchair for the rest of his life. He

was a student, he did not have a lot of

money, but would anything above and

beyond $500,000 for noneconomic damages be too much? That is my first

question, and I am not willing to give

up on that principle, especially when I

do not really have any precise way of

knowing what the benefits are of the

amendment. And second, I say to my

colleague from Minnesota, in 1986, the

Minnesota Legislature enacted a

$400,000 cap on intangible loss which

was defined to mean embarrassment,

emotional distress, so on and so forth,

and we repealed it the following year

because we felt it did not work at all.

This may be good in Arizona, but

why should this be applied to the State

of Minnesota? We have tried something

different. We have some of our own alternative dispute mechanisms, et

cetera, et cetera. If it is good for Arizona, fine, but why the Federal preemption on this?

Two questions, if you follow me: A,

in all due respect—and, by the way,

there is a lot of respect—I still feel like

my colleague has not been able to spell

out what exactly will be the pluses and

the minuses of this, the losses and the

benefits, who would benefit, who would

not; and, B, therefore, I am a little reluctant to—more than a little reluctant—to give up on two principles,

which are, I do not know why, in some

cases, we say $501,000 is too much, and

why preempt what Minnesota is doing?

Mr. KYL. I will be happy to try to respond to my colleague. First of all, by

its very nature, these noneconomic

damages are not quantifiable, so no one

can say a particular amount is or is

not warranted, which is to say of

course, except we have put this decision in the hands of the jury. They are

no more capable of divining a figure

than the rest of us. We ask them to do

it. We charge them with that responsibility, and they discharge their responsibility and, in many cases, do so

very, very well. But these are very

emotional cases, by their very nature.

Ordinarily, the jury is well within the

bounds of reason when it fixes the damage amount. We are only talking about

those very, very exceptional cases, the

less than 2 percent which exceed the

half of a million dollars.

So no one can say in one case it

should have been $501,000 and in another case $499,000. But I think we

should be guided by two or three different principles.

First of all, we should understand

that all of the economic damages are

unaffected by this, so that with regard

to the young man who has been confined to a wheelchair there would have

to be a question about the loss of his

earning power throughout the rest of

his life, and he would receive damages

for that entire sum of money. If he was

building houses or something of that

sort, his economic damages would be

tremendous at that point, they would

probably be in the millions and millions of dollars. In other cases, because

of the nature of the economic loss, it

would not be. If you are talking about

a 65-year-old person who is about at

the end of the earning part of their career, the economic damages would not

be quite as large. We are already compensating for the economic loss.

Second, since we cannot know precisely how much pain and suffering

should be compensated, I think we

ought to fix it at a level that is adequate to compensate an egregious case

but not such as to permit all of the rest

of society to pay a very large price as

we are paying.

What kind of a price do we put on the

poor woman in rural Minnesota or

rural Arizona who loses a child because

there is not an obstetrician there to

help deliver her baby because the high

cost of medical malpractice premiums

prevented that person from practicing?

I know several communities in Arizona

where every one of the OB’s have left

town because they cannot make it with

the high premiums that they have to

pay. I have cited these statistics here.

So when we talk about how many

millions of dollars should one person

receive for being injured, I turn that

around and say, how many millions of

dollars worth of damage are being

caused by the fact that physicians are

not able to practice the way we all

would like to have them practice and

the way they used to practice.

Finally, I note that our amendment

does not provide for reduction in

present value, therefore, in the case of

the young man, the example the Senator cited, that $500,000, since he already received the economic damages—

he has been made whole in that sense—

this $500,000 can generate maybe several millions of dollars, many millions

of dollars of income during that person’s lifetime. We are enabling the person to collect the entire sum rather

than having it to be reduced to present

value.
S5878 CONGRESSIONAL RECORD — SENATE May 1, 1995

As to the question why preemption,

it is a very good question, because ordinarily we would like to have the experimentation at the State level, and

that certainly has been a part of my

philosophy over the years. But we

found in many areas from standards we

have established on health care delivery, from the FDA, in welfare, in so

many different areas we have found we

want to have some kind of at least

minimal national standards.

In the case of people trying to do

business and provide insurance so that

hospitals and physicians can provide

care to people so that they will receive

the kind of health care that they need,

in order for them to do that, they are

going to need to have some kind of

standard by which they can operate.

If there is a different standard in

every State, it is going to be very difficult—in fact, they have said it—it is

very difficult for these insurers to insure against the different standards in

different States. So some predictability and a maximum level of exposure, we think, would go a long way toward enabling companies around the

country to reduce the overall cost of

health care which, of course, would tie

into our efforts to try to establish

some kind of health care reform later

in the session in Congress.

Mr. WELLSTONE. I see other colleagues on the floor. I wanted to speak

briefly about an amendment that I

have offered.

Mr. KYL. May I say, before my colleague leaves the floor, I appreciate his

questions. They are all very good. I

wish we had more of an opportunity to

engage in colloquy. I think we would

get to the bottom of some of these

things.

Mr. WELLSTONE. I thank my colleague, too. I think ultimately where I

come down on this question is—while

some of my objections I have tried to

be clear about—I guess I still do not

find the argument about the jury being

swayed on a motion to appeal that persuasive—and you know what I am

going to say. These are the people who

vote for us in elections. I will tell you

that my State has struggled with this

question, and we have passed some significant reform. You may want to do

this in Arizona. I think the Senator

from Massachusetts ultimately will

have the State-opt-out amendment. It

seems that States—the Federal preemption bothers me to no end and not

trusting juries, which are citizens, to

make these decisions when we trust

them to elect us to office, I think is a

curious irony. I think that is one of the

flaws in the proposal.

I know the Senator presents this in

very good faith. I agree with the Senator—not on his amendment, but I

agree and we share a very strong common commitment and interest—and I

look forward to working with you on

this—about how we can make sure that

some of our underserved areas, where

we have men and women that can deliver dignified and affordable health

care. In rural Minnesota, the issue is

not any longer whether you can afford

a doctor but whether you can find one.

I do not think the cause of that is what

you think is the cause. But I think we

can work together. I thank my colleague.

I want to briefly speak about a ‘‘Dear

Colleague’’ letter I have sent out on an

amendment I introduced on Friday.

This amendment deals with what is

called the national practitioner data

bank, which was created in 1986.

Mr. President, this data bank provides information in two decisive areas

that are extremely important to provide this. One is the area of what is

called adverse actions. When an adverse action has been taken against a

doctor by a hospital or by a medical

board, essentially saying to that doctor, ‘‘You cannot practice medicine at

this hospital any longer because of a

pattern of negligence,’’ or ‘‘you cannot

practice medicine in the State any

longer,’’ then that information—very

important information—goes into this

data bank.

Mr. President, the second kind of information that is critically important

that goes into that data bank is information that deals with malpractice

payments. When in fact a doctor has

made a malpractice payment, then

going into this national practitioner

data bank is very important information on how many times this has happened and what amount has been paid.

Mr. President, this is, I think, the

bitter irony to it. This information in

the national practitioner data bank is

available to hospitals; it is available to

doctors; it is available to managed care

plans; it is available to just about everybody but the consumers. It is not

available to the consumers.

Now, Mr. President, what we do in

this amendment is a couple of different

things. First of all, we really strengthen the disclosure of this information in

a couple of different ways. What this

amendment calls upon is for the Secretary of Health and Human Services,

over a 6-month period—every 3 months

he comes to Congress, and 3 months

later promulgates rules as to the best

way to make sure that this information gets to consumers. Understand,

Mr. President, there are 80,000 deaths a

year for medical malpractice, from

negligence, and 300,000 people injured.

Now, I want to be clear for colleagues

that tomorrow when I speak on the

floor when all of our colleagues are

back, in summarizing this amendment,

I am going to make this point again.

We are very clear that what goes into

this data bank is not when someone

complains about the doctor—that is

not part of the data bank. It is only

when there has been an adverse action

taken or a malpractice payment has

been made. That is all there is. I mean,

for example, if you go to a dentist and

you do not like the dental work, you

are pretty angry about it and you feel

like you were put in a lot of pain and

you say, ‘‘Look, I want to get my

money back,’’ and he says, ‘‘I do not

want to deal with you, here is your

money back,’’ that is not in this data

bank. It is only when an actual adverse

action has been taken or there has

been a malpractice payment. That is

very important. That is the only information.

Moreover, Mr. President, in response

to what I think were some fairly legitimate questions from the providers, we

have done a couple of other things in

this amendment which I think are important. First, we list the norms, we

were just talking about obstetricians,

and we were talking about that in

terms of rural areas. We list the norm

for each subsection of the health care

profession so that, for example, if you

were to see there had been a malpractice payment, one or two with an

obstetrician, you might think that is

bad. But if you saw the norm for obstetricians and it looked pretty good, you

would not be nearly as worried. We

make sure the norms are listed for

each part of the medical profession

that a consumer would have access to.

Second, since insurance companies

sometimes say to a doctor, ‘‘Look, just

settle,’’ and the doctor really does not

want to, does not feel he or she did

anything wrong but that is the best

thing to do, we make sure that is part

of that data bank, that provider’s perspective analysis of what happened and

why it is a part of the data bank. This

is available as part of the data base.

Fourth of all, Mr. President, we deal

with what is a very serious problem.

Maybe tomorrow, because I see my colleague from Ohio and I promise I am

going to try and finish within 5 minutes—maybe tomorrow I will give examples which are very heartrending.

But all too often what happens is—and

we are not talking about, thank God,

many doctors—but all too often what

happens is that you have a doctor who

has had an adverse action taken

against him—and I know my colleague

from Ohio is interested in this question—and he actually leaves the State,

changes his name, and commits the

butchery again. What we make sure

of—and we have examples of this in a

number of different States, and this

has been a proposal that Health and

Human Services has made for some

time—as a matter of fact, the Social

Security number is entered into this

data bank, so it is much easier to track

those individuals—so that, Mr. President, if you had to have back surgery

in Minnesota and you wanted to

check—and God forbid there had been

somebody who came from Ohio who literally had an adverse action taken

against him, and he no longer was able

to practice in the State, changed his

name in Minnesota—you could track

that person. You could have access to

that kind of information.

Mr. President, I really believe that

this amendment is extremely important. Here we are talking about malpractice reform—med-mal amendments. I am saying that one of the
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5879

ways we can prevent this malpractice

or this negligence from happening in

the first place is to make sure consumers have this information. I really find

it a very weak argument, and weak arguments were made as to why we cannot do it. Some say, ‘‘Let us study it,’’

or ‘‘We need to improve the data.’’ We

have, as a matter of fact; we have

plugged some of the loopholes.

In any case, it is far better that we

make sure the consumers have access

to this information. I am a little startled at some of the opposition to this.

If in fact this information is available—and you could go to a court in

any State and get it. But it is not readily available to consumers. It is readily

available for hospitals, for doctors,

medical boards, medical societies, and

managed care plans. The only people

that do not have access to this information are the consumers.

So it seems to me that this amendment strengthens what we are trying

to do here, especially if what we are

trying to do here does, I hope, in part,

prevent this kind of negligence from

happening in the first place.

I do not think there is any reason

why a Senator should vote against

what is a strong consumer protection

amendment. Tomorrow morning, I will,

if there are any Senators who want to

debate this, be pleased to debate it. Or

later on today, we will do so, as well.

I yield the floor.

AMENDMENT NO. 612 TO AMENDMENT NO. 603

(Purpose: To clarify that the provisions of

this title do not apply to actions involving

sexual abuse)

Mr. DEWINE. Mr. President, I ask

unanimous consent that the pending

amendment be set aside so that I may

offer an amendment.

Mr. WELLSTONE. Mr. President, reserving the right to object, is this a

medical malpractice amendment?

Mr. DEWINE. It is, indeed.

Mr. WELLSTONE. Mr. President, I

no longer object.

The PRESIDING OFFICER. Without

objection, it is so ordered.

Mr. DEWINE. Mr. President, I send

an amendment to the desk and ask for

its immediate consideration.

The PRESIDING OFFICER. The

clerk will report.

The assistant legislative clerk read

as follows:

The Senator from Ohio [Mr. DEWINE] proposes an amendment numbered 612 to amendment No. 603.

The amendment is as follows:

In section 12(5) of the amendment, add at

the end thereof the following new sentence:

‘‘Such term does not include an action where

the alleged injury on which the action is

based resulted from an act of sexual abuse

(as defined under applicable State law) committed by a provider, professional, plan or

other defendant.’’.

Mr. DEWINE. Mr. President, the underlying amendment that we are considering, the McConnell medical malpractice amendment, would place a cap

on the punitive damages that may be

awarded by a jury against a doctor or

against other medical providers.

My amendment would except out

from this cap sexual assault and sexual

abuse.

The underlying amendment, Mr.

President, does set this cap. By setting

the cap, it also sets a cap on all medical malpractice cases, including cases

where the doctor has committed a sexual assault, some form of sexual abuse,

against the patient.

Mr. President, I find no logical reason for this Congress, as we debate the

issue of medical malpractice, to impose

our will on the States and say to each

State no longer can a person have unlimited punitive damages against those

who a jury has found or an individual

who a jury has found has sexually

abused his patient.

I find no logic behind that, and I

think it would be, quite frankly, morally wrong for this Congress to impose

such a limit.

Mr. President, the amendment I have

just sent to the desk would add, at the

end of the relevant section, the following new sentence:

Such term does not include an action

where the alleged injury on which the action

is based resulted from an act of sexual abuse

(as defined under applicable State law) committed by a provider professional, plan, or

other defendant.

Mr. President, it is not my intention

at this time to talk about the underlying merits of the amendment. What I

will try to do, instead, is make absolutely certain by my amendment, that

this legislation does not have a truly

disastrous, if unintended, consequence,

one that may well occur if we do not

make the legislation absolutely crystal

clear.

Mr. President, sexual abuse is a horrible problem in this country. Two and

a half percent of all medical malpractice cases involve sexual abuse.

In the last reporting period, Mr.

President, it was reported that this totaled 173 cases of not only medical malpractice, but of sexual abuse.

Clearly, Mr. President, there are a

few doctors out there who are engaging

in very reprehensible conduct. These

cases involve a brutal violation of one

of the most sacred relationships that

exist; that is, the relationship between

a doctor and his or her patient.

When a person goes to a doctor, that

person establishes that sacred relationship. That person goes to a place where

she or he can be healed and certainly

not hurt. The patient goes to a doctor

in a spirit of trust, someone who is

bound by a sacred oath not to violate

that trust.

Mr. President, tragically, at least 173

women have recently discovered that

they had misplaced that trust. They

trusted someone who posed as a healer

but who it turns out was, in fact, a

predator. When they entered the doctor’s office, they certainly did not expect that it would turn into an outrageous, humiliating, criminal nightmare.

Let me talk about a few cases that

have been in the news recently. Let me

talk about a woman in Virginia who

went to a doctor because she and her

husband wanted to have children. They

asked the doctor, because they had

that problem, to help them start this

pregnancy. The doctor led them to believe that the husband’s semen would

be implanted in the wife by artificial

means.

The woman became pregnant, all

right. But tragically, it turned out that

the semen was not her husband’s but

was, rather, the doctor’s. It was later

revealed that the doctor had literally

made a practice of impregnating his

own patients.

Mr. President, what words can we

summon to express the rage that we all

feel when we hear about this kind of

outrageous conduct?

Mr. President, it has been said that

one of the problems we have in this

country today in our society is that we

accept too much, we tolerate too much;

we see so much on TV that is sad and

brutal that we just pass it off and say

that that is just the way it is.

I think, Mr. President, we need to

really recapture a spirit of outrage, a

sense of deep shame, a sense that we

are not going to tolerate this anymore,

that we are really going to succeed in

deterring this kind of intolerable behavior. It is that sense of outrage that

we must have.

Would it be right, would it be just,

for this Congress to impose a cap and

tell the State of Virginia to tell that

jury in Virginia, ‘‘You cannot impose

punitive damages above a certain

amount in this particular case’’? I

think the answer is, clearly, no.

We cannot tolerate what happened to

a woman in Connecticut. She had been

going to a dentist for about 10 years.

She was going to get a molar filled.

The dentist sedated her with nitrous

oxide. She woke up, Mr. President,

three times in the next hour and 15

minutes.

The first time, she found the dentist

kissing her and she felt pain in her

breasts. She attempted to resist and

saw the doctor turn up the concentration of nitrous oxide so that she would

pass out again, which she did. The second time she woke up, she found the

dentist on top of her, and the third

time she woke up the dentist was still

on top of her.

She felt very scared and very sick.

The dentist realized she was awake. He

helped her out of the chair. He grabbed

her and kissed her. The woman did not

remember any dental work ever having

been done in that visit.

During her excessive exposure to the

nitrous oxide, some obviously went

into her lungs. And stomach acid had

actually gone into her lungs, leaving

her with a permanent asthma condition and permanent loss of 30 to 40 percent of her lung capacity.

Would it be right to tell the jury in

Connecticut, ‘‘No, in this case, there

will be a cap on the punitive damages
S5880 CONGRESSIONAL RECORD — SENATE May 1, 1995

that can be awarded’’? I do not think

so.

In another case, a Florida woman

thought she was receiving periodontal

treatment. She awoke from the anesthesia the doctor had given her and

found the doctor touching her private

parts. Would it be right, in that particular case, Mr. President, to impose a

cap? Again, I think not.

Mr. President, according to a recent

study, in one-third of the sex abuse

cases—in one-third—the doctor was

permitted to go on practicing medicine. Patients today are being treated

by those doctors, totally unaware of

the doctors’ history of obscene conduct.

Sometimes, tragically, it takes time

for justice to be done. An investigation

by ABC News revealed that a gynecologist in southern California sexually abused as many as 200 women over

a 30-year period. It took almost 20

years after the first complaint for California authorities to start proceedings

against him. But in that case, the very

first complaint really told the whole

story. The victim wrote that while the

doctor was examining her pelvic region

he began sexually abusing her and

using foul language. My amendment

would exclude this kind of behavior

from the changes contemplated in the

bill we are considering. This medical

malpractice amendment should not

have caps which would affect sexual

abuse.

The Senate may decide to cap damages in case of medical malpractice.

But there certainly is no logical reason

to extend that protection to individuals who sexually abuse their patients.

It would, I believe, be morally wrong.

Indeed, I believe it would be outrageous

for this Congress to protect, by the use

of a cap on punitive damages, individuals who sexually molest or abuse their

patients. Under my amendment, all of

the remedies currently available for

victims of this kind of sexual abuse

will continue to remain available to

them under the applicable State law.

Punitive damages are historically

used to punish and to deter. Let us not

limit the punishment of these sex offenders. Let us not limit the deterrent

effect on these sex offenders. Let us

allow juries the full latitude they need

to punish and the full latitude they

need to deter these offenders. That is

what this amendment would do.

The vast majority of doctors in this

country do a fantastic job. We rely on

them for literally the most precious

thing in our lives, which is the health

and welfare of our family members.

Each one of us has had, we hope, great

experiences with these doctors. This

amendment should not in any way reflect on these doctors. All we are saying by this amendment is let us not

have the U.S. Congress interfere with a

jury, interfere with a State, interfere

with the people’s right to punish and

deter the small minority of doctors

who violate the sacred trust that the

patient has given them.

The same amendment I am offering

today was offered by Senator KENNEDY

in the Labor and Human Resources

Committee. The committee passed that

amendment and it is my hope the full

Senate will, tomorrow, do the same.

The American jury speaks with the

voice of America’s deepest conscience.

That is why I want to make sure the

jury keeps the power, the power to

punish fully these horrible violations

of trust by some truly warped and dangerous individuals.

Mr. President, I yield the floor.

I suggest the absence of a quorum.

The PRESIDING OFFICER. The

clerk will call the roll.

The assistant legislative clerk proceeded to call the roll.

Mr. HATCH. Mr. President, I ask

unanimous consent that the order for

the quorum call be rescinded.

The PRESIDING OFFICER (Mr.

THOMAS). Without objection, it is so ordered.

BASHING BUSINESS/HELPING LAWYERS

Mr. HATCH. Mr. President, during

debate on the products liability bill

last week, some of our colleagues who

defend the status quo made comments

on the punitive damages issue to which

I would like to say a few words.

I heard one comment to the effect

that, ‘‘if a multibillion-dollar corporation makes a mistake in building a bus

and the bus explodes, to punish a

multibillon-dollar corporation $250,000

or three times economic damages is

not going to cut it.’’

First, let us understand that punitive

damages were not conceived for application in cases of mere mistake, mere

negligence. They are intended for application in cases of much, much more

serious conduct. The underlying bill,

which speaks to conduct carried out

with a conscious, flagrant indifference

to the safety of others is the kind of

standard usually employed before punitive damages are found appropriate.

Second, given today’s regime of compensatory damages, the cost of litigation, and adverse publicity, punitive

damages infrequently are needed to

punish and deter such misconduct. In

the case of the exploding bus, if it had

resulted from the kind of conduct triggering a right to punitive damages

under the law today, all of these factors would combine as a powerful incentive for the company to reform its

practices. But, the underlying bill

hardly does away with punitive damages, it simply places rational limits

on their award.

Third, the current, largely uncontrolled nature of punitive damages is

anticonsumer. The threat of these

awards must be built into the cost of

services and products today, even before we get to the impact on prices

when runaway awards are handed

down. Punitive damage reform is

proconsumer.

I will have more to say about this

subject when Senator DOLE offers his

amendment on punitive damages to

broaden the scope of the provision now

in the bill. I believe my colleagues

might be interested in the testimony of

George L. Priest before the Judiciary

Committee on April 4, 1995. Mr. Priest

is professor of law and economics at

Yale Law School and has taught in the

areas of tort law, products liability,

and damages for 21 years. He has served

as director of the Yale Law School Program in Civil Liability since 1982.

He appeared before the committee as

a private citizen, and not as a representative of any interest or lobbying

group. His scholarship has led him to

the conclusion that the kind of reform

on punitive damages that Senators

GORTON and ROCKEFELLER are talking

about, and which Senators DOLE and I

and others would like to extend beyond

products liability, would be beneficial

to consumers. He also concluded that

punitive damages do not serve a deterrent purpose. He testified:

I have never once seen a careful study in a

specific case showing that a punitive damages judgment of some particular amount

was necessary to deter some particular

wrongful behavior.

Professor Priest unhesitatingly stated that the view—

That ever-increasing civil liability verdicts, including punitive damage verdicts,

would serve to reduce the number of accidents * * * has been totally discredited

today, and I know of no serious tort scholar

publishing in a major legal journal who

could maintain it.

He added:

It is widely accepted—and it is a routine

proposition of a first year modern torts

course—that compensatory damages * * *

serve as a complete deterrent in addition to

their role in compensating injured parties.

I ask unanimous consent that Professor Priest’s testimony be printed in the

RECORD at the conclusion of my remarks.

The PRESIDING OFFICER. Without

objection, it is so ordered.

(See exhibit 1.)

Mr. HATCH. Thank you, Mr. President.

Now, Mr. President, let me address

another point made on the floor last

week. It was asked, how can Congress

know how to limit judges and juries in

making punitive damage awards, how

can we lay down a rigid law?

Mr. President, I find the criticism

odd in the extreme. These same Senators would not dream of imposing

punishment, be it jailtime or criminal

fines or both, on some violent thug,

without according that criminal a full

panoply of procedural protections, clarity in the law as to what constitutes

criminal conduct, and certainly, a defined set of punishments. That is what

we do before we seek to punish anyone

in our society for criminal misconduct.

But, because some of the opponents

of change in our civil justice system

like to mischaracterize the issue before

us as a matter involving only businesses, they apparently could not care

less if defendants are punished in a

civil case in an almost totally uncontrolled fashion. It is OK I guess in their
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5881

Footnotes at end of article.

eyes to bash business. It is OK to unload on large, medium, and small businesses. What the heck, some of our Nation’s lawyers make out just fine. Forget about the fact businesses, especaily

small businesses, provide the jobs in

this country. Forget about the fact

they bring new products and services

to the American people. Who cares if

runaway punitive damage awards stifle

innovation, curtail products and services, hurt employment, and deplete

company assets for use in compensating other victims of the company’s

wrongdoing? Let us just bash American

business and watch some of the Nation’s lawyers laugh all the way to the

bank. I am not being critical of all lawyers by a long shot and I understand

the crucial role lawyers play in vindicating individual rights. But, today,

the biggest beneficiaries of the stubborn defense of the status quo are some

of our Nation’s lawyers—not consumers.

And the opponents of change can

wave around lists of consumer organizations that also oppose change. But

the American people for whom they

claim to speak, favor change. They

know the civil justice system is broken.

EXHIBIT 1

TESTIMONY OF PROF. GEORGE L. PRIEST BEFORE THE SENATE COMMITTEE ON THE JUDICIARY

Mr. Chairman, I am grateful for the opportunity to testify on the subject of punitive

damages reforms being considered by your

Committee. I am the John M. Olin Professor

of Law and Economics at Yale Law School,

and have taught in the areas of tort law,

products liability and damages for 21 years—

the last 15 years at Yale. I have served as the

Director of the Yale Law School Program in

Civil Liability since 1982.

Over the course of my career, I have written broadly on the fields of tort law and

damages. A major area of my interest has

been jury verdicts in civil litigation. I have

published many empirical studies of jury

verdicts, including verdicts involving punitive damages. I was one of the original organizers of the now-famous Rand Corporation

studies of jury verdicts that began in the

early 1980s.

The concern of my scholarship universally

has been how the civil justice system can be

reformed to benefit consumers in our society

and low-income consumers most of all. I

have no particular concern to define what is

beneficial to manufacturers or to other corporate entities, except as their activities

provide benefit to consumers. I wish to emphasize that I am testifying today at your

invitation, solely in my capacity as a private

citizen interested in the effects of tort law

and punitive damages on American consumers. The views presented here are mine alone

and do not represent those of any interest or

lobbying group.

As an academic, my job is to study and define the ideal world and the system of laws

that would most benefit American citizens.

The reform of punitive damages alone—even

reforms that would cap punitive damages or

introduce a proportionality cap—will help

consumers, but will not achieve the ideal. I

believe consumers in this country would be

benefitted all the more if Congress (or our

courts) were to modify substantive standards

of civil liability, reducing the scope of liability and cutting off at the source a great deal

of what today is needless and counterproductive litigation. Indeed, if such reforms

were introduced, changes in punitive damages might not be necessary because punitive damages awards would nearly disappear.

That world, however, is the ideal, and we

should not allow hope for the ideal to discourage support for true reform. As I hope to

convince you, sharp yet reasonable Congressional limits on punitive damages will constitute true reform to the benefit of all

American citizens.

THE INCREASING COMMONALITY OF PUNITIVE

DAMAGES

Forty years ago, punitive damages verdicts

were exceptionally rare and were available

against only the most extreme and egregious

of defendant actions. The world of civil litigation is surely different today. But the

number and, especially, magnitude of punitive damages judgments have increased dramatically. Indeed, the frequency of claims

for punitive damages has increased to approach the routine. These claims affect the

settlement process, both increasing the litigation rate 1 and, necessarily, increasing the

ultimate magnitude of settlements even in

cases that are settled out of court.

I recently participated in an empirical

study of punitive damages verdicts that illustrates the point. The study reviewed

claims and verdicts for punitive damages in

several counties in Alabama—a state in

which it has been alleged that punitive damages verdicts have skyrocketed over the past

decade.

The study first addressed the extent to

which tort actions filed included claims for

punitive damages. Many commentators have

dismissed concerns about punitive damages

on the grounds that there are very few ultimate punitive damages verdicts reported. In

the American system of civil justice, of

course, very few verdicts of any kind are reported, relative to the number of claims

filed, since only 2 to 5 percent of civil cases

filed ever proceed to a verdict.2 The better

test of the frequency and impact of punitive

damages, thus, derives from a study of

claims.

Here are the results: Bullock, Lowndes,

and Barbour Counties in Alabama are relatively rural locales, with small populations

and without substantial industry. We studied

all tort actions filed in these counties for

several fiscal years to determine the numbers in which punitive damages were

claimed. To summarize the most recent statistics, we found that, in the fiscal year 1992–

93, of all tort cases filed in Bullock County,

76.5 percent included a punitive damages

claim; 65.1 percent in Lowndes County; and

78.3 percent in Barbour County.3

The exceptionally high proportion of punitive damages claims and the universality of

such high proportions over each of the counties are striking and nearly incredible.

Again, the study was not limited to only

claims involving high dollar amounts or

product liability claims or, even, claims

against corporate defendants; the study addressed all tort claims. Anyone familiar in

the slightest with our civil justice system

knows that most tort actions involve relatively routine forms of accidents, including

traffic accidents. That 65 to 78 percent of all

tort actions over a fiscal year include punitive damages claims starkly challenges the

notion that punitive damages are an infrequent and seldom invoked remedy in American civil law.

Yet, incredible as these numbers may

seem, in the succeeding fiscal year, the proportion or number of tort cases including a

punitive damages claim actually increased

in each of the counties. During the 1993–94

fiscal year, an extraordinary 95.6 percent of

tort cases filed in Bullock County included a

punitive damages claim; 78.8 percent in

Lowndes County. In Barbour County, the

proportion of tort cases including a punitive

damages claim decreased from 78.3 to 72.1

percent, but the absolute number of punitive

damages claims increased during 1993–94 by

over 40 percent.

Much of the debate over punitive damages

proceeds in the form of battle by competing

anecdote in which a defender of our modern

regime will present a case of exceptionally

egregious defendant behavior deserving of

punitive damages, and a supporter of reform

will present an opposite example. (Indeed, I

present an anecdotal case—though a telling

one—below.) The Alabama numbers belie

anecdotes. No one can plausibly claim that

72.1 to 95.6 percent of all accident cases over

an entire year in any county of the U.S. involve the form of exceptionally egregious defendant behavior that might merit substantial punitive damages. In contrast, these

numbers show that the role of punitive damages has changed dramatically in our civil

justice system, from an occasional remedy

invoked against outrageous action to a commonplace of tort law practice.

These numbers also belie the commonlyheard defense that actual punitive damages

verdicts are rare and that many of those

awarded by juries are later reduced on appeal

so that there is no substantial effect. Debate

can be had on what is meant by the term

‘‘rare’’ and what constitutes in terms of

magnitude of verdicts a ‘‘substantial’’ effect.

The impression is often suggested, however,

that even for the Nation in its entirety, punitive damages claims amount to nothing

more than a handful.

Our Alabama study demonstrates that this

is a great misimpression. Again, we did not

select the largest cities in Alabama or industrial or manufacturing centers; in fact, just

the opposite: The counties that we studied in

Alabama are rural, with modest populations,

and a relatively non-urbanized citizenry. For

example, Bullock County has a total population of only 11,042, 4,040 of whom are employed, and a per capita income of $9,212;

Lowndes, a total population of 12,658, 5,300

employed, and a per capita income of $10,628.

Barbour County is somewhat larger, with a

total population of 25,417, 12,400 employed,

and a per capita income of $12,100. None of

these counties, however, resembles in the

slightest metropolitan areas such as Miami,

Los Angeles, or Dallas.

What did we find? In 1993–94, despite these

small populations, punitive damages claims

constituted far more themselves in these

rural counties than the claimed nationwide

‘‘handful’’. In Bullock County, 43 of 45 tort

actions included a punitive damages claim;

in Lowndes County, 52 of 66; and in Barbour

County, 93 of 129. Are punitive damages in

Alabama insignificant? The claims reported

above, of course, are quite recent and remain

still in the litigation pipeline. Looking to

much earlier claims, however, our study in

Alabama showed that the magnitude of punitive damages judgments affirmed by the Alabama Supreme Court from 1987 through the

first half of 1994 equalled $53.2 million,4 equal

to roughly $13 per Alabama citizen.

This study demonstrates that the number

and magnitude of affirmed punitive damages

verdicts is only the very small tip of an extraordinary iceberg. Again, it is universally

conceded that only 2 to 5 percent of cases

filed ever proceed to verdict. Thus, it is not

surprising that the systematic observation

of any single type of verdict is relatively

rare. What the Alabama numbers show is

that the availability of unlimited punitive

damages affects the 95 to 98 percent of cases
S5882 CONGRESSIONAL RECORD — SENATE May 1, 1995

that settle out of court prior to trial. It is

obvious and indisputable that a punitive

damages claim increases the magnitude of

the ultimate settlement and, indeed, affects

the entire settlement process, increasing the

likelihood of litigation. Thus, as shown in

the Bullock, Lowndes, and Barbour County

figures, our modern rules with respect to punitive damages impose these effects on 95.6

and 72.1 percent of even settled cases. Punitive damages reform—especially if it extends

to all state and federal litigation, not simply

products liability—is desperately needed.

DO PUNITIVE DAMAGES SERVE A NECESSARY

DETERRENT PURPOSE?

Virtually every supporter defends punitive

damages on grounds of deterrence, accompanied by an anecdote or anecdotes involving

persons who suffered serious losses in contexts in which most observers would agree

that the respective defendant should have

prevented the accident. Generally, the anecdotes are allowed to speak for themselves: I

have never once seen a careful study in a

specific case showing that a punitive damages judgment of some particular amount

was necessary to deter some particular

wrongful behavior. Instead, the argument

proceeds by implication. The basic defense of

punitive damages—and I believe that it is

the only serious defense—is the implication

that large, unlimited punitive damages verdicts are necessary to control injurious activities in the society. Put slightly differently, it is implied that, without the

availability of unlimited punitive damages

awards, potential defendants, especially corporate defendants, would face no deterrent

threat to prevent them from causing injuries.

Forty years ago, in a tort law regime that

provided little in the way of consumer remedies, it might have been believed that everincreasing civil liability verdicts, including

punitive damages verdicts, would serve to reduce the number of accidents.5 That view,

however, has been totally discredited today,

and I know of no serious tort scholar publishing in a major legal journal who could

maintain it. Instead, it is widely accepted—

and it is a routine proposition of a first-year

modern torts course—that compensatory

damages—economic losses and pain and suffering—serve a complete deterrent purpose

in addition to their role in compensating injured parties. Compensatory damages impose

costs on defendants who wrongfully fail to

prevent accidents, costs equal in amount to

the injuries suffered. Compensatory damages

internalize injury costs to defendants where

some action has wrongfully injured an innocent party.

Indeed, the strongest theory in the modern

tort academy is that full compensatory damages generate exactly the optimal level of

deterrence of accidents—not too little and

not too much.6 For purposes of deterrence or

accident prevention, given full compensatory

damages, there is no need for punitive damages of any dimension, not to mention unlimited punitive damages. Of course, this is a

theoretical conclusion, and there remains

dispute in the academy as to whether as an

empirical matter court or juries calculate

compensatory damages exactly perfectly in

every case or in every context. Thus, substantial academic attention has been given

to the refinement of liability so that the

deterrant effects of compensatory damages

may be sharpened.

Given the role of compensatory damages as

a deterrent, however, the analysis of punitive or other exemplary damages becomes

substantially different. The only justification on grounds of deterrence for any exemplary award beyond the compensatory is

that compensatory damages are inadequate

for some reason, say, that juries award damages too low in some dimension or that some

set of injuries go undetected or are perhaps

too insignificat individually to justify litigation.7 The only plausible defense of punitive

damages on deterrence grounds, thus, is to

restore aggregate damages to a level equal to

that that is fully compensatory.

Opponents of punitive damages reform in

current Congressional debates avoid this

issue, but this failure to confront it suggests

the ultimate weakness of their opposition.

Again, anecdotes involving individuals suffering serious serious loss are not generally

helpful to the analysis. I am extremely sympathetic—as all of us are—to individuals suffering serious injuries. We all wish that the

wrongfully injurious action might have been

avoided. Given a wrongful injury, we all

want the victim to receive full compensation

for economic losses and pain and suffering.

The question for punitive damages tort reform, however, is: Given full compensation

to the victim, is there some affirmative deterrent purpose served by awarding further

damages? Is there some reason to believe

that the payment of full compensatory damages will fail to deter the defendant, such

that some further multiple of punitive damages is absolutely necessary? For corporate

defendants, the answer surely is no. Corporate defendants who must maximize profits net of costs must necessarily take the

prospect of compensatory damages into account in determining how to invest in accident prevention. Again, this analysis presumes full compensation. If there were some

reason to believe that juries were systematically undervaluing economic losses or pain

and suffering, punitive damages might be

necessary to make up the shortfall. (Of

course, the opposite is true; many, including

myself, believe that juries overvalue compensatory damages, especially pain and suffering, justifying Congressional limits on

pain and suffering awards.) Barring such a

shortfall, however, there is no justification

for punitive damages on deterrence grounds.

The analysis is, perhaps, somewhat different in the context of individual

noncorporate defendants who are less subject

to cost constraints and, perhaps, more inclined to behave unconscionably. This is the

reason that exemplary or punitive damages

are often awarded in cases involving intentional harms such as assault.

As administered by juries, however, our

current civil liability regime approaches the

issue exactly backwards. In our current regime, large punitive damages verdicts are

seldom awarded against non-corporate defendants. And I know of no one objecting to

a punitive damages cap on the grounds that

it will impair the deterrence of private individuals. Instead, large punitive damages verdicts are most typically awarded against corporate defendants who, as profit maximizers

(a motivation often irrationally held against

them), will be carefully responsive to compensatory damages. Corporate defendants

need no punitive damages verdict to encourage them to take all cost-effective precautions to prevent injuries; compensatory

damages alone achieve that result. Thus, the

increasingly commonplace plaintiff lawyer’s

charge to a jury to ‘‘send the defendant a

signal’’ ignore entirely the universally accepted academic view that, to a corporate

defendant, full compensatory damages are

not only an effective signal, but also the

only and entire signal needed.

DO PUNITIVE DAMAGES HELP OR HURT

CONSUMERS?

If the effect of punitive damages were to

benefit consumers or if their effect were even

neutral to the consumer interest, we might

be unconcerned that punitive damages are

unnecessary to deter corporate defendants

from injurious behavior. The central problem of punitive damages, however, is that,

except in the rare cases of jury

undervaluation of damages or

underlitigation, punitive damages settlements and verdicts affirmatively harm consumers, and low-income consumers most of

all.

Where punitive damages become a commonplace of civil litigation as in Alabama,

or even where they become a significant risk

of business operations, consumers are

harmed because expected punitive damages

verdicts or settlements must be built into

the price of products and services. The effect

of the greater frequency and magnitude of

punitive damages recoveries of modern times

has been to increase the price level for all

products and services provided in the U.S.

economy. To observe this phenomenon is not

to say that injured consumers should go uncompensated. If a consumer suffers an injury

that can be attributed to some wrongful activity of a defendant, whether manufacturer

or service provider, that consumer should receive compensation for economic losses and

for reasonable non-economic losses, such as

pain and suffering.8 In contrast, punitive

damages, by definition, go beyond the compensatory. The problem with the increasing

commonality of large punitive damages verdicts and settlements, such as those we see

in Alabama, is that the awards to some consumers of greater than compensatory damages must be built into the prices paid by all

other consumers.

It is an obvious implication of this proposition that low-income consumers are most

seriously harmed by our current damages regime. First, low-income consumers have less

money generally and, regardless of the product or service, are more seriously affected in

terms of the purchasing power of their limited resources where the price level increases. Secondly, and most importantly,

low-income consumers are not the typical

beneficiaries of large punitive damages verdicts or settlements, surely not on a systematic basis. Again, research of my own currently in progress shows that low-income

consumers, if injured, are less likely to seek

an attorney; even with an attorney, are less

likely to sue; less likely to recover; and,

again by definition, less likely to recover

large damage judgments since their lost income is typically low and pain and suffering

awards, which are highly correlated with

lost income, equally low.

Put more simply, where punitive damages

verdicts and settlements are frequent and

large, low-income consumers are forced to

subsidize the high-incomes as expected punitive damages awards are built into the prices

of products and services. Occasionally, a lowincome individual will receive a punitive

damages windfall, but the far more systematic effect is to harm the low-income as the

prices of products and services generally are

increased as producers must adjust for the

expectation of future punitive damages payouts.

Although these Hearings are chiefly directed to punitive damages reforms, it is important to recognize that the current effect

of the doctrine of joint and several liability

is similar. Joint and several liability has its

most general effect on organizations or entities which engage in a large scope of activities, such as state and municipal governmental entities, public utilities, and the

like. It has become a commonplace of modern civil litigation for plaintiffs’ attorneys

to join as defendants any governmental entity or utility remotely associated with an

injury. Thus, state governments and municipalities are joined as defendants on claims
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5883

that roads were misdesigned or poorly maintained or that a guard rail or telephone pole

could have been placed in a better position.

Forty years ago, attorneys would not have

thought to include entities whose causal relationship to the harm was so low or, if they

had attempted to join such entities, the

claim would have been dismissed. Today,

such litigation is routine and imposes substantial litigation expenses upon our state

and municipal governments and liability expenses, only infrequently, but chiefly under

operation of the doctrine of joint and several

liability where the truly responsible defendants have gone bankrupt, leaving our governments and utilities to suffer the remaining judgment.

It is clear that, for very similar reasons,

operation of the doctrine of joint and several

liability harms citizens in general, but lowincome citizens most of all. Damages judgments must be paid from state and municipal financial sources. It is well-established

that state and, especially, municipal finance

is seriously regressive in effect, charging

more to middle- and low-income citizens,

proportionate to income, than to the relatively high-income. This effect, most obviously, is not limited to the product manufacture context and provides an important independent reason why the reforms the Senate

is considering should be expanded beyond application to products manufacture to all

civil litigation.

These propositions about the effect of punitive damages and joint and several liability on the poor and low-income may appear

abstract, though I believe that they are generally accepted within the academic community. To illustrate their import with greater

salience, however, I would like to present

one recent example of a punitive damages

verdict in Alabama, indeed, a case that inspired the research presented above. The

case will both show the pressing need for punitive damages reform, again, not limited to

products liability, but expanded to all state

and federal litigation.

In the case Gallant v. Prudential, decided

this past April 1994, Iran and Leslie Gallant

sued Prudential Life Insurance Company

based on the actions of a Prudential agent.

The Gallant’s had purchased a combination

life insurance-annuity policy with a $25,000

face value at a monthly premium of roughly

$39.00. At the time of sale, the agent had told

them that the value of the annuity was

roughly twice what in fact it was; the agent

had added together the table indicating

‘‘Projected Return’’ with the table indicating the lower ‘‘Guaranteed Return.’’ A jury

found this action fraudulent and held the

agent liable and Prudential separately liable

for failing to better supervise the agent.

Fortunately, the problem was discovered

before either the policyholder had died or

had retired to receive the annuity. Thus, to

the time of trial, there was no true economic

loss beyond the failed expectation of the

larger future return. I have carefully read

the transcript of the testimony, and the

Gallants testified that, between the time

that they discovered the misinformation and

Prudential called them to offer a remedy

(Prudential offered to return their premiums

or to discuss adjusting the policy), they had

suffered roughly two weeks of sleepless

nights and substantial anger at having been

misled. That was the extent of their ‘‘mental

anguish’’.

Twenty years ago, I taught cases of this

nature in a course entitled Restitution, in

which the appropriate remedy was restitution of all paid premiums or out-of-pocket

costs. On very rare occasions such as especially egregious actions by a defendant, some

courts considered awarding plaintiffs the

benefit of the bargain, say, by increasing

their annuity benefits.

Our modern world has changed: After a one

and one-half day trial, an Alabama jury

awarded the Gallants damages equal to

$30,000 in economic loss; $400,000 in mental

anguish; and $25 million in punitive damages. Again, the face value of the insurance

policy was only $25,000.

I do not wish to minimize the harm to the

Gallants, especially the indignity of the misrepresentation, nor to condone the fraudulent actions of the agent, apparently perpetrated on several other Alabama citizens

who recovered separately. Nevertheless,

there is not a single person to whom I have

described this case—not an attorney, whether plaintiff or defendant; not a liberal or a

conservative; not even a radical or idealistic

Yale Law student (or faculty member)—who

has not been shocked by the outcome or who

could defend it as a rational or sensible verdict in the context of the harm. Again, many

defenders of punitive damages argue that exceptionally large verdicts are usually overturned on appeal. Alabama provides a review

procedure for punitive damages verdicts that

the U.S. Supreme Court has approved.9 In

the Gallant case, however, the judge conducting the review affirmed the $25 million

award in its entirey, though directing part of

the amount to be paid to the State.

What will be the effect of a punitive damages verdict of this nature? The Gallants appear to be persons of modest means (before

the verdict). Does a verdict of this nature

help middle- or low-income consumers? Totally, the opposite. The insurance policy in

question—face value, $25,000—was the cheapest form of life insurance/annuity available

on the market; again, its monthly premium

was only $39.00. Obviously, at such a premium, the insurance carrier could not be expecting to make a substantial profit on the

policy. Indeed, an expert in the case estimated that over the entire life of the policy,

the premiums net of payouts paid by the

Gallants would increase Prudential’s assets

by only $46.00.10 Prudential, like most other

life insurance companies, profit more substantially from large dollar, rather than

small dollar policies. The expert estimated

that the verdict reduced dividends to every

Alabama policyholder (Prudential is a mutual carrier) by $323.

How do we analyze a case like this in

terms of whether punitive damages serve a

necessary deterrent effect? In his closing arguments, the (highly effective) attorney for

the Gallants asked the jury to determine a

level of damages that would send a ‘‘message’’ to the giant Prudential Life Insurance

Company that fraudulent behavior on the

part of an agent will not be tolerated.11 What

kind of damages message is necessary to

achieve that effect? Obviously, if the insurer

stood to gain no more than $46 over the life

of the policy, any damages judgment greater

than $46 sends the insurer a message by making the policy unprofitable. (Of course, I ignore entirely Prudential’s defense costs plus

the reputational harm from the lawsuit.)

The jury in the Gallant case went substantially beyond that amount, however, in

awarding compensatory damages of $30,000

for economic loss and $400,000 for the mental

anguish of the two weeks’ lost sleep and

anger. It certainly cannot be argued that the

jury has undervalued the Gallant’s compensatory loss—indeed, the $400,000 mental anguish award is extreme. Furthermore, there

is no reason to think that the agent’s behavior in other contexts would go undetected.

(Prudential later settled other cases brought

by the agent’s clients.) As a consequence,

there is no justification for a punitive damages award whatsoever.

What will be the effect of punitive damages

verdicts such as that in the Gallant case? In

the face of such a verdict, what is the rational response of an insurer like Prudential or

other insurers selling similar policies? Regrettably, but necessarily in a competitive

industry, the rational response is to quit

selling such low value policies altogether. It

makes very little sense to expose the company and its policyholders to the risk of such

a damages verdict given the very small gain

from the sale of such a policy.

Is this the type of product that our civil liability system should drive from the market? Obviously, not, and low-income consumers in Alabama are directly harmed as a result. Here, the dramatically differential effects of such verdicts on high-income versus

low-income consumers are made clear. In my

own view, it is far more important to our society to have our insurance industry provide

life insurance coverage to low-income than

to high-income citizens, since the relatively

affluent of our society have other means of

providing financial security for their families. The availability of financial protection

and security at relatively low cost will be

substantially diminished if such low premium policies, as here, are no longer available.

More generally, where expected punitive

damages verdicts are added to the price of

products and services, the first to feel the effect will be low-income consumers. And

where the magnitude of punitive damages

verdicts rise, imperiling the continued provision of the product or service, the first to be

affected will be those products and services

with the lowest profit margins, most attractive to the low-income. The Gallant case provides a dramatic example of the effect. Following Gallant and other large punitive damages verdicts, several insurers have quit offering coverage in Alabama altogether.

Punitive damages reform would cure that

ill to the benefit of all Americans and especially low-income Americans. As the Gallant

case shows, however, to fully cure the problem, punitive damages reform must extend

beyond the products liability context to all

civil litigation. The Gallant case involved insurance, not product manufacture, Punitive

damages verdicts such as the $25 million verdict in the Gallant case encourage wasteful

litigation. (Indeed, litigation seeking punitive damages judgments against financial

service companies has become an industry in

Alabama.) By increasing the prices of all

products and services, punitive damages verdicts and settlements reduce the purchasing

power of all Americans, again, especially the

poor.

MUST CONGRESS IMPLEMENT PUNITIVE

DAMAGES REFORM?

Many defenders of our current regime

question why the Congress should become involved in civil liability reform, rather than

leaving reform initiatives to the courts or to

the state legislatures. The question is particularly appropriate with respect to punitive damages reform, given that the Supreme

Court has addressed the issue of the excessiveness of punitive damages in several recent cases.12

I have been involved in the tort reform effort for many years and have testified in

favor of tort reform before various state legislatures (California, Louisiana, New Jersey)

and in various judicial proceedings evaluating state tort reform statutes (Alabama,

Florida, New Mexico). I have organized several conferences addressing tort reform for

state legislators and judges, and have directed much of my writing on tort reform to

the judiciary.
S5884 CONGRESSIONAL RECORD — SENATE May 1, 1995

This varied experience has convinced me

that only Congress is in a position to implement effective civil liability reform and, especially, punitive damages reform. First, it

is evident, after many opportunities, that

the Supreme Court has great difficulty proceeding beyond what might be called a ‘‘procedural’’ approach to the punitive damages

problem. The Court’s various options suggest

clearly that a majority of Justices are concerned about the excessiveness of modern punitive damages verdicts. To date, however,

the only form of punitive damages control

that the Court has adopted has been procedural: approving a set of procedures at the

state level for judicial review of punitive

damages verdicts (Haslip, supra) or disapproving a state judicial procedure as not

providing sufficient review (Oberg, supra).

In my view, a merely procedural approach

to the punitive damages problem will never

be successful. Indeed, we have stark evidence

of its failure. In 1991 in the Haslip case, the

Supreme Court specifically approved the procedure for reviewing punitive damages verdicts for excessiveness adopted by the Alabama Supreme Court.13 Viewing the Alabama

procedure on its face, few can contest that

the review procedure appears reasonable. In

practice, however, as the Gallant case proves

and as the statistics from the rural Alabama

counties strongly suggest, the punitive damages problem in Alabama, under the procedures approved by the U.S. Supreme Court,

has grown to epidemic proportions.

Upon reflection, it is not surprising that

the Supreme Court has found it difficult to

deal with excessive punitive damages. The

Supreme Court’s job, in general, is to define

rights. Few would contest—I do not contest—that punitive damages may be appropriate in some contexts. I would not support

a Constitutional right of immunity from punitive damages (though that may well be an

important improvement over the current

state of the law).

What is needed for punitive damages reform is a prudential judgment of the appropriate cap or limit to punitive damages that

will allow some room for punishing egregious

behavior, but constrain the deleterious effects of unlimited punitive damages judgments on consumers and on the low-income.

A proportional limit of three times economic

losses or $250,000 is a prudential judgment of

that nature. (Personally, I would support a

lower figure absent a definitive finding of

malice.) But that prudential judgment is a

uniquely legislative, not judicial, exercise.

With respect to reform by the states, the

question is somewhat different. Punitive

damages verdicts implicate both interstate

and foreign commerce in a manner that only

the federal Congress can address. Some have

argued that a state without a significant

manufacturing or interstate service sector

could actually benefit its citizens by adopting an expansive civil liability regime at the

expense of citizens of other states. Only the

federal Congress can address this issue.

Secondly, there is one further effect of our

modern damages regime that should not go

unnoticed in Congress: an effect on the competitiveness of American manufacturers and

producers. Some have argued that large punitive damages verdicts in the U.S. are neutral with respect to competitiveness since

foreign courts do not award such verdicts

against U.S. producers with respect to sales

abroad and because foreign producers are

equally subject to such verdicts for sales in

the U.S. Thus, for U.S. sales, foreign producers, just like U.S. producers, must add expected punitive damages and joint and several liability verdicts into the prices of products and services. (It is often lost on these

observers that an increase in prices on account of punitive damages—even if operating

neutrally—is not an affirmative argument on

behalf of consumers.)

This analysis, however, is only partially

correct. Increasingly, foreign courts are refusing to enforce extraordinary judgments

from U.S. courts against foreign defendants.

For example, very recently the German Federal Court of Justice (Germany’s highest

court for civil and commercial matters) refused to enforce a $400,000 punitive damages

verdict obtained in an American court by an

American plaintiff against a German defendant on the grounds that the punitive damages verdict was inconsistent with German

public policy.14 In the same case, an intermediate court had reduced the pain and suffering damages component from $200,000 to

$70,000 on the same grounds.

Foreign judgments of this nature should be

alarming both to Congress and to U.S.

courts. First, they are strong evidence that

the current course of American law does not

command wide assent—itself another reason

for Congress to enact general punitive damages reform. Secondly, however, such judgments suggest an increasing competitiveness

problem facing U.S. producers here in the

U.S. To the extent that U.S. verdicts must be

enforced abroad, foreign producers need not

add the costs of the U.S. civil justice system,

including punitive damages and excessive

pain and suffering awards, into the prices of

products and services sold in the U.S. Thus,

foreign producers can underprice U.S. producers in sales to American consumers here

in the U.S.

Ironically, although U.S. producers and

their employees are harmed by this effect,

U.S. consumers benefit because they can obtain products and services at lower prices,

without the effects of our punitive damages

verdicts built in. Put slightly differently, the

refusal of foreign courts to enforce large punitive damages or pain and suffering awards

from U.S. courts represents a type of tort reform, regrettably however, only available—

prior to federal punitive damages reform—to

foreign, rather than to U.S., producers.

For these various reasons, I endorse punitive damages reform. May I emphasize again

the necessity of extending reform to all civil

litigation, state and federal, rather than limiting it to products liability or some other

subset, in order to spread the benefits of reform most broadly.

There are a wide range of punitive damages

reforms that the Senate might consider.

Most important would be a proportionality

limit on available punitive damages. The

proposed limit of three times economic

losses or $250,000 is a reasonable first start,

though strong arguments can be made for

lower limits or more rigorous standards requiring a finding of actual malice before any

exemplary damage award can be made. It

would also be helpful to provide for the bifurcation of trial as between the compensatory

and punitive damages phase, in order that

the often highly-inflammatory evidence concerning defendant (most often, corporate)

wealth does not taint a jury’s evaluation of

the basic evidence with respect to liability.

It is also important to place limits on or give

credit to defendants facing multiple punitive

damages awards. The tragic modern experience in the asbestos litigation demonstrates

the problem. Here, because of multiple punitive awards to sets of plaintiffs reaching

court first, many subsequent claimants have

been unable to collect basic compensatory

damages of any amount.

These comments address only current proposals. Again, I have studied the reform of

modern tort law for many years and would

be happy to respond to any questions concerning the full range of modern tort law reform.

FOOTNOTES

1See, e.g., Richard A. Posner, An Economic Approach to Legal Procedure and Judicial Administration, 2 J. Legal Stud. 399 (1973); G.L. Priest, Selective Characteristics of Litigation, 9 J. Legal Stud.

399 (1980). 2 G.L. Priest, Private Litigants and the Court Congestion Problem, 69 B.U.L. Rev. 527, Table 1 at 540

(1989). 3These data were collected under a research

project organized and directed by myself and Professor James R. Barth, Auburn University for the case

Gallant v. Prudential. Publication is in process; the

data are available from the author. 4This figure excludes wrongful death awards which

are denominated ‘‘punitive’’ in Alabama. If such

awards were included, the amount equals $109 million, equal to $26 per capita. 5For a discussion of the development of modern

tort law, G.L. Priest, The Invention of Enterprise

Liability: A Critical History of the Intellectual

Foundations of Modern Tort Law, 14 J. Legal Stud,

461 (1985). 6 Richard A. Posner, Economic Analysis of Law

(4th ed., 1992). 7Of course, this is also a justification for the class

action. 8 I have written widely on the subject of appropriate pain and suffering awards, and would strongly

endorse limits on pain and suffering, though this

issue is somewhat beyond the focus on punitive damages here. See, e.g., G.L. Priest, The Current Insurance Crisis and Modern Tort Law, 96 Yale L.J. 1521

(1987). 9Pacific Mutual Life Insurance Co. v. Haslip, 111

S.Ct. 1032 (1991). 10Testimony of Professor James R. Barth, Auburn

University. 11Gallant v. Prudential, Barbour County, Alabama,

Trial Transcript at 647, April 6, 1994. 12See, e.g., Pacific Mutual Life Insurance Co. v.

Haslip, 111 S.Ct. 1932 (1991); TXO Production Corp. v.

Alliance Resources Corp., 113 S.Ct. 2711 (1993), Honda

Motor Co. v. Oberg, 114 S.Ct. 2331 (1994). 13Pacific Mutual Life Insurance Co v. Haslip,. 111

S.Ct. 1032 (1991). 14Judgment of June 4, 1992, BGH Gr. Sen. Z., discussed in G.L. Priest, Lawyers, Liability and Law

Reform: Effects on American Economic Growth and

Trade Competitiveness, 71 U. Denver L. Rev. 115 at

146–47 (1993).

MCCONNELL AMENDMENT TO H.R. 956, PRODUCT

LIABILITY FAIRNESS ACT

Mr. HATCH. Mr. President, there is a

subtle implication in this whole debate

on the McConnell amendment—an

amendment which I strongly support—

that somehow health care providers are

a bunch of greedy so and so’s, motivated solely by dreams of maximizing

profit.

If they ask for relief from liability, it

must be because they want to escape

responsibility, to make a quick buck,

not because it would make our health

care delivery system better.

What is ironic is that this body has

spent countless hours over the past 2

years debating proposals on health care

reform, all of which were based on a

system which places the utmost trust

in the health care professional, whether it be a doctor, a nurse, a chiropractor, or a lab technician.

In fact, we spent countless hours here

in this very Chamber, debating how to

improve our health care delivery system. We spent 54 days in the Labor and

Human Resources Committee—46 days

in hearings and 8 days in markup—and

40 days in the Finance Committee—36

days in hearings, and 4 days in markup.

And that does not even count the

countless hours of work outside the

committee and on the floor.

There was no disagreement over the

need for medical liability reform. Indeed, the Clinton proposal, the Labor
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5885

Committee bill, the Finance Committee bill, the ensuing Mitchell bill—all

contained medical liability provisions,

as I will discuss later. The only question was over what those proposals

should be.

When we get sick, who do we see? A

doctor, a nurse practitioner, or another

health care professional. Not an attorney.

When our children get sick, who do

they see? A pediatrician, a physician

assistant, or another health care provider. Not an attorney.

Our entire medical system—which

everyone knows is heralded as the best

in the world—is based on a total reliance on the abilities of the health care

professionals who treat us, professionals who have scarified immeasurably to get the requisite training and

credentialing. These are professionals

who spend long and hard hours in

school and at work to make our system

the best in the world.

Will there be mistakes?

Of course there will. After all, we are

only human. And while we must drive

for perfection, that by definition cannot be.

My heart goes out to each and every

person who has suffered an adverse

medical event, whether it were caused

by the delivery system or not.

I wish we could have a perfect health

care delivery system, where everyone

was healthy and no one ever was ill or

suffering.

I wish this could be a perfect world in

which children never suffered adverse

reactions from the very vaccines designed to protect them.

I wish this could be a perfect world in

which a surgeon never removed the

wrong eye, or the wrong kidney. But it

is not a perfect world, nor can it ever

be.

I was a trial attorney before I came

to the Congress.

I saw heart-wrenching cases in which

mistakes were made. I saw heartwrenching cases in which mistakes

were not made, and doctors were forced

to expend valuable time and resources

defending themselves against frivolous

lawsuits.

I have litigated these cases, both as

an attorney for the plaintiff and as an

attorney for the defendant.

No one in this body knows better

than I—perhaps with the exception of

our colleague from Tennessee, Senator

FRIST—what the defects are in this system.

Mr. President, there are over 260 million people in these United States. I

wish we could design a system which

would protect each and every one of

them from harm, but that is not possible. Our job is to design the best system we can.

Several of our colleagues came to the

floor last week and gave very heart-felt

statements, citing specific cases in

which patients had not had the outcome we all would have liked.

I pray that these cases could have

turned out for the better. I fervently

wish that such problems never occur

again.

But in a country as large and as diverse as this one, problems are inevitable. The task before us is to make

sure the system minimizes those problems.

I ask my colleagues: ‘‘Do we have the

best system possible?’’

I do not believe any one in this

Chamber would argue that is so.

Thus, the question before is how to

design a system which protects both

the patient and the provider. I do not

believe that a protracted war between

trial attorneys and health care professionals is the way to accomplish that

goal.

My experience indicates that the best

way for us to pass solid legislation

which really solves a problem is for

both sides to come together and negotiate a solution. Unfortunately, that

has not been the case to date. And I

think our debate, and indeed our country, has suffered because of this.

Nevertheless, the intransigence of

one or more parties is no reason that

we should cast aside consideration of

one of the most important issues that

has faced this body since I came to the

Senate.

Indeed, I first introduced a medical

liability bill in this body in 1978. Many

of the approaches embodied in my legislation are also contained in the

McConnell-Kassebaum amendment before us today.

THE NEED FOR HEALTH CARE LIABILITY REFORM

What are the problems which give

rise to the need for the McConnell

amendment? Let me list them for my

colleagues:

First, medical liability costs are out

of control. A significant portion of our

gross domestic product is devoted to

tort costs, of which medical torts are a

large part. This number is growing.

As our distinguished House colleague, Representative DAVE

MCINTOSH, noted in an April 1994 ‘‘Hudson Briefing Paper,’’ the United States

has the most expensive tort system in

the world, with direct tort liability

costs of 2.3 percent of the gross domestic product. Our colleague went on to

note that whereas U.S. economic output grew 100 percent between 1933 and

1991, tort costs grew almost 400 percent. In other words, over the past 58

years, tort costs have grown almost

four times faster than the U.S. economy.

In that briefing paper, which I commend to my colleagues, Mr. MCINTOSH

found that 7 percent of America’s tort

costs—$9.1 billion—are associated with

medical malpractice claims. As Senator MCCONNELL, the author of this

amendment, said last Thursday, according to the AMA physician

masterfile and other AMA liability

data, the average rate of claims has increased every year since 1987. In fact,

as Senator MCCONNELL noted, the AMA

data show that in 1992, 33,424 medical

professional liability claims were filed.

The next year, 1993, 38,430 claims were

filed, a 28-percent jump from one year

to the next.

Second, liability insurance costs are

having a direct impact on health care

spending. Professional liability insurance rates are rising in response to our

runaway tort system. The estimated

annual cost of liability insurance for

physicians and health care facilities,

for example, was calculated at more

than $9 billion in 1992, and it continues

to grow.

We have all heard the statistics cited

in our debate on the amendment by our

distinguished colleague from Wyoming,

Senator THOMAS.

The costs of ob-gyn malpractice

claims in particular are having a very

serious impact on both professional liability costs and the patient’s bill. Statistics from the American College of

Obstetricians and Gynecologists show

that one out of eight ob-gyn’s has

dropped obstetrical practice due to liability concerns. A 1990 OTA report indicated that more than half a million

rural residents are without any ob

services at all, a number which has undoubtedly grown since the report was

issued.

Third, health care liability costs

raise the costs of health care. The explosion in medical liability claims diverts resources which could be used for

patient care, and it raises the per patient cost of health care.

As Federation of American Health

Systems President Tom Scully noted

at a March 28 Labor Committee hearing, the total yearly cost of medical liability insurance is $9.2 billion. He

went on to relate that that, added to

Lewin-VHI estimates of defensive medicine, as I will discuss in a minute, plus

the liability costs borne by manufacturers of drugs and devices—$10.8 billion a year—could total up to $45 billion a year. And that does not even include settlements. Clearly, even if

these estimates are off a bit, we are

talking about a substantial sum involved in the cases.

Fourth, defensive medicine contributes to increased health care spending.

Health care professionals, fearing lawsuits, perform more services and order

more tests than they would otherwise

would.

I know about that. As a former medical malpractice lawyer, one of the bits

of advice I would give to doctors was

you cannot afford to not list every possibility in your health history. You

cannot afford to not try everything you

possibly can to make sure that that

simple cold is not a respiratory disease,

blood disorder or any number of other

things. You have to make sure of your

history because no longer can you get

by just meeting the standard of practice in the community. You better be

way above and beyond that. And in the

process, the cost of health care has

gone up exponentially because doctors

must now protect themselves, against

medical liability cases, and I cannot

blame them. The only way to stop it is

to get some reason into the system.
S5886 CONGRESSIONAL RECORD — SENATE May 1, 1995

This issue has been one of the more

hotly contested in the medical liability

debate.

In fact, a few years ago, Ways and

means Chairman BILL ARCHER and I

asked the Office of Technology Assessment to conduct a study on defensive

medicine. The results embodied in a

July 1994 report were not as conclusive

as we would have liked. As OTA admitted, ‘‘Accurate measurement of the extent of this phenomenon (defensive

medicine) is virtually impossible.’’

However, Lewin-VHI, one of the leading analysts in the whole field, has estimated that the combined cost of hospitals’ and physicians’ defensive practices was $25 billion in 1991, and that

study was based on what was considered to be a very conservative definition of ‘‘defensive.’’

In fact, the Hudson Institute Competitiveness Center study I cited earlier found that liability premiums and

defensive medical practices contributed $450 per patient admitted to a

large urban hospital in Indiana, an average of 5.3 percent of the patient’s

hospital bill. Of that amount, $327 went

for defensive medicine practices, and

$123 went for insurance and administrative costs.

But, Mr. President, I do not believe

you need the results of a study to realize that there is defensive medicine and

that it costs a lot of money.

I have a very simple gauge. Ask your

doctor or other health care professional the next time you have an office

visit. They will confirm: defensive

medicine is real.

In fact, you do not have to even wait

for your next visit. Ask our colleague

from Tennessee, Senator FRIST. In a

very compelling statement before this

body last week, he said:

As a physician, I have seen first-hand on a

daily basis the threat of litigation and what

it has done to American medicine.

I have watched my medical colleagues

order diagnostic tests that were costly and

unnecessary to the diagnosis or to the care

of the patient, and they are ordered for one

purpose: To create a trail—in many cases a

paper trail—to protect them in the event a

lawsuit were ever to be filed.

It is called defensive medicine and it happens every day in every hospital in America.

It alters the way medicine is practiced, and

it is wasteful.

He could not have said it better. In

fact, some scholars and leaders say

that if the American Medical Association admits to $25 to $30 billion a year

in defensive medicine, can you imagine

how really high it must be? We have to

get a handle on this.

Fifth, a significant portion of these

tort awards never make it to the plaintiff. Despite all these tremendous litigation costs, the beneficiaries seem to

be lawyers, not patients.

Lawyers should be compensated and

they should be fairly and reasonably

compensated. But studies have shown

anywhere from 28 to 43 percent of every

dollar spent on liability litigation ever

reaches patients. That is a strong indication that our liability system has

been turned squarely on its head.

There are lawyers in some States

who set up separate corporations to

provide for documentary evidence or

exhibits or designs and pictures and

other matters. Sometimes total costs

taken out of these suits can go as high

as 60 percent of the money before any

of it ever reaches the patient. Now, I

think that is outrageous in some of

these States. But I am aware of some

of these things that go on. These lawyers are just making a killing off some

of these cases. I will never deny or begrudge any lawyer the right to make a

fair compensation for what happens to

be a very difficult and skillful trial or

even a case. But there are limits to everything, and that is why this bill is

providing some additional limits that

would help all of us to save and conserve on medical costs.

Sixth, the liability crisis has limited

the public’s access to, and confidence

in, health care. An Insurance Information Institute report in May of last

year cited that a 1992 survey of obstetricians and gynecologists showed that

80 percent has been sued. Is it likely

that 80 percent of obstetricians and

gynecologists are committing malpractice? I do not think so.

The results of this are obvious. A survey conducted by the American College

of Obstetricians and Gynecologists

showed that one out of eight physicians specializing in pregnancy-related

services stopped delivering babies because of liability concerns, and, I

might add, the cost of malpractice insurance.

A New York Times article from July

of 1993 said that as many as 17 percent

of obstetricians and 70 percent of family practitioners who once delivered

babies in New York no longer do so.

I ask my colleagues, is the goal of access to care helped by a system that

drives providers out of certain areas or

types of practice?

I ask my colleagues, does a system

which creates these disincentives to

patient care instill public confidence in

providers?

In each case, I think the answer is a

resounding ‘‘no.’’ Senators MCCONNELL

and KASSEBAUM have provided us with

a solution.

The vulnerability of both health care

payers and health care providers to

claims arising from the liability morass is not an abstract proposition.

According to Lewin-VHI, comprehensive medical liability reform would

save $4.5 billion in year one, and an estimated $35.8 billion over 5 years, by

curbing both the costs of premiums and

of defensive medical practices.

The McConnell amendment, modeled

after the Health Care Liability Reform

and Quality Assurance Act of 1995 (S.

454), which I strongly support, would

instill a much needed measure of stability into our legal lottery and benefit

both patient and provider. How?

Statute of limitations: First, the proposal includes a 2-year statute of limitations for health care liability actions. A claim must be filed within 2

years of the date on which the claimant discovered or, in the exercise of

reasonable care, should have discovered the injury and its cause. This is

similar to a provision contained in S.

672, my Civil Justice Fairness Act.

It is also similar to the law in Utah,

which provides for a 2-year statute of

limitations, with a 4-year maximum.

Punitive damages reform: Second,

the McConnell amendment sets standards for punitive damages awards. In

order for a claimant to receive such

damages, he or she must prove by clear

and convincing evidence that:

The defendant intended to injure the

claimant for a reason unrelated to

health care;

The defendant understood the claimant was substantially certain to suffer

unnecessary injury and yet still deliberately failed to avoid such injury; or

The defendant acted with a conscious, flagrant disregard of a substantial and unjustifiable risk of unnecessary injury, which the defendant failed

to avoid in a manner which constitutes

a gross deviation from the normal

standard of conduct.

Further, the amendment precludes

punitive damages awards only if compensatory damages are more than

nominal.

One of the strong points of the

amendment is that it sets up standards

for punitive damages. Any defendant

may request separate proceedings on

either punitive damages liability or

the amount of the award. There is a

proportionality requirement, so that

no award will exceed three times the

amount awarded for economic damages

or $250,000, whichever is greater.

Finally, there is an important safeguard contained in the McConnell

amendment, so that it is made clear

the language does not imply a right to

seek punitive damages if none currently exists under Federal or State

law.

Again, this language is very similar

to the language in my bill S. 672.

Periodic payments: Under the

McConnell amendment, periodic payment of future damages can be made at

the request of either party if the award

exceeds $100,000. This is an important

provision which ensures that the injured party will receive more of the

award, and the attorney less. It also

makes it easier for insurers to judge

their appropriate reserves.

This provision was also contained in

my Civil Justice Fairness Act. I would

note that in Utah law, periodic payments for awards of over $100,000 are

mandatory.

Limits on attorney fees: The amendment before us limits attorney fees to

331⁄3 percent of the first $150,000, based

on after tax-recovery, and 25 percent of

any amount in excess of $150,000. Although my bill this year addresses attorney fees from a different perspective, I would note that last year the
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5887

Labor and Human Resources Committee adopted an amendment I offered to

cap attorney’s fees at 25 percent across

the board.

I have to say, I am concerned about

any limitation on attorney’s fees, but

there have been some colossal rip-offs

in this area and this appears to be a

reasonable approach in the McConnellKassebaum amendment.

Finally, I want to mention two other

important provisions in the McConnellKassebaum amendment.

Alternative dispute resolution [ADR]

mechanisms: I have long felt that our

fault-based liability system may not be

the most equitable or the most efficient. It is expensive, time consuming,

and unpredictable.

The McConnell-Kassebaum bill encourages States to establish or maintain alternative dispute resolution systems. It also requires the Attorney

General, in consultation with the Administrative Conference of the United

States, to develop guidelines for State

ADR procedures, including:

Arbitration; mediation; early neutral

evaluation; early offer and recovery

mechanisms; certificate of merit; and

no-fault.

Further, the provision authorizes the

Attorney General to provide States

with technical assistance in establishing and maintaining such ADR systems. The AG is required to monitor

and evaluate the effectiveness of these

systems.

I believe that these provisions will be

very helpful in encouraging alternatives to our current system. However, I am concerned that the language

does not go far enough in encouraging

the development of such systems.

For example, at least two States,

Colorado and Utah, are developing nofault liability systems. No-fault may

hold great promise in rectifying many

of the problems with a fault-based system, such as its unpredictability and

cost, but we are far from designing a

system which will work perfectly.

Later in this debate, I plan to offer

an amendment authorizing the Attorney General to assist States to help develop the ADR programs which are authorized in the McConnell amendment.

On measures to improve quality;

when I began this statement, I talked

about efforts to improve our health

care delivery system, and, in particular, the quality of care that patients

receive.

There are myriad safeguards in our

system to ensure that we strive for

quality care.

Physicians are credentialed by the

hospitals at which they practice to ensure that the medical staff both has

the appropriate training, experience,

insurance coverage, and is utilizing

their skills appropriately. Peer review

protects against problems with patient

care as do the many activities of local

and State medical societies.

All U.S. medical schools are accredited by one of three organizations sponsored and supported by the American

Medical Association. In addition, all

medical school graduates must pass the

U.S. Medical Licensing Examination

and almost all voluntarily choose to

become board certified.

The Joint Commission on the Accreditation of Healthcare Organizations

[JCAHO] accredits most of the hospitals in the United States. Hospital

insurors monitor the care at the facilities they cover as well.

Finally, I would also note that according to statistics provided to me by

the Federation of State Medical

Boards, State medical board authorities disciplined 3,685 physicians in 1994,

representing an 11.8-percent increase

over the previous year. Almost 86 percent of those actions involved loss of license or some restriction of license.

By the way, I want to recognize that

the States are also moving to improve

health care quality.

In my own State of Utah, the legislature in January of this year enacted

the second phase of Governor Leavitt’s

HealthPrint health reform program.

The act established a 2-year demonstration program to promote and

monitor quality health care. Specifically, the law requires that the project

include a collaborative public-private

effort to promote clinical quality and

cost effectiveness through communitywide continuous quality improvement

methods. It also requires a process for

evaluating the effectiveness of health

care continuous quality improvement

in the State of Utah.

Some have alleged that this system

is not tight enough to guard against

problem practitioners.

That may be the case. For example,

there is an impediment to physicians

self-regulating themselves which is

posed by our antitrust laws; that obstacle is something Chairman ARCHER and

I attempted to address in our antitrust

legislation last year. It is an issue I intend to pursue again this year.

But, obviously, out antitrust laws are

not the entire answer.

The McConnell-Kassebaum amendment provides additional resources for

State health care quality assurance

and access activities. One-half of all

punitive damage awards will be used

for licensing, investigating, disciplining, and certifying health care professionals in a State or for reducing the

malpractice-related costs for health

care volunteers in medically underserved areas.

This is a common sense provision,

and one which I believe should be

adopted.

BIOMATERIALS LIABILITY

A very important provision contained in Senator MCCONNELL’s original medical liability bill, S. 454, is not

contained in this amendment as it is

contained in the underlying Gorton

substitute product liability bill. I am

referring to the biomaterials liability

legislation sponsored by my colleagues

from Arizona, Senator MCCAIN and

from Connecticut, Senator LIEBERMAN.

I am very supportive of this legislation. There is a real need for the Congress to take action to relieve raw materials suppliers from liability in finished medical products.

Last month, I received a letter from

Dr. Don B. Olsen, director of the University of Utah Artificial Heart Laboratory. He cited a situation which

points out precisely why the McCainLieberman language is needed.

In his letter to me, Dr. Olsen said:

Perhaps you were informed about the recent patient at LDS Hospital who is on one

of our devices awaiting cardiac transplantation. The patient is doing very well, after

having been bed-ridden for about 11 days

awaiting a heart transplant. ‘‘As his health

continued to deteriorate, he received an

intraaortic balloon pump (manufactured

from one of the polymers now pulled off the

market) and this device was inadequate to

support his failing heart. Dr. Long, Dr. Doty

and myself then elected to replace his heart

with the CardioWest pneumatic artificial

heart developed at the University of Utah.

CardioWest is a not-for-profit corporation that has 42 of their pneumatically powered artificial hearts implanted in patients as a bridge to cardiac transplantation.

The problem is that large polymer

manufacturers, who make the raw materials needed to produce the artificial

heart, have stopped marketing the

polymers due to liability concerns.

A large device manufacturer, facing

similar liability concerns, has set up

its own polymer plant to produce the

materials needed for its own devices.

They are working with the university

in an attempt to reach an agreement to

provide the polymers for the artificial

heart. However, they are understandably reluctant to provide the materials

without some liability protection.

There again the liability problem has

reared its head.

Here we have a renowned university

designing literally lifesaving products

which cannot be used because of liability concerns. This is a travesty.

The McCain-Lieberman language is

needed to obviate such problems. Enactment of it cannot come to quickly.

HEALTH CARE REFORM REDUX?

In closing, Mr. President, I want to

outline for my colleagues the road we

have traveled in the past 2 years.

When the President and Mrs. Clinton

transmitted their Health Security Act

to Congress, they acknowledged that

we do have a health care liability problem in this country.

The Clinton bill, while it did not contain caps on damages, contains provisions on collateral source reform, periodic payment of future damages, limits

on attorneys’ fees, and alternative dispute resolution mechanisms.

In the Labor Committee, we adopted

provisions on collateral source reform,

periodic payment of future damages,

limits on attorneys’ fees, and grants

for alternative dispute resolution

mechanisms, including no-fault.

Subsequently, in the Finance Committee, we adopted a measure which
S5888 CONGRESSIONAL RECORD — SENATE May 1, 1995

contained a $250,000 cap on noneconomic damages indexed to inflation,

joint and several liability reform, use

of punitive damage awards for quality

improvement, limits on attorneys’ fees,

mandatory ADR, and grants for nofault demonstration programs.

Obviously, none of these measures included all of the provisions of the

Mcconnell proposal; at the same time,

it is obvious that much of the ground

we have covered in the past 2 weeks we

have covered before, in that many of

these provisions been advocated, indeed endorsed, by significant parties in

our past health care reform debate.

CONCLUSION

Mr. President, what we are talking

about here is improving our health

care delivery system, by ending the

legal lottery which threaten both patients and providers.

Some in this body have expressed opposition to the very fundamental

changes espoused by my colleague from

Kentucky and Kansas.

What I find ironic is that when the

shoe is on the other foot, that is, the

Government is the deep pocket not a

practitioner, this body can move quickly to enact tort reforms far more radical than those we are discussing today.

I am referring to the 1992 amendments to the Federal Tort Claims

Act—FTCA—amendments I supported,

indeed helped pass—which relieved

Community health centers from burdensome malpractice premiums.

In placing community health centers

under the FTCA, Congress endorsed

prohibiting punitive damages, allowing

liability to be determined by a judge,

not a jury, and capping contingency

fees at 25 percent of a litigated claim

or 20 percent of a settlement.

And, while we are on the subject of

community health centers—a program

I support fervently and which I hope

can be expanded to help address the uninsured problem—I might mention another irony.

Many have stood in this Chamber and

cited the statistic that malpractice

claims only amount to 1 percent of our

total health care bill.

With a national health care bill approaching almost $1 trillion, 1 percent

amounts to almost $10 billion.

Think how we could expand access to

health care by using those billions of

dollars for a program so much more

productive than litigation.

With current funding of $757 million,

community, migrant and homeless centers provide care to almost 9 million

people in 2,200 communities. They estimate that, incrementally, each additional $10 million they are provided

would extend services to 100,000 people

in 30–40 new communities.

Reforming our medical liability system and using those savings in community health centers would truly be

health care reform in the first order of

magnitude.

In closing, I wish to commend Senator MCCONNELL, Senator KASSEBAUM,

and Senator LIEBERMAN for their efforts on this important topic.

I intend to continue working with

them closely on this issue, as it is extremely important to health care in

America.

AMENDMENT NO. 613 TO AMENDMENT NO. 603

(Purpose: To permit the Attorney General to

award grants for establishing or maintaining alternative dispute resolution mechanisms)

Mr. HATCH. Mr. President, I ask

unanimous consent that the pending

amendment be temporarily set aside,

and I send an amendment to the desk

and ask for its immediate consideration.

The PRESIDING OFFICER. Without

objection, the pending amendment is

set aside.

The clerk will report.

The legislative clerk read as follows:

The Senator from Utah [Mr. HATCH] proposes an amendment numbered 613 to amendment No. 603.

Mr. HATCH. Mr. President, I ask

unanimous consent that reading of the

amendment be dispensed with.

The PRESIDING OFFICER. Without

objection, it is so ordered.

The amendment is as follows:

In section 20(d)(1), strike ‘‘with technical

assistance’’ and insert ‘‘with grants or other

technical assistance’’.

Mr. HATCH. Mr. President, one thing

is clear from our debate over the past

week.

While there are both proponents and

opponents of the medical liability

amendment before us, we all agree that

the system is not perfect.

Specifically, many commentators

have criticized our current liability

system as compensating very few of

those entitled to recovery and punishing the wrong providers.

And most of the money spent on liability goes to lawyers.

By a RAND estimate, 57 cents of

every liability dollar goes to lawyers,

leaving only 43 cents for injured patients.

Injured patients can wait years for a

final judgment and eventual payment

of the small percentage of their awards

left to them by the lawyers and the

system.

And doctors can have their reputations destroyed or lose their livelihood

by a single lawsuit or even mere insurance costs. The results of tort litigation, particularly in jury cases, is so

unpredictable that it has been called

the liability lottery.

There must be a better way of compensating injured patients and punishing bad doctors without wasting so

much time, money, and effort while

getting such unpredictable and inconsistent results. There must be a more

rational and efficient liability system.

As with so many things, innovative

ideas are coming from the States. And,

I believe, many more interesting new

ideas can be developed in the States if

we will allow them to experiment.

One idea, which some in Utah, and in

other States like Colorado, have been

investigating is the development of innovative no-fault medical liability systems. A no-fault system could compensate more injured patients more

quickly than the litigation system.

It could be more effective at punishing those providers who do act culpably. It may be that a no-fault system

could be not only more equitable, but

more inexpensive.

Researchers at Harvard University,

who have been working in this for

years and who are working with those

in Utah and Colorado suggest that

these systems hold substantial promise

on all these fronts.

But we need more experience with

different alternative dispute resolution

systems, such as no-fault, before we

can be sure.

There are many other approaches

being tried in various parts of the

country that might help make the system more rational. In the last few

years we have heard about innovative

dispute resolution systems that encourage quick and fair settlements like

early intervention and early offer models.

Practice guidelines and enterprise liability are also options that should be

watched and studied to see if they will

yield helpful results elsewhere.

Enhancing the evidentiary status of

clinical practice guidelines could help

the tort system move to judgment

more quickly and efficiently, with

more uniform results. And practice

guidelines could also be an interesting

method of developing more uniform

standards of medical practice.

There are many forms of each of

these approaches, and I think we can

learn much from experimenting with

various approaches in the States. I believe we should encourage the States

and entities in the States to experiment so that we can see what approaches are most likely to lead to a

more fair and efficient liability system.

The amendment I am offering to the

McConnell-Kassebaum provision on

medical liability is very simple.

In section 20, State-Based Alternative Dispute Resolution Mechanisms,

the current language in subsection (d)

authorizes the Attorney General to

provide States with technical assistance in establishing or maintaining alternative dispute resolution mechanisms.

My amendment would expand that

slightly, so that the Attorney General

may provide grants or technical assistance to States in establishing or maintaining alternative dispute resolution

systems.

The only change is the addition of

the words ‘‘grants or’’, and I note that

this would be entirely permissive.

While minor, it is an important

change, because it will allow States, or

their designees, to work on ADR alternatives, without time-consuming work

which is potentially duplicative at the

Federal level.
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5889

I hope this amendment can be adopted.

Mr. WELLSTONE addressed the

Chair.

The PRESIDING OFFICER. The Senator from Minnesota.

Mr. WELLSTONE. Mr. President, I

know my colleague from Illinois is

shortly going to introduce an amendment that I will support, which gives

States the right to opt out. I am in

profound disagreement with this Federal preemption. I think I will respond

to my colleague from Utah just with a

somewhat different perspective for the

record, if you will, Mr. President.

Mr. President, I remember last year

during the health care debate when we

had talked about the cost of medical

malpractice premiums that both the

Congressional Budget Office—I did not

say Democrat or Republican—and the

Office of Technology Assessment,

which gets high remarks for its very

rigorous work—indicated that the medical malpractice premiums account for

less than 1 percent of the overall

health care costs. A trillion-dollar industry, less than 1 percent.

As I remember, there were some

other reports that said even if you were

to take into account defensive medicine, altogether it was 2 percent of the

total cost. By the same token, Mr.

President, when the Congressional

Budget Office, for example, and the

General Accounting Office scored a single payer bill, where there was one single payer at each State level, as I remember, the estimates were that we

could save up to $100 billion a year. But

that challenged the power of the insurance industry. My understanding, Mr.

President, is that medical malpractice

insurance is the single most important

profitable line of property casualty insurance and generated $1.4 billion in

profit in 1992.

So we do not talk about insurance reform, record profits being made; we do

not talk about how to really contain

costs. The Congressional Budget Office

also said, Mr. President, that the best

single way of containing health care

costs would be to put some limit on

what insurance companies can charge.

We do not do that at all. We go the

path of least political resistance. Those

folks have entirely too much economic

and political power. We dare not

confront them.

But, Mr. President, instead, we are

going to go after those people who have

been hurt, those people who have been

injured, that have lost loved ones and

take away some of their protection and

take away some of their rights to seek

redress of grievance.

Mr. President, I am going to go back

to an example—I am sorry my colleague is not on the floor right now. I

have a practice of not debating colleagues directly if they are not here. I

do not think there is a standard of fairness to that. So I will be more general.

Let me raise the question about

these caps on punitive damages. For

example, I think my colleague wants

caps across the board, as I understand

it. Let me put a face on this question.

Think of Lee Ann Gryc from my State

of Minnesota who was 4 years old when

the pajamas she was wearing ignited,

leaving her with second- and third-degree burns over 20 percent of her body.

An official with the company that

made the pajamas had written a memo

14 years earlier stating that because

the material they used was so flammable, the company was ‘‘sitting on a

powder keg.’’ When Lee Ann sued for

damages, the jury awarded $8,500 in

economic damages and $1 million in

punitive damages. By the way, children—earlier we were talking about

this in debate, and one of my colleagues was making projections for

economic damages for children—children do not get much by way of economic damages.

Let me ask you, Mr. President, as I

cannot ask my colleague, was the jury

wrong? Should the company have gotten away with a cap of $250,000 in punitive damages, as this bill would require? Unless you are comfortable answering the question yes, unless you

are willing to say that Lee Ann Gryc

was entitled to no more than $250,000 in

punitive damages, when the company

knew that the pajamas were flammable, then you should not be supporting this bill.

This legislation is going to have a

very negative effect on consumers. I

think it is unconscionable.

Now, Mr. President, I do not get a

chance to ask the question, but I get a

chance to present another perspective

on the floor of the Senate right now in

response to my colleague. The question

I would raise is—I do not think my colleagues have an answer to this question—No. 1, if we have this cap on punitive damages, what is the projection on

how many citizens are going to be denied, how much by way of compensation, over the years to come? And No.

2, what implications does this have toward weakening the deterrent effect?

Like it or not, Mr. President, the

company that made those pajamas had

a memo written 14 years earlier stating

that it was sitting on a powder keg.

But for this company the bottom line

was the only line. Unfortunately, there

are some companies like that—thank

God, not too many. For those companies that produced these pajamas that

are flammable that burn children, or

products that injure or kill people, one

of the ways we know they will not do it

again is when they are slapped with

such a stringent punitive damages suit

that they know they cannot do it

again. What is the effect of taking

away that deterrent? What is the projection on how many innocent people

are going to be injured, maimed, or

killed by defective products in the foreseeable future? Give me near-term figures. Give me middle-term figures.

Give me long-term figures.

Mr. President, what we have before

us is an agenda that is an extreme.

First of all, there is this agenda to, on

the one hand, weaken some of the

agencies which have as their mandate

to protect the health and safety of consumers in this country. Then, on top of

that, we try and take away from citizens their right to receive fair compensation.

I might add, when it comes to the cap

on punitive damages, I think we essentially severely undercut the deterrent

effect of this. That is why they are

there. I mean, you have the economic

and noneconomic damages to make the

victim whole. In addition, you have punitive damages to say to a company:

By God, you need to understand this is

so egregious in what has been done

that you really are slapped with a

major damage which will prevent you

from ever, ever doing this again and

will prevent other companies from

doing this again.

That is what we are attempting to

overturn. That is what is so dangerous,

no pun intended, for consumers in this

country.

Mr. President, again, No. 1, for Lee

Ann Gryc from the State of Minnesota,

4 years old when the pajamas she was

wearing were ignited, leaving her with

second- and third-degree burns over 20

percent of her body. Is $250,000 too

much? Is any Senator willing to say it

was too much? I do not think so.

Then my colleagues say, we cannot

leave it up to a jury to decide. They are

too swayed by emotion. The juries are

the citizens that elect Senators.

Then, in addition, when my State of

Minnesota decides that a cap on noneconomic damages did not work, we

may not have any choice in the matter

because we have legislation that preempts States. Whatever happened to

decentralization? Whatever happened

to the idea of States making some of

these decisions?

Finally, Mr. President, again, on the

medical malpractice part, I can simply

say that I am not aware of any independent study done by CBO or Office of

Technology Assessment since last year

that went through the whole question

of a $1 trillion industry, that went

through medical costs, went through

an analysis of health care costs.

What CBO and OTA said is 1 percent—medical malpractice premiums

account for less than 1 percent of overall health care costs. Medical malpractice premiums account for less

than 1 percent; adding defensive medicine, maybe 2 percent. Those are my

figures as I remember.

When, in the name of controlling

health care costs, are we going to pass

a piece of legislation which is profoundly anticonsumer, which tips the

scales of justice away from people who

were seeking redress of grievance in behalf of negligent companies or negligent doctors? It is just outrageous.

We take away from people some of the

basic legal rights they have, some of

the basic consumer protection they

count on.

On the other hand, I would say to my

colleagues, if we want to control health
S5890 CONGRESSIONAL RECORD — SENATE May 1, 1995

care costs, great, I will give my colleagues an opportunity. Sometime I

hope to bring an amendment on the

floor that talks about putting a limit

on insurance company premiums. Then

we will see whether or not we are interested in controlling health care costs.

According to the Congressional Budget

Office, that is the way to control

health care costs.

And I will say to my colleagues, if

my colleagues are interested in having

more health care in rural or urban

communities, I am extremely interested in how we encourage more family

doctors, nurse practitioners, and how

we deliver health care in a humane, affordable way in underserved communities. But do not use these medical

malpractice amendments as a reason to

do that. We do not have to take away

from citizens in this country protection when it comes to their health and

safety. We do not have to take away

from them their rights in the court

system in order to make sure that we

provide dignified, affordable health

care. That is not a choice.

Mr. President, I hope on both the underlying product liability, and much

less, some of these medical malpractice

amendments—ones with caps—that colleagues will vote no. I yield the floor.

Mr. President, I suggest the absence

of a quorum.

The PRESIDING OFFICER. The

clerk will call the roll.

The legislative clerk proceeded to

call the roll.

Mr. SIMON. Mr. President, I ask

unanimous consent that the order for

the quorum call be rescinded.

The PRESIDING OFFICER. Without

objection, it is so ordered.

Mr. SIMON. Mr. President, I ask

unanimous consent that amendment

No. 613 be laid aside.

The PRESIDING OFFICER. Without

objection, it is so ordered.

AMENDMENT NO. 614 TO AMENDMENT NO. 603

(Purpose: To clarify the preemption of State

laws)

Mr. SIMON. Mr. President, I send an

amendment to the desk and ask for its

immediate consideration.

The PRESIDING OFFICER. The

clerk will report.

The assistant legislative clerk read

as follows:

The Senator from Illinois [Mr. SIMON], for

himself and Mr. WELLSTONE, proposes an

amendment numbered 614 to amendment No.

603.

Mr. SIMON. Mr. President, I ask

unanimous consent that reading of the

amendment be dispensed with.

The PRESIDING OFFICER. Without

objection, it is so ordered.

The amendment is as follows:

At the appropriate place insert the following:

SECTION . STATE OPTION.

(a) A provision of this subtitle shall not

apply to disputes between citizens of the

same State if such State enacts a statute—

(1) citing the authority of this section; and

(2) declaring the election of such State

that such provision shall not apply to such

disputes.

(b) If a dispute arises between citizens of

two States that have elected not to apply a

particular provision, ordinary choice of law

principles shall apply.

(c) For purposes of this section, a corporation shall be deemed a citizen of its State of

incorporation and of its principal place of

business.

Mr. SIMON. Mr. President, this is

word-for-word the amendment that the

Presiding Officer offered in our Labor

and Human Resources Committee, a

very thoughtful amendment, which

says we will permit the Federal Government to establish these standards,

and if there is a litigation between a

citizen of one State and a physician or

hospital from another State, or whatever the circumstances may be, then

these Federal standards apply. But if a

State wishes to differ from this, a

State can do that. That is all this

amendment does. It was carried, as the

Presiding Officer will recall, in a bipartisan vote in the Labor and Human Resources Committee. I hope it can pass

in a bipartisan vote here.

I have some concerns about the basic

product liability bill, but there can be

a very cogent argument made for it,

because if a manufacturer in Illinois or

Michigan, or in some other State, manufactures a product, that goes interstate. So having some national standards makes some sense.

But in the case of medical malpractice, in all but a few cases we are

talking about litigation within a State.

And the argument made by Senator

ABRAHAM in the committee seems to

me to be a very logical argument, and

that is, let us establish the Federal

standards, but if a State wishes to vary

from those standards, a State can do

that. That is all the amendment does.

It is not complicated. I will, at an appropriate time tomorrow, ask for a

rollcall vote on the amendment.

I see my colleague from Washington

is off the floor right now.

I suggest the absence of a quorum.

The PRESIDING OFFICER. The

clerk will call the roll.

The assistant legislative clerk proceeded to call the roll.

Mr. GORTON. Mr. President, I ask

unanimous consent that the order for

the quorum call be rescinded.

The PRESIDING OFFICER. Without

objection, it is so ordered.

Mr. GORTON. Mr. President, I would

like to speak for a few moments on the

underlying bill on product liability—

the debate on which began a week ago

today—on some aspects of the amendments which are before us at the

present time on medical malpractice,

and respond to two questions raised by

the Senator from Minnesota during one

of his sets of remarks on product liability earlier during the course of the day.

But I can begin in no better fashion

than to share with you, Mr. President,

and with my colleagues, a remarkably

eloquent essay which appeared in last

Friday’s Washington Post. Its author,

Bernadine Healy, was Director of the

National Institutes of Health during

most of the Bush administration and is

a senior policy advisor at the Cleveland

Clinic Foundation.

Mr. President, rather than simply to

put that essay into the RECORD, in

order that our Members, in making

their judgments on the important

votes they are going to cast tomorrow

and the rest of the week, I intend to

read that essay, because I was so

moved by it, with simply the caveat in

the beginning. The essay, entitled

‘‘Tort Tax on Women’s Health,’’ is primarily about the impact of this bill

and these amendments on women. And

I trust, Mr. President, that you will remember, as I read it, that it speaks

from Dr. Healy’s female perspective. I

am quoting and I will be until I bring

this to an end:

As the move to fix the broken tort system

gains steam in the Senate, we’re hearing a

tired refrain: Legal reform will hurt women.

This political gimmick to paint women as

victims is precisely the opposite of the truth:

Perpetuation of the litigation lottery, not

its reform, hurts most women in the long

run.

In dire need of reform is the current system’s imposition of massive and arbitrary

fines under the guise of ‘‘punitive damages.’’

In product liability cases, punitive damages

are intended to punish a company that manufactures a dangerous product. In medical

malpractice cases, these fines are cloaked as

non-economic damages, such as those for

‘‘pain and suffering.’’

Juries are asked to impose these damages

on a purely subjective, emotional basis. They

are in excess of the amounts needed to pay

for the harm actually done. One juror told

the Legal Times her reasons for awarding $10

million against a Washington, D.C. doctor

and hospital: ‘‘[Q]uite honestly, I think it

had something to do with sounding like a

round figure.’’

It is this open-ended freedom to punish

that creates a legal lottery, one in which

many trial lawyers scoff at smaller claims in

favor of the winning ticket of a million-dollar contingency fee.

How could reforming this system hurt

women? Protectors of the current system

claim that, because society places women at

a lower economic value, economic compensation for an injury will never be enough. They

point to lower wages for women than men in

comparable jobs, as well as to the pathetically low wages identified for women who

care for the children and home in a family.

Women always must stand firm for equal

wages for equal work. We also must fight for

economic respect for our work within the

family unit. (This might even include calculating compensatory damages based on the

total income of the family unit, not just the

market value of domestic services). But our

struggle for economic equality should not be

used as a smokescreen to justify a liability

system that threatens women’s health.

Women live longer and suffer from chronic

diseases (such as osteoporosis) to a greater

extent than men. More than men, we will

rely on new drugs and therapies to combat

these debilitating diseases. Unfortunately,

unpredictable and excessive product liability

costs are forcing drug and medical device

companies to withdraw needed products, or

even to decline to develop them.

Some products used exclusively by

women—namely, those for pregnancy and

contraception—are particularly susceptible

to withdrawal by companies fearing lawsuits. For example, the price of Bendectin, a

drug approved by the FDA for morning sickness, skyrocketed 250 percent after lawsuits
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5891

alleged birth defects. Although no causal

link to birth defects was ever found, the

manufacturer withdrew the drug from the

market. There are no other drugs for morning sickness.

Improvement to contraceptive products

also have been stalled by the product liability system. While there was a need to compensate women for problems associated with

the Dalkon Shield intrauterine device (which

physicians—not lawsuits—first called to the

attention of the FDA), the lengthy,

hyperadversarial and profit-oriented stream

of lawsuits seriously wounded the development and acceptance of an improved version.

The same may become true for Norplant. Liability intimidation over minor problems in

the first generation of this useful contraceptive may foreclosure the development of an

updated version.

Another threat to women’s health comes

from the current medical malpractice system. The American College of Obstetricians

and Gynecologists found that malpractice

premiums increased 237 percent between 1982

and 1991. Added on are the indirect costs of

defensive medicine (like too many Cesarean

sections) and fewer doctors choosing to go

into obstetrics.

No one pays a higher price for this system

than the poor. The Institute of Medicine reports that physicians’ fear of lawsuits has

left many rural communities without obstetrical care. The National Council of Negro

Women reports the same for urban low-income areas.

Who gains from this tort tax on women’s

health? Only 40 percent of malpractice insurance premiums goes to injured patients,

while the remaining 60 percent goes to lawyers’ fees and administrative costs.

Instead of health care by lottery, women

need good science and the aggressive pursuit

of medical advances by the NIH, academia

and the private sector. We don’t need women’s advocates who protect a liability system

that limits our health care choices by turning businesses away from women’s health.

Nor do we need the same people who rightly argue for women to pilot F–16s then to

characterize us as too delicate to weight our

health risks. It is time to recognize that

women, armed with solid research and medical information, can make their own intelligent choices about their health, from

choosing a contraceptive to getting breast

implants.

During the House debate, a congresswoman

characterized liability reform as a male conspiracy, comparing the ‘‘second-class status’’

of non-economic damages under a reformed

system to what she viewed as a ‘‘second-class

status’’ for women. But just as women’s

health has finally been upgraded to first

class, we cannot abide a liability system

that holds women back in the dark ages of

medicine.

Mr. President, two principal points in

Dr. Healy’s essay, I think, deserve special emphasis.

The first has almost been ignored entirely since the opening salvos in this

debate. That is, the tremendous cost of

the present system, a tremendous cost

which does not go to victims under any

set of circumstances.

Dr. Healy speaks of medical malpractice as producing 40 percent of all

the insurance premiums that go into

medical malpractice insurance to victims and 60 percent to lawyers and to

administrative costs, the rest to the

costs of the system itself.

Mr. President, that figure is not limited to medical malpractice. It is endemic across the board in product liability litigation. I am astounded that

we have not been met with an outrageous attack on this system by the

very Members of this body who, instead, are arguing for its preservation

without change.

They who speak of victimization,

they who speak of appropriate compensation seem overwhelmingly content with a system where 60 percent of

the money that goes into it ends up in

the pockets of people who are not victims but who are lawyers or expert witnesses or insurance investigators or

the like.

In almost any other aspect of our

lives, we would be outraged by a 60-percent administrative cost. If anything,

Mr. President, that 60 to 40 percent

split underestimates the cost of the

system. That is only what is reflected

in medical malpractice premiums. It

does not reflect at all the unnecessary

defensive medicine that is practiced in

order to try to prevent such claims

from coming up in the first place.

If there were no other reason for

change, to make more effective compensating the actual victims of negligence, either in product liability or

medical malpractice, we should be demanding reform instead of fighting

that reform.

At the same time, Mr. President, if

this split in favor of overwhelming administrative costs is shocking, it seems

to me especially shocking is the other

principal point made by Dr. Healy and

by others, the tremendously adverse

impact of the present system on research, on the development of new

products, whether National Institutes

of Health related, machine tools—a

wide range of products and the marketing of those products.

First, of course, is that the price of

every such product includes an insurance premium, a product liability insurance premium. More significant

than that—more significant than that

—are the choices made by companies

faced with this lottery system.

My distinguished friend and colleague from New Mexico last Friday

read a statement by retired U.S. Supreme Court Justice Lewis Powell,

which I can only paraphrase here, saying that the most irrational form of

business regulation is the product liability system.

We have in this Government a large

number of regulatory bodies, many of

which are devoted to the safety and effectiveness of the kinds of articles, the

kinds of products that we use in our

lives every day. Those agencies, of

course, are not infallible. By comparison, a jury system dealing with a specific instance only, in every case is a

pure lottery. The argument that somehow or another this system, which on

identical facts can come up with a verdict for a defendant after a huge investment in the costs, or a multimillion-dollar punitive damage claim

for actions deemed by the jury to have

been deliberate or close to deliberate,

is exactly that; it is a lottery.

What is the rational response of a

small business or, for that matter, a

very large business in the field of producing new and improved items, especially related to our health? Well, the

response is, in many cases, the flame is

not worth the candle. Why should we as

a company subject ourselves to tens of

millions of dollars in attorney’s fees,

even in cases in which we are successful, and the possibility, however remote, of multi-million dollar judgments and terrible publicity in punitive damages in connection with a

product which sells for a relatively low

profit margin? Companies will, under

those circumstances, not so much

weigh the question of the safety of a

particular device or medicine or product, they will weigh their potentials

for successful business against the potential of all of these large attorney’s

fees and potential punitive damage

awards.

And what happens? What happens is

many companies simply get out of the

business; 90 percent of all of the companies manufacturing football helmets,

for example, have abandoned the business during the course of the last 20

years. Major national laboratories and

developers have abandoned the search

for drugs that will have a positive impact on the AIDS epidemic because

their calculation was that the legal

costs of introducing such drugs, even

with the approval of the Food and Drug

Administration, vastly exceeded any

profit that they can make on them.

Other companies have gotten out of the

business, as Dr. Healy says in one particular case here, ‘‘. . . have gotten out

of the business of producing traditional

immunizations and the like because of

the potential cost of either verdicts or

even the cost of successfully defending

lawsuits.’’

We have discussed on this floor the

dramatic impact of product liability

litigation against companies manufacturing piston driven aircraft, a 95-percent reduction in the production of

that kind of aircraft in the United

States over a 20-year period all because

of product liability litigation. Not successful lawsuits, Mr. President; in the

overwhelming majority of these cases,

the lawsuits were unsuccessful. But the

costs of a successful defense are often

more than the costs of a judgment. So

that industry was practically destroyed until a modest change was

made by this Congress last year and we

have, in that one industry, the beginning of a recovery.

Mr. CRAIG assumed the chair.

Mr. GORTON. The goal of product liability legislation is the recovery and

development of those industries which

make our lives better, which provide

new and more effective treatment for

medical conditions to which all of us

are subject, more and better products

for our enjoyment, for our transportation, for every other aspect of our

lives. And when we can do that without
S5892 CONGRESSIONAL RECORD — SENATE May 1, 1995

denying a single claimant the right to

go into court and the right to recover

all of the actual damages that a jury

awards to that plaintiff—all of the actual damages—and when we can do

that at so low a cost to anyone except

those who benefit from the litigation

itself, it would not seem to me that

this debate should have lasted as long

as it did or that its result should still

be so highly unpredictable.

So, I congratulate Dr. Healy on her

particular insight into this question,

and say that insight can be expanded

across the entire scope of the legislation with which we are dealing here

and urgently speaks for its passage.

I did want to remark briefly on two

questions which were propounded by

the Senator from Minnesota to the supporters of this legislation an hour or so

ago. The Senator from Minnesota asks,

and I hope I paraphrase him accurately, ‘‘What projections are there for

how many people will be denied how

much money as a result of the cap on

punitive damages included in this legislation?’’ The second question was,

‘‘What is the extent of adverse effects

of the bill on the deterrent effect of uncapped punitive damages?’’

In a sense, each of those questions is

the same. Ironically, the answer to the

first question, how many people will be

denied how much money by some kind

of limitations on punitive damages, has

probably been answered most eloquently by the opponents to the bill.

Opponents to the bill have been at

great pains to say that there is no litigation explosion with respect to product liability litigation. That is an interesting argument, since the contrary

argument has never been made on the

floor of this Senate during the course

of the last week. And that only a relative handful of punitive damages

judgments had been entered in the last

10 to 12 to 20 years in product liability

litigation.

Of course, not all of those awards

would be affected by this cap. A number of them are less than the cap is in

the bill in its present form. So the answer is, ‘‘Not very many people directly through the litigation system

will be denied very much money by the

passage of this bill in this form.’’

But what is not asked in the question

is, no one, not a single individual, will

be denied $1 of the actual damages that

they suffer and have proved to a judge

and jury by this litigation because punitive damages, by its very definition,

is an award above and beyond the damages suffered by a claimant in a particular case.

The importance of this legislation in

connection with punitive damages is

not so much in connection with actual

awards as it is with the effect of the

threat of potential awards against

sound business judgment about the

marketing, particularly of new and improved articles, items, and products;

and the fear of losing such a lottery on

the settlement of lawsuits for more

money than can justly be found due to

a given claimant in order to prevent

that lottery from going against a particular defendant.

While we can probably come up with

an accurate and relatively low count of

the number of major punitive damage

judgments in product liability cases, it

is impossible to come up with the number of product liability cases in which

punitive damages have been alleged for

$1 million, for $10 million, for $100 million. It costs very little for the word

processor to add another zero to the

prayer in a complaint for damages. And

in every case, that complaint must be

taken seriously by a potential defendant. There is no way to predict the outcome and therefore many settlements

are made for claims which are not justified, in significant amounts of

money, and it is that uncertainty

which has so constricted the desire of

many businesses to make valid business judgments, not only from the

point of view of the businesses themselves but to the great gain of the people who would otherwise have used

those new products.

Again, we can simply go back to the

one area in which we know what the

impact has been and will be, piston

driven aircraft, 95 percent destroyed by

the system, significantly restored already last year since the modest reform in the system has been made.

That, too, answers the second question propounded by the Senator from

Minnesota. What is the extent of the

adverse effects of the bill on the deterrent effect of uncapped punitive damages? Again to paraphrase Justice Powell, this is the most irrational system

of business regulation that can be

imagined. It lacks any general principle whatsoever. It lacks any certainty whatsoever. It is utterly arbitrary.

Mr. President, I am sure that the

Senator from Minnesota would not for

1 minute countenance our changing the

Criminal Code to one in which no matter what the crime the jury could impose whatever sentence it thought appropriate—capital punishment for an

assault, life imprisonment for running

a stop sign. Yet, that is by analogy exactly what we do with a punitive damages system, unlimited in every case

except by the judgment of the jury itself.

Moreover, the criminal justice system at least requires proof beyond a

reasonable doubt, something not required as far as I know by any State

having punitive damages. The deterrent effect: Well, Mr. President, the

State I represent in this body does not

now and never has allowed punitive

damages in the bulk of civil litigation,

nor have four or five other States. And

there is no evidence that there is any

greater carelessness or willfulness on

the part of business enterprises in that

State in dealing with consumers in our

State because of the entire absence of

punitive damages.

So my answer to the question, ‘‘What

is the extent of the adverse effects of

the bill on the deterrent effect of uncapped punitive damages?’’ is: None.

Not a conditional answer whatsoever;

the answer is none. We have far better

and far more just ways of dealing with

rogue business enterprises than to deal

with any such businesses in this fashion and in a fashion which deter the

State’s legitimate businesses and those

who would wish to use such, to benefit

from what those businesses will

produce in the way of products and

treatments and the like.

So, Mr. President, I think we are perhaps winding up our day on this subject. I repeat once again, for the benefit of all of my colleagues, that today

we must have all of the amendments

introduced to the McConnell amendment, the amendment seeking to limit

malpractice to a product liability bill.

There will be a brief time of debate, approximately 11⁄2 hours and a half tomorrow in the morning and then a series of votes on all of those amendments, after which we will go on to

other amendments dealing with the

general bill itself.

Seeing no Member who wishes to

offer an amendment or a comment on

the floor at the present time, Mr.

President, I suggest the absence of a

quorum.

The PRESIDING OFFICER. The

clerk will call the roll.

The legislative clerk proceeded to

call the roll.

Mr. KYL. Mr. President, I ask unanimous consent that the order for the

quorum call be rescinded.

The PRESIDING OFFICER. Without

objection, it is so ordered.

Mr. KYL. Mr. President, I have been

trying to watch the proceedings on the

floor all day. I was here twice before

talking about amendments that are

pending before the body on the issue of

malpractice reform. I have been disappointed, frankly, that there has not

been more debate joined on two very,

very critical questions, except for a

brief colloquy which the Senator from

Minnesota and I had earlier today, I

have heard virtually no refutation of

the points that I have set forth regarding the two amendments. I wanted to

spend 5 minutes this evening summarizing my views prior to the time that

we will have votes on these two issues

tomorrow.

Mr. President, you know that we

have before us the product liability

legislation by which we are going to

try to reform this Nation’s product

liability laws. Pending is also an

amendment—the McConnellLieberman-Kassebaum amendment—

which will add the medical malpractice

area to that reform. There are a couple

of specific amendments pending to that

which we hope will help to further reform our tort law relating to medical

malpractice; specifically, an amendment that would limit attorney’s fees

and, secondly, one that would put a cap

on noneconomic damages.
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5893

The point of these two amendments

is to try to return more of the recoveries of these cases to the victims, to the

plaintiffs or claimants in the cases. In

the past, the claimants received—in

fact, today the claimants receive on

the order of 40 to 50 percent of the recoveries, and the attorneys receive

most of the rest.

In fact, several studies demonstrate

that at least half of the recovery in

these kinds of cases go to the attorneys. Let me cite two or three of those

studies, Mr. President. There is a Rand

study which demonstrates that about

50 percent of the money goes to lawyers, and less than 50 percent goes to

the claimants. Some of it goes to administration. There are other studies

that show somewhere in the neighborhood of between 40 and 50 percent. The

bottom line is that the claimants are

not getting the recovery; the attorneys

are.

As a result, what we have sought to

do is to limit the recovery of the attorneys in the noneconomic damage area

to 25 percent of the first $250,000. That

is over $60,000. In addition to that, the

attorney, under the McConnell amendment, would be getting either 331⁄3 percent of the first $150,000, or 25 percent

of everything thereafter, on all economic damages.

So let us take a very large recovery

for the sake of argument. Let us take

a million-dollar recovery. The attorneys could easily get between a quarter

of a million or more in their contingent fee from that. Then, of course, if

punitive damages are further sought,

an attorney, under my amendment,

could go to the court and ask for a reasonable fee. Twenty-five percent would

be presumed to be reasonable, and the

court would have to determine it based

on reasonableness and the ethics standards to apply to attorney fees. We are

not limiting attorneys from recovering

their fees. We are saying in a great big

recovery, where it is a multimilliondollar recovery, the bulk is not going

to go to the attorneys. About 75 percent would go to the claimants.

The adjunct to that is a limitation

on the noneconomic damages themselves. By giving the claimants more of

the money that they get and giving

less of it to the attorneys, we can afford to put a cap on the noneconomic

damages. That is what the second

amendment I have introduced would

do. The House-passed cap is $250,000.

But a lot of our colleagues in the Senate said $250,000 was just too stringent

in that exceptional case. They are rare,

but in those exceptional cases where

you would want to give an award of

more than a quarter of a million dollars, you can provide an award of up to

$500,000 under my amendment. It could

not be discounted at the present value.

So that is a lump sum of money. Invested over a period of time, it could

make millions of dollars. That is on

top of the economic damages, which

would be collected to totally recompense the plaintiff for all out-ofpocket expenses as well as lost earning

power and any other economic damages.

So you do not limit the totality of

the award so much as you provide that

the claimant gets the award by putting

a limit of $500,000 on the noneconomic

damages. By having a limit on the attorney’s fees, the claimants get essentially the same thing. But the attorney’s fees are reduced to a more reasonable level. So these two amendments fit hand-in-glove. We are going

to be voting on them tomorrow.

I urge my colleagues to support the

limit on attorney’s fees and the limit

on noneconomic damages. Some of my

colleagues says the limit on attorney’s

fees is not strong enough. It does not

really whack the lawyers. That is not

my objective. My objective is to make

sure there is a fairness and a balance

here and that some reason is restored

to the system. With respect to the noneconomic damages limit, there is a

question about really whether that will

do any good. I just want to cite to my

colleagues the Office of Technology Assessment report of 1993 which said:

Limits on noneconomic damages is the single most effective reform in containing medical liability premiums.

We all suffer by virtue of medical expenses going out of sight, of physicians

having to close down their practices or

decline to serve certain kinds of patients because of the escalating costs

of medical malpractice premiums. This

is one of the cost-drivers in this whole

health care reform debate. We have to

get that under control. When a group

like the OTA notes the fact that this is

one of the most significant reforms we

can pass, it seems to me important to

do so.

So again, I urge my colleagues, when

we vote on these two amendments tomorrow to, of course, support the

McConnell-Kassebaum-Lieberman

amendment and to support my amendment on attorney’s fees and on limiting noneconomic damages. I think if

we do all three of those things, we will

have strengthened the bill and will be

better able to go to conference and

come out with a really strong bill that,

as a result, we can tell the American

people we have done something in this

area of medical malpractice and tort liability reform.

Thank you, Mr. President.

Mr. President, I suggest the absence

of a quorum.

The PRESIDING OFFICER. The

clerk will call the roll.

The bill clerk proceeded to call the

roll.

Mr. KENNEDY. Mr. President, I ask

unanimous consent that the order for

the quorum call be rescinded.

The PRESIDING OFFICER. Without

objection, it is so ordered.

Mr. KENNEDY. Mr. President, for 2

days during the consideration of the

product liability bill the Senate has

been debating fundamental change to

the system under which victims of

medical negligence are compensated

for their injuries. I regret that the subject of malpractice reform is before the

Senate as a rider to product liability

legislation. We should not begin to tinker with the malpractice liability system except as a part of a more comprehensive effort to reform the Nation’s health care system.

As we have pointed out at other

times in the debate, tomorrow we will

have an opportunity to give consideration to a proposal that deals with

malpractice insurance that represents

the best judgment of the Human Resources Committee of a year ago and

which will reflect a bipartisan effort to

come to grips with that particular

issue. We are not in that situation at

the present time.

That particular proposal was also accompanied by a variety of proposals to

try to avoid medical malpractice, to

try to enhance the quality of health

care so that we were not going to have

the incidence of malpractice. But we do

not have included in this legislation

the provisions to try to enhance quality health care, nor do we have this

measure as a part of a comprehensive

health care proposal.

The health care crisis in this country

continues to be extremely serious. Last

year, the number of Americans without

health insurance increased by more

than 1 million people, 800,000 of whom

were children. Costs are spiraling out

of control. Our health care system

needs urgent repair, and malpractice

reform is at most one small part of

such reform.

Proponents of malpractice reform

speak of a crisis, but they are ignoring

the real health care crisis. By the year

2000, only half of working Americans

and their families will be protected by

health insurance through an employer.

As recently as 1987, two-thirds had this

protection. Forty million Americans

have no coverage today and, by the

year 2000, 50 million will have no coverage. If current efforts to cut Medicaid and Medicare are successful, the

number could be much higher. Eightyfive percent of those who have no insurance are members of working families. They face a health care crisis

every day. But even those who currently have coverage cannot be complacent because, if they lose their job

or change jobs or become seriously ill,

their health insurance is in jeopardy.

This is the point, Mr. President. Here

we are taking one small phase of the

whole health care issue that effectively

is going to protect negligent doctors

and substandard hospitals as being the

principal measure to be considered as

health care reform when we have these

other kinds of issues and challenges

which we are facing as a country, and

we are not addressing them. We are not

addressing them. We are not addressing

the serious, continued decline of the

coverage of working families. Eightyfive percent of those not covered are

from working families.

Where are their interests covered in

this legislation? They are not. And
S5894 CONGRESSIONAL RECORD — SENATE May 1, 1995

what we have seen is the fastest growing group of individuals who are not

being covered end up being children in

our society. Working families and children, their interests are not being attended to with this particular measure

that is before us because it is just dealing with the issues affecting negligent

doctors and substandard treatment.

Senior citizens have no coverage for

prescription drugs. This is another

problem. Coverage for long-term care

is grossly inadequate—another health

care problem. Last year, the average

senior citizen had to spend one-quarter

of his or her income on health care,

and that does not count those who are

in nursing homes and hospitals.

Health care costs are out of control.

We have the problem with access, the

coverage of people, and we have the

issue of health care costs. Those are essential elements. We have the other additional issue of quality health care

that has to be attended to and other

measures in the health care debate.

But we have the access issue and the

cost issue. And the costs are out of

control. The Nation spent $1 trillion on

health care last year and that number

will double in 10 years. Health care

costs are devastating to the Federal

budget and to the family budget. And

this is the health care crisis we should

be talking about and these are the people who need the protection.

Getting the handle on health care

costs in Medicare and Medicaid ought

to be a part of health care reform.

Many of us are strongly committed to

that particular challenge. That will

make a difference in terms of the quality of health care for senior citizens.

And for the rest of Americans, it can

make a difference in terms of the escalation of health care costs and it can

make an important difference for the

families in this country.

But are those the issues that we are

debating here on health care this

evening? Absolutely not. We are dealing with a very narrow issue of profit

for the medical insurance industry, $1.4

billion in 1991 profits. And who pays for

that? It is the American consumer.

And that is what is happening on the

floor of the Senate.

Instead, the proposals before the Senate offer protection to substandard

doctors and substandard hospitals.

Limits on malpractice liability will be

a windfall for them—and also for an insurance industry already reaping

record profits. The crude limits in this

amendment are an insult to hundreds

of thousands of patients injured or

killed every year as a consequence of

medical negligence.

Medical malpractice is the third

leading cause of preventable death in

the United States. According to researchers at the Harvard School of

Public Health, 80,000 Americans die in

hospitals each year from the negligence of physicians or other health

providers, and an additional 1.3 million

are injured. As many as a quarter of all

patient deaths could have been prevented but for negligent medical care.

It is ironic that one of the first pieces

of health legislation considered by the

Senate this year would actually hurt

patients by protecting negligent doctors and their insurance companies. In

fact, the current malpractice compensation system already offers too

much protection to doctors and insurance companies.

Fewer than 2 percent of malpractice

victims ever file suit. The rate of medical malpractice claims has declined

steadily since 1985. Patients won fewer

than one-third of the malpractice verdicts in a 1994 study. The size of malpractice awards has dropped significantly in the last year alone, according

to the New York Times.

The legal system pays only 1 malpractice claim for every 15 torts inflicted in hospitals, according to Business Week. According to Business

Week, the legal system pays 1 malpractice claim for every 15 torts inflicted in hospitals.

That is what is happening. It is not

just the studies at the Harvard School

of Public Health. This is Business Week

that is demonstrating the inadequacy

of the system—the fact that there are

hundreds of thousands of Americans

who are not compensated, that the

total number of claims are going down,

that the premiums are going down, and

that the insurance industry’s profits

are soaring up through the roof. That

is what we are dealing with here on

this particular issue.

And Business Week points out, rather

than a surplus, the article concludes,

there is a ‘‘litigation deficit because so

many injured people wind up

undercompensated.’’

That is the true problem that we are

facing. Are our fellow citizens, who are

subject to malpractice, unable to have

any kind of compensation, unable to

get any kind of help and assistance?

That is what we are talking about.

Those are the issues that we addressed in a bipartisan way in the

Labor and Human Resources Committee last year to try to work through alternative dispute resolutions and other

kinds of measures in order to make

sure that people are going to receive at

least some benefit.

Part of the reason for this litigation

deficit is that the legal system is inaccessible to so many citizens. That problem will be exacerbated by the proposals now before the Senate. The deficit

is also attributable to the malpractice

reforms already adopted in many

States under pressure from the powerful medical insurance lobbies.

I do not know how many of our fellow

colleagues turned on the television

over the period of this weekend. I was

back in Washington on Friday evening.

Just after suppertime, I watch television to see the news for a couple of

hours. I tried to watch it again on Saturday for a couple of hours. Eight

times I saw—eight times—including

twice on Sunday morning between 6

and 7 a.m. I do not know who the buyers of time are for those insurance

companies and I do not know how

much value they are getting for that

particular purchase time, but you

could not turn on the television programs all week long and not see those

insurance industry spokesmen trying

to replicate the television ads of last

year that distorted the health care debate, talking about California, what is

happening out in California.

Well, it is interesting. They were

talking about how California had

worked so well. Well, we find out, of

course, that California has had a number of the kinds of changes in their tort

legislation that is included in the

McConnell amendment.

Here is a news release entitled ‘‘AMA

Propaganda False on Tort Law Restrictions, Report Shows.’’ It says:

A 1975 California law that limits the legal

rights of victims of medical malpractice—

the model for Federal tort law proposals before the U.S. Congress—has failed to deliver

what its backers have promised, according to

a study released today by a California nonprofit insurance watchdog organization.

What they pointed out is health care

costs rose in California 343 percent between 1975 and 1993. The president-elect

of the new AMA says that the No. 1

issue in the United States is access to

health care—we can say that is true,

along with increased costs—and then

says the access to health care costs is

malpractice reform, and urges us to go

ahead with the McConnell amendment.

And here we have an example of what

happens with the McConnell amendment in one particular State, the State

of California.

It shows that rather than having any

impact in terms of slowing escalation

of costs down, it has not. As a matter

of fact, it has not done that in the

other States.

I hear my friend from Indiana, Senator COATS, talk about the changes

they have had in Indiana. The health

care costs, in terms of health care in

Indiana, have not gone down. They

have not gone down in the other six

States that have implemented many of

the suggestions that are included in

the McConnell amendment.

Health care costs in California rose 343 percent between 1975 and 1993, faster than the

inflation rate in California. Since 1985, the

California Medical Consumer Price Index has

grown nearly twice as fast as the inflation

rate . . .

Compensation paid to medical malpractice

victims, as estimated by insurers, is a tiny

fraction—about one-fifth of 1 percent.

One-fifth of 1 percent. That is what

we are talking about. I mean, for anyone to look over, as I did the other day,

the findings of this legislation, where

they have the findings of the problem

of access to health care, findings there

is a problem of costs and therefore we

have to enact this legislation, and you

put that against what the real facts are

and that is, if you just look at one

State that has capped some damages
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5895

and has other changes in their malpractice law, they talk about the estimate by insurers on compensation of

medical malpractice, one-fifth of 1 percent in 1993 of all health care costs in

California, and the fraction has been

dropping.

Medical malpractice liability insurance

premiums paid by physicians and hospitals

are a negligible components—about half of

one percent in 1993—of California’s total

health care expenditures, and the percentage

has been falling.

The idea that it is less than half of 1

percent and to think that is going to be

able to leverage a health care system

just reaches, I think, the impossible to

imagine.

‘‘Insurance companies have not reduced malpractice liability premiums

commensurate with the drop in malpractice claims payments’’—one might

expect, if the insurance companies are

giving less in terms of payments out in

terms of injured individuals, one might

think that the cost of that insurance

might go down; that is not what is happening, not in California—‘‘in recent

years in both California and the nation. Insurance companies have reaped

excessive profits from MICRA—in 1993,

insurers paid out only 38 cents of every

premium dollar.’’ The rest of it goes in

terms of administration, advertising

and profits. That is what we are talking about this evening, because the

McConnell amendment tracks very

closely what has happened in California and in the five other States that

have enacted measures which are similar to the McConnell amendment.

Despite the claims of the backers,

such reforms have not lowered health

care costs. The cost of medical care

grew faster in California. And in Indiana, malpractice reforms have not

caused health care costs to decrease.

Compared to neighboring States, consumers derive no benefit from malpractice reform. In fact, they are

harmed. If they fall victim to medical

negligence, they are likely to be

undercompensated for their injuries.

Malpractice reforms in States have

been greeted enthusiastically by insurance executives. The General Accounting Office surveyed six States that enacted limits on recoveries in malpractice cases similar to what is before

the Senate in terms of the McConnell

amendment. And this is what the General Accounting Office—this is not the

trial lawyers, this is the General Accounting Office. When I mentioned the

other fact, it was not trial lawyers, it

was Business Week talking about the

fact of the few tort cases that are actually brought in our health care system.

This is what the General Accounting

Office has said about the six States

that have enacted limits in terms of

awards in malpractice cases:

Insurance companies in those States were

enjoying profits that averaged 122 percent

above the national average. Nationwide, insurers reaped $1.4 billion in malpractice-related profits in 1991, but in those six States,

the return was so great that the National Insurance Consumer Organization labeled it

‘‘insurance profiteering.’’

Insurance profiteering. Here we have

the States themselves taking action,

and I have a letter from some of the

medical profession in the State of

Michigan. This is true in many other

States. Other States are taking action

to try and deal with this problem that

has changed dramatically since 1985

when we saw the rather dramatic increase in the number of malpractice

cases, particularly with regards to obgyn’s. We have seen those numbers go

down dramatically in the period of the

last 2 years. I included those in the

RECORD at the end of last week.

Here we have the States themselves

dealing with this issue. In the hearings

that we had in our Health and Human

Resources Committee, we did not have

State attorneys general that were in

there testifying saying, ‘‘Look, we need

a Federal preemption law.’’ We did not

hear from them on that issue, not from

a Republican or Democrat. We did not

have letters from Governors saying,

‘‘Help us out, bail us out, get a preemptive law. We haven’t got one.’’

Maybe someone has a letter to that

effect. We never saw it. It was never referred to, never commented on, never

quoted. We do not have the Governors

asking us for this action. We do not

have the States attorneys general asking for this action. We do not have the

State legislators saying, ‘‘Please, bail

us out, we can’t handle this problem.’’

We do not have that. We do not have

that at all.

What we have is the medical insurance industry looking over what has

happened in the States where they

have been effective on wanting to preempt the States and to do it not in a

single piece of legislation, not even

taking the bill that was reported out of

the committee, not even giving reference to that with the modest adjustments that were made to try and

strengthen the quality provisions of

this with the Jeffords amendment; to

recognize that in the areas of punitive

damages, when they have been utilized

in the past, it has been against primarily women who have been the beneficiaries as a result of sexual exploitation at the hands of corrupt doctors.

We did not even have the chance to

consider what was actually reported

out of the committee. The medical

malpractice industry insisted on the

whole thing. They wanted the whole

bill before it went to the committee

and not what was acted on, either Republican amendments that were accepted or even Democrat amendments

that were accepted, with support from

different sides of the aisle. No, no, they

wanted the whole thing.

This is in an area that is different

from product liability. This is in an

area that involves the most personal

relationship between the doctor and

the patient. What could be more local,

what could be more within a State’s jurisdiction more completely?

We can understand products produced

in Massachusetts and shipped to California, those in Michigan are sent to

Florida, we understand that there is a

case to be made in terms of product liability. But we are talking about a doctor in a community dealing with a patient in that community and do we

need a Federal solution for that?

The McConnell amendment says yes.

The McConnell amendment has a onesize-fits-all. How many times have we

heard that on the floor of the Senate?

What we do not want is all knowledge

in Washington. The solution to the

problems in Boston are going to be different than in Pocatello, ID. How often

do we hear that?

Here my friends say, ‘‘Except when it

affects the medical insurance industry

on medical malpractice.’’ Sure, the

States have been acting. Sure, the

States have been dealing with their

particular problems that they are facing that are as diverse in some of the

rural States or the mountain States as

they are in some of the industrial

States. Sure, they have been trying to

deal with those particular issues. But

here we say on the floor of the U.S.

Senate, we are going to preempt those

States, we are preempting, we know

better on the issue of malpractice affecting a doctor and their patient in

that particular community.

Mr. President, I find that it is an extraordinary extension of political philosophy that indicates a demand for

this kind of standardization is so compelling. I think when you reach a situation where we are dealing with a total

reform of a health care system that includes, for example, the 10 million Federal employees that are being covered

by health insurance, expanding the

Federal employees insurance to pick

up people in all parts of the country

that you say, ‘‘OK, in those circumstances, we ought to permit the

States to develop alternative dispute

resolutions and permit the States to

experiment with no-fault liability,

pools with enterprise challenges and to

permit experimentation, all of which

we did last year.’’ But, oh, no, we have

a preemption of those States which

may, according to the medical insurance industry, may be more sympathetic to the consumers than they are

to substandard doctors, and that is

where we are.

So we end up with a situation as we

have heard now from the Michigan

State Medical Society:

DEAR SENATOR KENNEDY: On behalf of our

more than 12,000 physician members, the

Michigan State Medical Society wishes to

appraise you of our concern that the Michigan law of joint and several liability applicable to medical malpractice not be affected by

Federal legislation. We have fought hard to

retain joint and several liability in medical

malpractice cases in Michigan, for the reason that its abolition would cause substantial increase in physicians’ premiums and resultant health care costs. . .

Malpractice carriers in Michigan advise us

the premiums would increase by 64 percent if

the coverage was increased to $1 million,
S5896 CONGRESSIONAL RECORD — SENATE May 1, 1995

which would be even more unaffordable but

essential for the physicians’ personal protection. . .

The dynamics of malpractice litigation

. . . virtually require we retain the common

law doctrine of joint and several liability in

malpractice cases. . .

It is critical that Federal legislation not

preempt State joint and several liability

laws.

Twelve thousand doctors in Michigan

say they do not need the preemption

that is in the McConnell amendment.

The list goes on.

I daresay, as more and more of them

begin to understand what is really

going on here, and the fact that we

have rushed to judgment on this

issue—2 days after we take the action

in the committee, we have the amendment right here on the floor. Generally, you have a reporting out of 10

days, you have a report that points out

the reasons and the justifications for

those provisions. You have the opinions of those that might differ that are

published and circulated by the various

groups that are interested in this, and

had a chance to review that. Oh, no,

not on this measure. We have to put it

right on the product liability without a

report, without even printing—I do not

know whether today it is available, but

last week it was not—even the printed

changes in the legislation, based upon

the amendments that we had included.

You are going to find out, my friends

and colleagues, how many other doctors are going to get a chance to finally have a chance to sit down and

look this over and say, woe, how did we

get into this? The president of the

Michigan State Medical Society, Jack

Barry, sent a carbon copy of a letter he

sent out. I wish he sent it to colleagues

on our committee. He sent it to his colleagues in the medical community.

I ask unanimous consent that the

letter be printed in the RECORD.

There being no objection, the letter

was ordered to be printed in the

RECORD, as follows:

MICHIGAN STATE MEDICAL SOCIETY,

East Lansing, MI, April 20, 1995.

Senator EDWARD M. KENNEDY,

Ranking Member, Senate Labor and Human Resource Committee, Washington, DC.

DEAR SENATOR KENNEDY: On behalf of our

more than 12,000 physician members, the

Michigan State Medical Society wishes to

apprise you of our concern that the Michigan

law of joint and several liability applicable

to medical malpractice cases not be affected

by federal legislation. We have fought hard

to retain joint and several liability in medical malpractice cases in Michigan, for the

reason that its abolition would cause substantial increases in physicians’ premiums

and resultant health care costs.

As you undoubtedly know, medical malpractice litigation in Michigan has been out

of control. Premium costs for malpractice

coverage in Michigan virtually exceed all

other states. Malpractice insurance in Michigan is typically $200,000 per occurrence, with

an annual aggregate of $600,000. The annual

premium cost to obstetricians and surgeons

in southeastern Michigan often exceeds

$80,000. Even with this substantial cost, the

coverage is still insufficient to provide comfort to physicians. Malpractice carriers in

Michigan advise us that premiums would increase by 64 percent if the coverage was increased to $1 million, which would be even

more unaffordable but essential for the physicians’ personal protection if joint and several liability was abolished.

As a result of this unique problem in

Michigan, the Michigan legislature adopted

malpractice reform legislation which took

effect on April 1, 1994. This legislation has

not yet had any effect upon premiums for

the reason that it essentially applies prospectively and is being constitutionally challenged in the state appellate courts. We are

helpful that this legislation will cause malpractice costs to fall into line with other

states when this legislation becomes fully

applicable to malpractice cases. Until then,

we will continue to have the unique and

costly problem in Michigan.

The dynamics of malpractice litigation in

our state virtually require that we retain the

common law doctrine of joint and several liability in malpractice cases. The potential

for joint liability causes hospitals and other

corporate defendants to more readily settle

cases where the greater liability might potentially be imposed upon individual physicians. This provides at least some protection

to the physician in engaging in the higher

risk practices and also has a beneficial effect

upon the legal system and the public generally in that cases are more likely to settle.

Michigan law has, therefore, retained joint

and several liability.

We urge you to protect the current status

of joint and several liability in Michigan. It

is critical that federal legislation not preempt state joint and several liability laws.

Any federal legislation enacting malpractice

reform should have a provision clearly making the federal legislation inapplicable to the

extent that state statutes retain joint and

several liability in medical malpractice

cases.

The Michigan State Medical Society fully

supports the federal legislation in malpractice reform, including a $250,000 limitation on noneconomic damages. We urge you

to support this federal legislation, but request that you protect the interests of physicians and their patients in Michigan by assuring that any federal legislation will not

preempt joint and several liability in medical malpractice cases in this state.

Thank you for your help. If you have any

questions, please feel free to contact Kevin

A. Kelly, Managing Director, Michigan State

Medical Society at (517) 336–5742.

Sincerely,

JACK L. BARRY, MD,

President.

Mr. KENNEDY. If enacted, the proposals before the Senate today may

well fatten the profit margin of malpractice insurers nationwide. But malpractice reform will not address the

fundamental problems facing our

health care system. It has not in California, or Indiana, or elsewhere. In any

event, the cost of medical malpractice

premiums amounts to only six-tenths

of 1 percent of the Nation’s health care

costs.

Nor will legal reforms make a dent in

the prevalence of malpractice itself. Instead, we need more effective means to

discipline the few bad apples in the

medical profession who cause upwards

of 45 percent of all of the unnecessary

injuries. Today, a negligent auto mechanic or a negligent funeral director

is more likely to be disciplined by a

State licensing board than a physician.

That is really saying something, Mr.

President. Are we here attempting to

discipline? No, we are not even beginning to go down that road. We are not

even in the legislation that is being

provided giving the full information.

That is a matter of public record, included in the data bank to consumers.

It can be collected. I understand my

friend from Minnesota, Senator

WELLSTONE, has addressed this issue.

There is already the assemblage of that

kind of information, but it is not done

in a comprehensive way as I think it

should be. Hospitals can find out certain information with regard to disciplinary conduct with regard to professions. HMO’s can find that out but

the consumers cannot.

There was no real effort or attempt—

there was a good faith expression that

we ought to get after this issue and we

will revisit it later. But we are still

moving ahead with the legislation.

First, Mr. President, here are the

four major flaws of the McConnell

amendment:

First, it sets an impossibly high

standard for awarding punitive damages and then imposes a cap on such

damages, even in cases involving sexual abuse of a patient and other outrageous conduct. Sixty-eight percent of

all punitive damage awards in malpractice cases are awarded to women,

so the impact of this provision is discriminatory.

Now we know that those punitive

cases are only a small number of cases.

We did not include, for example, in the

markup, other kinds of cases, for example, when doctors go in and practice a

medical procedure when they are on illegal drugs. We did not include that in

the legislation, in the amendment. Or

when hospitals knowingly and willfully

destroy records with regard to the

treatment of patients. We did not even

include that in it. We did not even include the punitive damages situations

where doctors lost their licenses in a

State and fraudulently practice in another State. I would think that any

Member of this body who was concerned about what is happening to any

member of their family wrote would

think that in those circumstances, and

in some others, punitive damages

would be justified. We did not. We included one reference in our Senate

markup to permit punitive damages if

the standard was to be met in terms of

the intent standards, which is extremely high, and in the Dodd amendment, which gave the jury the power to

establish whether punitive damages

should be awarded and the judge, with

guidelines, to set the amount. But that

has been effectively set aside.

Second, the amount severely limits

the longstanding legal doctrine of joint

and several liability, leaving the patients vulnerable to inadequate compensation. For at least 100 years, it has

to be recognized as unacceptable to

force an innocent patient to bear the

cost of other people’s negligence if one

or more of the wrongdoers are available to provide compensation. That is a

sensible rule to protect patients, and
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5897

we should not undermine it for the benefit of guilty malpractice defendants.

I point out, Mr. President, that we

are talking about an individual who

has been wrongfully treated. I think we

can understand the circumstances of

what might appear to be unfair and unjust, payments by those who are

brought into the compensation awards

through joint and several. There are

many here that are enormously sympathetic to anyone that would be so included.

The fact of the matter is, Mr. President, we are talking about circumstances where there has been malpractice and where, if they do not collect it, they are not given any kind of

adequate remedy for the malpractice.

It is interesting. Effectively, this legislation is immunizing the medical insurance companies, and as we do that,

make no mistake about who pays for

all of the other care for those individuals. It ends up being the taxpayers—to

the tune of about $60 billion a year.

So here we go in and set up a program that has windfall profits when

this has been adopted in the six States,

and we are going to do it nationwide

and you are going to see—even according to Business Week and the business

insurance publication—the benefits

that are going to the insurance industry. Who is left holding the bag? On the

one hand, it is the victims, and on the

other hand it is the taxpayers. They

are going to be the ones that are going

to be left paying for the care of this individual rather than the wrongdoer.

That is wrong and unfair.

Third, the amendment denies consumers access to the information about

the fitness of their doctors, even when

those doctors have repeatedly committed malpractice or have been repeatedly disciplined. The Wellstone amendment addresses this flaw and I hope

that will be accepted.

Finally, the McConnell amendment

unjustifiably preempts a wide array of

the State malpractice laws.

The preemption language in the proposal before us is not balanced. It

strikes down State laws that are of

benefit to consumers. I think it is not

appropriate. If preemption of State

tort laws were appropriate, and I think

it is not, it should at least be accomplished in a fair and even-handed manner. The one-way preemption in the

amendment ensures the absence of the

national standard that the proponents

say they want.

For these reasons, I urge defeat of

the McConnell amendment. But rejection of that proposal does not mean we

should not take some action. There are

a series of steps Congress should take

to assist the States and improve the efficiency of the malpractice system in a

way that will benefit both doctors and

patients.

Last year, the Labor and Human Resources Committee favorably reported

a health care reform bill which contained sensible malpractice reforms.

We required alternative dispute resolution to provide for streamlined consideration of malpractice claims. We

capped attorneys’ fees to make sure

that patients get fair compensation for

their injuries, and that they get early

resolutions for these claims, and to

permit the States themselves to develop alternative dispute resolutions.

Let them develop those measures—

they had to meet certain minimum

standards—but permit the States to develop their own. That was one part of

it.

We capped attorney’s fees to make

sure the parties get fair compensation

for their injuries. We provided seed

money to let the States experiment

with innovative models such as enterprise liability, no-fault funds, and medical malpractice guidelines.

Medical malpractice guidelines—

there is a case we could say if a person

would establish the medical malpractice guidelines and doctors follow

those, that ought to be a basic presumption against the malpractice and

would permit what would be the basis

of the evidence to be able to rebut that.

I think there is a great deal that commends that concept. When we talked

about it last year as part of the health

care reform, it got labeled as ‘‘cookbook medicine,’’ that we will have

medicine by the numbers.

So, there are legitimate public policy

issues with regard to this issue that we

ought to address seriously. That is not

unimportant in terms of this whole debate. We ought to give serious consideration to that kind of an action, not

just dismiss it completely as we have

in this legislation. It is just not correct. It is a concept that can make an

important difference in terms of quality health care and should not be dismissed out of hand, as it has been effectively in this legislation.

Some of last year’s reforms have

been included in the McConnell amendment, but in other ways that I have described, the amendment goes too far. I

will offer a substitute amendment tomorrow that contains the reasonable

reforms proposed by the Labor Committee last year.

I will also offer an amendment to

strike the preemption provisions in the

McConnell amendment. If the Federal

Government is to involve itself in this

area of the law, it should do this cautiously and with respect to State prerogatives.

For example, we received a strong request from the Michigan Medical Society urging that we not preempt that

State’s law, and joint and several liability. Federal malpractice reforms

should only apply in those situations

where no State statute is applicable.

That was the concept which had bipartisan support. The legislation that was

reported out of our committee was

unanimous—unanimous—Republicans

and Democrats alike on that issue. It

will be that provision which I will offer

with regard to preemption.

In urging ill-considered malpractice

reforms, a hypocritical Congress is violating the Hippocratic oath, first, to do

no harm. Some of the proposals before

the Senate will cause great harm to

large numbers of our fellow citizens if

we reduce the ability of the legal system to deter negligent medical care. If

we deny adequate compensation to severely injured patients, we violate

basic principles of federalism. The Senate will have committed legislative

malpractice.

Mr. President, I see the Senator from

Maine, who has been extremely patient. As I understand, under the previous agreement—and I want to comply

with the parliamentary situation that

exists at the current time in order that

my amendments be eligible—as I understand it, is it the desire of the Chair

that we call them up and have them set

aside? Is that the procedure which has

been agreed on or is that the satisfactory procedure?

The PRESIDING OFFICER (Mr.

FRIST). The Senators have been following that procedure by unanimous consent.

AMENDMENT NO. 607 TO AMENDMENT NO. 603

Mr. KENNEDY. Mr. President, I will

follow that same procedure. I ask

unanimous consent that the pending

amendment be set aside, and I will call

up amendment No. 607 and ask it be

considered.

The PRESIDING OFFICER. Without

objection, it is so ordered. The clerk

will report the amendment.

The assistant legislative clerk read

as follows:

The Senator from Massachusetts [Mr. KENNEDY] proposes an amendment numbered 607

to amendment No. 603.

Mr. KENNEDY. Mr. President, I ask

unanimous consent further reading be

dispensed with.

The PRESIDING OFFICER. Without

objection, it is so ordered.

The amendment is as follows:

In lieu of the matter proposed to be inserted, insert the following:

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Medical Liability Reform Act of 1995’’.

TITLE I—LIABILITY REFORM

SEC. 101. FEDERAL TORT REFORM.

(a) APPLICABILITY.—

(1) IN GENERAL.—Except as provided in section 102, this title shall apply with respect to

any medical malpractice liability action

brought in any State or Federal court, except that this title shall not apply to a claim

or action for damages arising from a vaccine-related injury or death to the extent

that title XXI of the Public Health Service

Act applies to the claim or action.

(2) EFFECT ON SOVEREIGN IMMUNITY AND

CHOICE OF LAW OR VENUE.—Nothing in this

title shall be construed to—

(A) waive or affect any defense of sovereign

immunity asserted by any State under any

provision of law;

(B) waive or affect any defense of sovereign

immunity asserted by the United States;

(C) affect the applicability of any provision

of the Foreign Sovereign Immunities Act of

1976;

(D) preempt State choice-of-law rules with

respect to claims brought by a foreign nation

or a citizen of a foreign nation; or

(E) affect the right of any court to transfer

venue or to apply the law of a foreign nation
S5898 CONGRESSIONAL RECORD — SENATE May 1, 1995

or to dismiss a claim of a foreign nation or

of a citizen of a foreign nation on the ground

of inconvenient forum.

(3) FEDERAL COURT JURISDICTION NOT ESTABLISHED ON FEDERAL QUESTION GROUNDS.—

Nothing in this title shall be construed to establish any jurisdiction in the district courts

of the United States over medical malpractice liability actions on the basis of section 1331 or 1337 of title 28, United States

Code.

(b) DEFINITIONS.—In this Act, the following

definitions apply:

(1) ALTERNATIVE DISPUTE RESOLUTION SYSTEM; ADR.—The term ‘‘alternative dispute

resolution system’’ or ‘‘ADR’’ means a system that provides for the resolution of medical malpractice claims in a manner other

than through medical malpractice liability

actions.

(2) CLAIMANT.—The term ‘‘claimant’’

means any person who alleges a medical

malpractice claim, and any person on whose

behalf such a claim is alleged, including the

decedent in the case of an action brought

through or on behalf of an estate.

(3) HEALTH CARE PROFESSIONAL.—The term

‘‘health care professional’’ means any individual who provides health care services in a

State and who is required by the laws or regulations of the State to be licensed or certified by the State to provide such services

in the State.

(4) HEALTH CARE PROVIDER.—The term

‘‘health care provider’’ means any organization or institution that is engaged in the delivery of health care services in a State and

that is required by the laws or regulations of

the State to be licensed or certified by the

State to engage in the delivery of such services in the State.

(5) INJURY.—The term ‘‘injury’’ means any

illness, disease, or other harm that is the

subject of a medical malpractice liability action or a medical malpractice claim.

(6) MEDICAL MALPRACTICE LIABILITY ACTION.—The term ‘‘medical malpractice liability action’’ means a cause of action brought

in a State or Federal court against a health

care provider or health care professional by

which the plaintiff alleges a medical malpractice claim.

(7) MEDICAL MALPRACTICE CLAIM.—The term

‘‘medical malpractice claim’’ means a claim

brought against a health care provider or

health care professional in which a claimant

alleges that injury was caused by the provision of (or the failure to provide) health care

services, except that such term does not include—

(A) any claim based on an allegation of an

intentional tort;

(B) any claim based on an allegation that

a product is defective that is brought against

any individual or entity that is not a health

care professional or health care provider; or

(C) any claim brought pursuant to any

remedies or enforcements provision of law.

SEC. 102. STATE-BASED ALTERNATIVE DISPUTE

RESOLUTION MECHANISMS.

(a) APPLICATION TO MALPRACTICE CLAIMS

UNDER PLANS.—Prior to or immediately following the commencement of any medical

malpractice action, the parties shall participate in the alternative dispute resolution

system administered by the State under subsection (b). Such participation shall be in

lieu of any other provision of Federal or

State law or any contractual agreement

made by or on behalf of the parties prior to

the commencement of the medical malpractice action.

(b) ADOPTION OF MECHANISM BY STATE.—

Each State shall—

(1) maintain or adopt at least one of the alternative dispute resolution methods satisfying the requirements specified under subsection (c) and (d) for the resolution of medical malpractice claims arising from the provision of (or failure to provide) health care

services to individuals enrolled in a health

plan; and

(2) clearly disclose to enrollees (and potential enrollees) the availability and procedures for consumer grievances, including a

description of the alternative dispute resolution method or methods adopted under this

subsection.

(c) SPECIFICATION OF PERMISSIBLE ALTERNATIVE DISPUTE RESOLUTION METHODS.—

(1) IN GENERAL.—The Board shall, by regulation, develop alternative dispute resolution methods for the use by States in resolving medical malpractice claims under subsection (a). Such methods shall include at

least the following:

(A) ARBITRATION.—The use of arbitration, a

nonjury adversarial dispute resolution process which may, subject to subsection (d), result in a final decision as to facts, law, liability or damages.

(B) CLAIMANT-REQUESTED BINDING ARBITRATION.—For claims involving a sum of money

that falls below a threshold amount set by

the Board, the use of arbitration not subject

to subsection (d). Such binding arbitration

shall be at the sole discretion of the claimant.

(C) MEDIATION.—The use of mediation, a

settlement process coordinated by a neutral

third party without the ultimate rendering

of a formal opinion as to factual or legal

findings.

(D) EARLY NEUTRAL EVALUATION.—The use

of early neutral evaluation, in which the parties make a presentation to a neutral attorney or other neutral evaluator for an assessment of the merits, to encourage settlement.

If the parties do not settle as a result of assessment and proceed to trial, the neutral

evaluator’s opinion shall be kept confidential.

(E) CERTIFICATE OF MERIT.—The requirement that a medical malpractice plaintiff

submit to the court before trial a written report by a qualified specialist that includes

the specialist’s determination that, after a

review of the available medical record and

other relevant material, there is a reasonable and meritorious cause for the filing of

the action against the defendant.

(2) STANDARDS FOR ESTABLISHING METHODS.—In developing alternative dispute resolution methods under paragraph (1), the

Board shall assure that the methods promote

the resolution of medical malpractice claims

in a manner that—

(A) is affordable for the parties involved;

(B) provides for timely resolution of

claims;

(C) provides for the consistent and fair resolution of claims; and

(D) provides for reasonably convenient access to dispute resolution for individuals enrolled in plans.

(3) WAIVER AUTHORITY.—Upon application

of a State, the Board may grant the State

the authority to fulfill the requirement of

subsection (b) by adopting a mechanism

other than a mechanism established by the

Board pursuant to this subsection, except

that such mechanism must meet the standards set forth in paragraph (2).

(d) FURTHER REDRESS.—Except with respect to the claimant-requested binding arbitration method set forth in subsection

(c)(1)(B), and notwithstanding any other provision of a law or contractual agreement, a

plan enrollee dissatisfied with the determination reached as a result of an alternative dispute resolution method applied

under this section may, after the final resolution of the enrollee’s claim under the

method, bring a cause of action to seek damages or other redress with respect to the

claim to the extent otherwise permitted

under State law. The results of any alternative dispute resolution procedure are inadmissible at any subsequent trial, as are all

statements, offers, and other communications made during such procedures, unless

otherwise admissible under State law.

SEC. 103. LIMITATION ON AMOUNT OF ATTORNEY’S CONTINGENCY FEES.

(a) IN GENERAL.—An attorney who represents, on a contingency fee basis, a plaintiff in a medical malpractice liability action

may not charge, demand, receive, or collect

for services rendered in connection with such

action (including the resolution of the claim

that is the subject of the action under any

alternative dispute resolution system) in excess of—

(1) 331⁄3 percent of the first $150,000 of the

total amount recovered by judgment or settlement in such action; plus

(2) 25 percent of any amount recovered

above the amount described in paragraph (1);

unless otherwise determined under State

law. Such amount shall be computed after

deductions are made for all the expenses associated with the claim other than those attributable to the normal operating expenses

of the attorney.

(b) CALCULATION OF PERIODIC PAYMENTS.—

In the event that a judgment or settlement

includes periodic or future payments of damages, the amount recovered for purposes of

computing the limitation on the contingency

fee under subsection (a) may, in the discretion of the court, be based on the cost of the

annuity or trust established to make the

payments. In any case in which an annuity

or trust is not established to make such payments, such amount shall be based on the

present value of the payments.

(c) CONTINGENCY FEE DEFINED.—As used in

this section, the term ‘‘contingency fee’’

means any fee for professional legal services

which is, in whole or in part, contingent

upon the recovery of any amount of damages, whether through judgment or settlement.

SEC. 104. REDUCTION OF AWARDS FOR RECOVERY FROM COLLATERAL SOURCES.

(a) REDUCTION OF AWARD.—The total

amount of damages recovered by a plaintiff

in a medical malpractice liability action

shall be reduced by an amount that equals—

(1) the amount of any payment which the

plaintiff has received or to which the plaintiff is presently entitled on account of the

same injury for which the damages are

awarded, including payment under—

(A) Federal or State disability or sickness

programs;

(B) Federal, State, or private health insurance programs;

(C) private disability insurance programs;

(D) employer wage continuation programs;

and

(E) any other program, if the payment is

intended to compensate the plaintiff for the

same injury for which damages are awarded;

less

(2) the amount of any premiums or any

other payments that the plaintiff has paid to

be eligible to receive the payment described

in paragraph (1) and any portion of the award

subject to a subrogation lien or claim.

(b) SUBROGATION.—The court may reduce a

subrogation lien or claim described in subsection (a)(2) by an amount representing reasonable costs incurred in securing the award

subject to the lien or claim.

(c) INAPPLICABILITY OF SECTION.—This section shall not apply to any case in which the

court determines that the reduction of damages pursuant to subsection (a) would

compound the effect of any State law limitation on damages so as to render the plaintiff

less than fully compensated for his or her injuries.
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5899

SEC. 105. PERIODIC PAYMENT OF AWARDS.

(a) IN GENERAL.—A party to a medical malpractice liability action may petition the

court to instruct the trier of fact to award

any future damages on an appropriate periodic basis. If the court, in its discretion, so

instructs the trier of fact, and damages are

awarded on a periodic basis, the court may

require the defendant to purchase an annuity

or other security instrument (typically

based on future damages discounted to

present value) adequate to assure payments

of future damages.

(b) FAILURE OR INABILITY TO PAY.—With respect to an award of damages described in

subsection (a), if a defendant fails to make

payments in a timely fashion, or if the defendant becomes or is at risk of becoming insolvent, upon such a showing the claimant

may petition the court for an order requiring

that remaining balance be discounted to

present value and paid to the claimant in a

lump-sum.

(c) MODIFICATION OF PAYMENT SCHEDULE.—

The court shall retain authority to modify

the payment schedule based on changed circumstances.

(d) FUTURE DAMAGES DEFINED.—As used in

this section, the term ‘‘future damages’’

means any economic or noneconomic loss

other than that incurred or accrued as of the

time of judgment.

SEC. 106. CONSTRUCTION.

Nothing in this title shall be construed to

preempt any State law that sets a maximum

limit on total damages.

PART 2—OTHER PROVISIONS RELATING

TO MEDICAL MALPRACTICE LIABILITY

SEC. 201. STATE MALPRACTICE REFORM DEMONSTRATION PROJECTS.

(a) ESTABLISHMENT.—The Secretary shall

award grants to States for the establishment

of malpractice reform demonstration

projects in accordance with this section.

Each such project shall be designed to assess

the fairness and effectiveness of one or more

of the following models:

(1) No-fault liability.

(2) Enterprise liability.

(3) Practice guidelines.

(b) DEFINITIONS.—For purposes of this section:

(1) MEDICAL ADVERSE EVENT.—The term

‘‘medical adverse event’’ means an injury

that is the result of medical management as

opposed to a disease process that creates disability lasting at least one month after discharge, or that prolongs a hospitalization for

more than one month, and for which compensation is available under a no-fault medical liability system established under this

section.

(2) NO-FAULT MEDICAL LIABILITY SYSTEM.—

The terms ‘‘no-fault medical liability system’’ and ‘‘system’’ mean a system established by a State receiving a grant under

this section which replaces the common law

tort liability system for medical injuries

with respect to certain qualified health care

organizations and qualified insurers and

which meets the requirements of this section.

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

physician, physician assistant, or other individual furnishing health care services in affiliation with a qualified health care organization.

(4) QUALIFIED HEALTH CARE ORGANIZATION.—

The term ‘‘qualified health care organization’’ means a hospital, a hospital system, a

managed care network, or other entity determined appropriate by the Secretary which

elects in a State receiving a grant under this

section to participate in a no-fault medical

liability system and which meets the requirements of this section.

(5) QUALIFIED INSURER.—The term ‘‘qualified insurer’’ means a health care malpractice insurer, including a self-insured

qualified health care organization, which

elects in a State receiving a grant under this

section to participate in a no-fault medical

liability system and which meets the requirements of this section.

(6) ENTERPRISE LIABILITY.—The term ‘‘enterprise liability’’ means a system in which

State law imposes malpractice liability on

the health plan in which a physician participates in place of personal liability on the

physician in order to achieve improved quality of care, reductions in defensive medical

practices, and better risk management.

(7) PRACTICE GUIDELINES.—The term ‘‘practice guidelines’’ means guidelines established by the Agency for Health Care Policy

and Research pursuant to the Public Health

Service Act or this Act.

(c) APPLICATIONS BY STATES.—

(1) IN GENERAL.—Each State desiring to establish a malpractice reform demonstration

project shall submit an application to the

Secretary at such time and in such manner

as the Secretary shall require.

(2) CONTENTS OF APPLICATION.—An application under paragraph (1) shall include—

(A) an identification of the State agency or

agencies that will administer the demonstration project and be the grant recipient of

funds for the State;

(B) a description of the manner in which

funds granted to a State will be expended

and a description of fiscal control, accounting, and audit procedures to ensure the proper dispersal of and accounting for funds received under this section; and

(C) such other information as the Secretary determines appropriate.

(3) CONSIDERATION OF APPLICATIONS.—In reviewing all applications received from States

desiring to establish malpractice demonstration projects under paragraph (1), the Secretary shall consider—

(A) data regarding medical malpractice

and malpractice litigation patterns in each

State;

(B) the contributions that any demonstration project will make toward reducing malpractice and costs associated with health

care injuries;

(C) diversity among the populations serviced by the systems;

(D) geographic distribution; and

(E) such other criteria as the Secretary determines appropriate.

(d) EVALUATION AND REPORTS.—

(1) BY THE STATES.—Each State receiving a

grant under this section shall conduct ongoing evaluations of the effectiveness of any

demonstration project established in such

State and shall submit an annual report to

the Secretary concerning the results of such

evaluations at such times and in such manner as the Secretary shall require.

(2) BY THE SECRETARY.—The Secretary

shall submit an annual report to Congress

concerning the fairness and effectiveness of

the demonstration projects conducted under

this section. Such report shall analyze the

reports received by the Secretary under

paragraph (1).

(e) FUNDING.—

(1) IN GENERAL.—There are authorized to be

appropriated such sums as may be necessary

to carry out the purposes of this section.

(2) LIMITATIONS ON EXPENDITURES.—

(A) ADMINISTRATIVE EXPENSES.—Not more

than 10 percent of the amount of each grant

awarded to a State under this section may be

used for administrative expenses.

(B) WAIVER OF COST LIMITATIONS.—The limitation under subparagraph (A) may be

waived as determined appropriate by the

Secretary.

(f) ELIGIBILITY FOR NO-FAULT DEMONSTRATION.—A State is eligible to receive a nofault liability demonstration grant if the application of the State under subsection (c)

includes—

(1) an identification of each qualified

health care organization selected by the

State to participate in the system, including—

(A) the location of each organization;

(B) the number of patients generally served

by each organization;

(C) the types of patients generally served

by each organization;

(D) an analysis of any characteristics of

each organization which makes such organization appropriate for participation in the

system;

(E) whether the organization is self-insured

for malpractice liability; and

(F) such other information as the Secretary determines appropriate;

(2) an identification of each qualified insurer selected by the State to participate in

the system, including—

(A) a schedule of the malpractice insurance

premiums generally charged by each insurer

under the common law tort liability system;

and

(B) such other information as the Secretary determines appropriate;

(3) a description of the procedure under

which qualified health care organizations

and insurers elect to participate in the system;

(4) a description of the system established

by the State to assure compliance with the

requirements of this section by each qualified health care organization and insurer;

and

(5) a description of procedures for the preparation and submission to the State of an

annual report by each qualified health care

organization and qualified insurer participating in a system that shall include—

(A) a description of activities conducted

under the system during the year; and

(B) the extent to which the system exceeded or failed to meet relevant performance standards including compensation for

and deterrence of medical adverse events.

(g) ELIGIBILITY FOR ENTERPRISE LIABILITY

DEMONSTRATION.—A State is eligible to receive an enterprise liability demonstration

grant if the State—

(1) has entered into an agreement with a

health plan (other than a fee-for-service

plan) operating in the State under which the

plan assumes legal liability with respect to

any medical malpractice claim arising from

the provision of (or failure to provide) services under the plan by any physician participating in the plan; and

(2) has provided that, under the law of the

State, a physician participating in a plan

that has entered into an agreement with the

State under paragraph (1) may not be liable

in damages or otherwise for such a claim and

the plan may not require such physician to

indemnify the plan for any such liability.

(h) ELIGIBILITY FOR PRACTICE GUIDELINES

DEMONSTRATION.—A State is eligible to receive a practice guidelines demonstration

grant if the law of the State provides that in

the resolution of any medical malpractice

action, compliance or non-compliance with

an appropriate practice guideline shall be admissible at trial as a rebuttable presumption

regarding medical negligence.

AMENDMENT NO. 615 TO AMENDMENT NO. 603

Mr. KENNEDY. Mr. President, I ask

that the pending amendment be temporarily set aside, and I send an amendment to the desk and ask that it be

considered.

The PRESIDING OFFICER. Without

objection, it is so ordered.
S5900 CONGRESSIONAL RECORD — SENATE May 1, 1995

The PRESIDING OFFICER. The

clerk will report the amendment.

The assistant legislative clerk read

as follows:

The Senator from Massachusetts [Mr. KENNEDY] proposes an amendment numbered 615

to amendment No. 603.

Mr. KENNEDY. Mr. President, I ask

unanimous consent further reading be

dispensed.

The PRESIDING OFFICER. Without

objection, it is so ordered.

The amendment is as follows:

On page 8, line 20, insert after ‘‘subsection’’

the following: ‘‘(b) and’’.

Strike the material from page 9, line 4

through page 10, line 17, and insert in lieu

thereof the following: ‘‘The provisions of this

subtitle shall not be construed to preempt

any state statute but shall govern any question with respect to which there is no state

statute.’’

Mr. KENNEDY. Mr. President, I will

include the two statements, one on the

substitute which I referred to briefly

now and in great detail last week,

which I will expand on in my extended

remarks, and the other deals with the

preemption amendment.

As I understand from the leadership,

we will consider those in a timely fashion in our procedure outlined by our

leader tomorrow. I thank my colleagues. I yield the floor.

Mr. COHEN. Mr. President, I wish to

address a few comments on the underlying bill, the Product Liability Fairness Act, which attempts to address

some of the abuses that have occurred

in the civil justice system. Unfortunately, the cure being offered is worse

than the disease itself.

I am struck by the irony that many,

particularly on this side of the aisle,

have been calling for the deregulation

of our economy, for returning power to

the States, for empowering the people,

and for trusting the judgment of our

citizens. They invoke the 10th amendment as if remembering the Alamo—remember the 10th amendment.

Yet, at the very same time we are

calling for this deregulation, this

demassification—if I can use Toffler’s

phrase —of the power structure in

Washington by returning power back

to the States and local communities,

we are now calling for the passage of

another Federal piece of legislation.

At a time when we are searching for

ways to streamline the civil justice

system and to make litigation less

cumbersome and costly, this bill is

going to complicate the law and make

litigation even more expensive.

At a time when we are trying to improve the lives of hard-working middleclass Americans, this bill is going to

make it more difficult for these citizens to obtain compensation when they

are injured, at work or at home, from

defective products.

I am well aware that there have been

cases involving abuse of our civil justice system. We have seen cases of outrageous jury awards and frivolous lawsuits, and they have undermined public

confidence and interest in our legal institutions. Unfortunately, the bill before the Senate is not narrowly tailored to root out these abuses. Rather,

it is an unprecedented and unwarranted Federal takeover of a core State

responsibility.

Our system of federalism is based on

the principle that the national government should address problems that

confront the Nation as a whole, and

State governments, which are closer to

the people in both distance and temperament, should be responsible for

local concerns.

Writing of ‘‘Our Federalism’’ almost

25 years ago, Justice Hugo Black stated

that:

The concept . . . represents . . . a system in

which there is sensitivity to the legitimate

interest of both State and National Governments, and in which the National Government, anxious though it may be to vindicate

and protect federal rights and federal interests, always endeavors to do so in ways that

will not unduly interfere with the legitimate

activities of the States.

No less of a proponent of a strong national government than Alexander

Hamilton fully understood the genius

of a system that divided powers between the national and State governments. He wrote in Federalist No. 17

that ‘‘Commerce, finance, negotiation

and war,’’ should be the prerogatives of

the national government, while ‘‘the

administration of private justice . . .

[is] proper to be provided for by local

legislation.’’

There are few areas of law that are

more appropriate in State legislation

than the law of torts. In essence, tort

laws deal with the duties and responsibilities that members of a community have toward one another. Tort law

is, as Alexander Hamilton put it, ‘‘private justice.’’ It is an inherently local

issue. That is the reason, for the past

two centuries, from the beginning of

our Republic, that we have delegated

this responsibility of tort law to the

State legislatures and courts.

The same is true of the product liability law, which emerged as a key

element of tort law in the 1960’s.

Through time-tested methods of common law adjudication and legislative

adjustments, the courts and legislatures in each State have worked together to develop laws that strike the

appropriate balance between the needs

of plaintiffs and defendants and those

of consumers and business.

Over the past decade, many States

have begun to reform their tort systems by experimenting with alternative dispute resolution, limiting punitive damages, and changing liability

standards. The States continue to experiment with product liability reforms to achieve a balance between the

demands of the modern economy and

the need to ensure the products that

enter that marketplace are safe. This

is the way the Federal system is supposed to work. As Justice Louis Brandeis noted, ‘‘It is one of the happy incidents of the Federal system that a single courageous State may, if its citizens choose, serve as a laboratory; and

try novel, social, and economic experiments without risk to the rest of the

country.’’

The bill before Congress would bring

the experimentation that is taking

place in our States to a grinding halt

by wiping most of the State product liability laws off the books and replacing

them with one-size-fits-all Federal law

developed right here in Washington.

This is the same Washington that has

been so demonized as late for passing

too many Federal laws.

Now, suddenly, it is in the interests

of manufacturers to have a one-sizefits-all piece of legislation. It appears

as if Congress, which has had virtually

no experience in legislating in this

area over the past two centuries, believes it has found the single answer to

the ills of the civil justice system. It

has decided to impose that system on

the entire Nation.

Ironically, it is occurring at a time

when the Federal Government is already said to be too large. The public

already resents its intrusion into affairs that properly belong before the

States.

Congress ought to be focusing on

health care reform, the budget deficit,

and entitlement reform, not to mention terrorism and nuclear proliferation. These are appropriate concerns of

Congress. The time Congress spends

wading in the minutiae of product liability law, a subject the States are

fully capable of regulating, will be

time that should be spent on more

pressing national concerns.

The supporters of this legislation

maintain that a national product liability law is necessary to provide uniformity and to increase predictability.

I believe this bill will have precisely

the opposite effect. Litigants are no

longer going to be able to rely upon

well-established State law. Instead,

they will be faced with the uncertainty

of a Federal statute loaded with undefined, untried, and untested legal principles.

This bill is going to make the law

more complicated. Since certain aspects of the State laws are going to be

preempted and others are not, litigation is going to proceed under an amalgam of State and Federal law.

I will give you an example, Mr. President. S. 565 creates a new standard of

liability for product sellers but does

not change the law pertaining to the

manufacturers of those products. So in

a case brought both against a manufacturer and a seller of an allegedly defective product, the court is going to be

required to apply the Federal law to

one defendant and the State law to another. This unnecessary complexity

will lead to greater litigation expenses,

not less.

Mr. President, one of the great legal

scholars of this century, Prof. Herbert

Wechsler of Columbia University, once

wrote that ‘‘national action

has * * * always been regarded as exceptional in our polity, an intrusion to
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5901

be justified by some necessity, the special rather than the ordinary case.’’

This presumption against Federal involvement in local affairs has not been

overcome by the evidence that has

been presented to this body. The socalled litigation crisis that is often

cited by the sponsors of this legislation

simply does not exist.

The most comprehensive study to

date of product liability suits indicates

that they comprise 0.36 percent of all

civil filings—hardly a litigation explosion. If you take away the asbestos

cases, which I think are unique in our

history, the number of Federal product

liability cases declined by over 35 percent during the late 1980’s.

Proponents of the bill also claim that

there is an explosion of punitive damages and rely heavily upon horror stories of irresponsible jury awards as a

justification for Federal preemption.

Putting aside the fact that for every

punitive damage horror story, there is

a more compelling story of manufacturer misconduct, we should not legislate on the basis of anecdote. Listen to

the Wall Street Journal, an open advocate of reform, which reports that the

debate is largely ‘‘driven by anecdote’’

and ‘‘truth [has been the] first casualty

of tort-reform.’’

I think the case for punitive damages

has been overstated. The objective

facts demonstrate there have been few

punitive damage awards in product liability cases in the recent past. One

widely cited study indicates that only

355 punitive damage awards were entered by juries during the years 1965 to

1990. And 25 percent of these verdicts

were reversed or remanded on appeal.

So there is no evidence that runaway

punitive damage verdicts have wreaked

havoc, certainly not in my State of

Maine. Punitive damages were imposed

in only three product liability cases

during a 25-year period—just three

cases. The juries in Maine have acted

responsibly. They have applied State

law in a commonsense fashion and reserved the sanction of punitive damages for extreme cases in which there

has been either malicious or wanton

disregard for public safety on the part

of some companies. Maine does not

need a Federal solution for a problem

that does not exist in our State. Yet,

this is precisely what this law would

do—force Maine to abandon its law.

Our product liability laws have been

subject to sweeping criticism, but it

cannot be denied that the system has

been a very important protection for

American consumers. From the Ford

Pinto to the Dalkon shield, product liability laws and suits have caused dangerous products to be taken off the

market, products that have caused horrific injuries and multiple deaths.

Without product liability, including

the threat of punitive damages, American consumers would be at far greater

risk than they are today.

Let me recall a program I saw that

involved a lobbyist for tobacco companies. He indicated that he would stop

at nothing whatsoever. It did not matter what study was concocted; it did

not matter whether it was truthful or

untruthful. He used every conceivable

trick in the book in order to defeat any

legislation that would protect the

American people from the effects of tobacco. This man is now suffering from

cancer. I believe he had cancer of the

throat and it spread to his hip. This

may account for his change of heart in

terms of revealing the kinds of tactics

that have been applied by the company. I do not know if the allegations

he made on this program are true. But

if they are—if companies have deliberately lied, deliberately falsified documents, and concocted studies in order

to defeat consumer protection legislation—is that not a case in which we

want to see punitive damages that are

not limited by the amounts set forth in

this bill?

Let me give another example. Suppose a manufacturer of children’s toys

learns that a product has a dangerous

defect that is likely to cause, let us

say, 10 deaths over the lifetime of the

product. Under current law, the company would probably recall the product. It would fix that defect, regardless

of the cost, because it could not possibly risk the punitive damage award

or suits that might follow.

But under this bill, that company

would know that, since children have

little or no wages, the maximum punitive damage award would be $250,000

per fatal injury. If the toy makes $20

million to $30 million in profit, the

company might well decide that it

makes economic sense not to recall a

dangerous product.

I suspect this may have been the line

of thinking by Ford Motor Co. when it

put the Pinto on the market. And without punitive damages, many other dangerous products may be unleashed on

the unsuspecting American consumer.

This does not mean the system is free

of abuses. In a recent case from Alabama, a jury awarded $4 million in punitive damages because BMW failed to

disclose that a car sold as new had in

fact been damaged, and then repainted

on the way from the factory to the

showroom. Even though BMW may

have acted wrongly in this case, in my

judgment this punitive award was well

out of proportion to the seriousness of

the misconduct on the part of the company.

So we have examples of excessive

jury awards that are outrageous from

time to time. They undermine public

support for the civil justice system. A

narrowly tailored bill designed to curb

runaway jury verdicts may be deserving of support. This bill, however, is

not targeted at this problem. It uses a

sledgehammer where a scalpel may be

more appropriate.

Regardless of the outcome of this debate, I think the legal profession has to

undertake a concerted effort to address

a major premise that underlies this

legislation—that the law and the legal

profession no longer serve a valid public interest.

Lawyers are no longer held in as high

regard as some once were. Books,

plays, and movies were written about

Clarence Darrow for his dedication to

providing justice for the common man.

Lawyers like Thurgood Marshall and

Ruth Bader Ginsburg are revered for

striking down legal barriers based on

race and gender.

However, the esteem which the legal

profession once held has fallen quite

substantially in recent years. Attorneys are often portrayed as being more

interested in making profits than promoting the interest of justice.

I believe that it is a minority of the

profession that casts aspersion on the

broad majority of lawyers who are

dedicated to the best tradition of the

profession and volunteer much of their

time to public service. It is up to a majority of the profession to discipline

those who file frivolous lawsuits, who

sue parties only because they have a

deep pocket, or who run up the cost of

litigation solely to induce a settlement.

One of the great virtues of our civil

justice system is that everyone has a

right to have his or her grievance

heard before a court of law. When that

principle is abused, the very foundations of the system are called into

question. So I think the legal profession has to take swift and meaningful

action in order to rebuild the public’s

confidence in our civil justice system.

The legislation now pending before

the Senate is not the right answer to

these problems. It is a one-size-fits-all

Federal solution that will end State experimentation in tort reform. It will

impose uniformity on regions of the

country with different needs and values. The entire bill, in my judgment, is

an affront to the principle of federalism. State governments have demonstrated the capability of both developing and reforming product liability

law. There is no need for the Federal

Government to infringe on yet another

area of State sovereignty.

Mr. President, over the weekend, I,

like the Senator from Massachusetts,

saw many advertisements on television, some dealing with medical malpractice, others with the impact of

product liability litigation on small

businesses. Of course, small companies

as well as large companies have the

ability to purchase insurance to cover

themselves for liability suits. Manufacturers have the ability to purchase insurance to cover their exposure to liability. But when companies put into

the stream of commerce a product that

is inherently dangerous or has a defect

and that defect causes an injury to the

citizens of this country, the manufacturer should bear that responsibility,

not the consumer.

This bill seeks to put a limitation on

the ability of consumers to recover for

the damages that have been inflicted
S5902 CONGRESSIONAL RECORD — SENATE May 1, 1995

upon them and, yes, for punitive damages to discourage companies that either act willfully or in wanton disregard for public safety. These cases

demand that punitive damages be imposed in order to discourage and deter

manufacturers and the distributors of

dangerous products from continuing to

inflict harm upon the public.

Commercials that I saw over the

weekend said we are addressing this

problem of medical malpractice in

California. The State legislature

passed a medical malpractice reform

law and guess what? Those lawsuits

have now declined. We have also passed

a medical malpractice reform law in

the State of Maine. We have

prelitigation screening panels. We set

statewide standards for doctors and

hospitals. States can—in fact, have—

adopted changes in their tort law to

deal with their particular problems.

But in a State like Maine, which, over

a 25-year period, has actually awarded

punitive damages in three product liability cases, do we need a Federal law

to tell us what to do?

It is an insult to the people of this

country to say that the 12 men and

women sitting in the jury cannot be

trusted to weigh the evidence and decide to impose or not impose damages.

This legislation sets a uniform national standard for damage awards. It

says: You juries cannot go above this,

your judgment cannot be trusted. We

are saying that no matter how egregious the offense, no matter how defective the product, no matter how wanton the disregard for public safety, we

do not trust you, ladies and gentlemen

of the jury, to do what is right, to exercise common sense. And we here in the

Halls of Congress we are going to tell

you exactly how far you can go.

To me, Mr. President, it is an insult

to all the people of this country to say

that we no longer have faith in their

judgment, that only Congress can determine exactly how high they can go

in terms of compensating citizens of

their community who have been injured by defective products. I think

this contravenes everything that is

being said on this side of the aisle

about limiting the scope of government, reducing the power of Washington, returning power to the people, deregulating the economy, and revering

the 10th amendment.

I yield the floor and suggest the absence of a quorum.

The PRESIDING OFFICER. The

clerk will call the roll.

The bill clerk proceeded to call the

roll.

Mr. SPECTER. Mr. President, I ask

unanimous consent that the order for

the quorum call be rescinded.

The PRESIDING OFFICER. Without

objection, it is so ordered.

Mr. SPECTER. Mr. President, I have

sought recognition to comment about

punitive damages in our legal system

as they apply to tort reform. I have

spoken before on this bill and have

noted that I have had experience representing both plaintiffs and defendants in personal injury cases and had

one very involved product liability

case which I described in a floor statement a week ago today. I have noted

my concern that there is room for reform of product liability tort law. But

my concern is that it be done very,

very carefully because the body of law

in the United States, common law development is slow, laborious, careful.

Common law builds up by accretion or

encrustation over a long period of time

and is very different from the kind of

processes which we have in legislation

where there are frequently only one or

two Senators present at hearings and

where markups are done without the

kind of background or careful evidentiary study which marks development of the law, case law and common

law.

There is a very erudite analysis of

punitive damages in the Iowa Law Review, volume 78, appearing at page 1,

published in 1992, by Prof. Michael

Rustad and there are a number of aspects of that article about which I

would like to comment.

Even though this is a lengthy law review article, it is worth printing in full

in the CONGRESSIONAL RECORD because

of the importance of tort liability generally and product liability specifically

and punitive damages as it impacts on

the legislative consideration which we

have before the Senate.

My comments will be relatively brief

compared to the scope of the article.

I start by referring to four empirical

studies of punitive damages in product

liability cited in Professor Rustad’s

law review article.

The first is by the Rand Institute for

Civil Justice, which studied 24,000 jury

verdicts in Cook County, IL, and San

Francisco, CA, between 1960 and 1984.

The Rand study stated that the ‘‘punitive damages picture in personal injury

cases has changed very little in 25

years.’’

As noted in this law review article,

the Rand study states: ‘‘Product liability cases have been of special concern

to many critics, but our analyses indicate that punitive damages were

awarded in only four product liability

cases in San Francisco and two in Cook

County from 1960 through 1984.’’ It further notes that, ‘‘The rarity of punitive

damage awards in products liability

cases suggests that there is little need

for tort reform.’’

The second empirical study noted in

this law review article is by the American Bar Foundation, which examined

25,627 jury verdicts handed down from

1981 to 1985, drawn from State jury verdict reporters in 47 counties in 11

States. This study found that in 5 percent of the verdicts there was an inclusion of punitive damages and that

products liability accounted for 3.8 percent of the 25,627 verdicts. Of the 967

products liability verdicts, the study

found 34 cases in which punitive damages were awarded. The researchers

concluded that the awards were generally quite proportionate to the actual damages, and they concluded that

‘‘the median punitive damage award is

not at a level that is likely to ‘boggle

the mind.’’’

The third empirical study noted in

the Iowa Law Review article is the

GAO study on the frequency and size of

punitive damage awards in product liability cases in five States between

1983 and 1985. There was a review of

court records for 305 product liability

cases resolved through trial in Arizona,

Massachusetts, Missouri, North Dakota, and South Carolina. The GAO

supplemented official court records

with posttrial interviews with attorneys. The General Accounting Office

found that punitive damage awards

were neither routine nor excessively

large and that posttrial appeals and

settlements substantially reduced the

amount of punitive damage awards.

The fourth empirical study noted in

the Iowa Law Review was conducted by

Judge Richard Posner, a distinguished

court of appeals judge in the Federal

system, and Prof. William Landes of

the University of Chicago, who examined all products liability cases ‘‘reported in the 10 most recent volumes of

each of the West Publishing Company’s

regional reporters’’ and all ‘‘product liability cases in the federal courts of

appeals from the beginning of 1982 to

November 1984.’’ This study found ‘‘‘punitive damages were awarded in the

trial court in 10 of 172 cases.’ The

award was affirmed in whole in only

one of the ten cases. Appellate judges

reversed and remanded six of the cases

for further proceedings.’’

Mr. President, in an era when we are

looking toward less Federal regulation,

I think it is very important that we

take a close look at what private actions import. This is an area which has

attracted my attention since law

school days, when, as a member of the

board of editors of the Yale Law Review, I wrote an article on private

prosecution, which is a somewhat different line, on the need when there was

unwarranted inaction by the public

prosecutor. In the Senate, I have authored legislation to establish a private right of action for people who are

damaged by unfair foreign competition, where goods come in the United

States either as a result of subsidy or

dumping because of the insufficient

resolution of proceedings in the International Trade Commission.

At this point, I am going to refer to

a number of cases, some of which are

cited in the Iowa Law Review article

and some of which are found in other

places.

One case of considerable interest was

Richardson-Merrell’s concealment of

side effects of MER/29, an

anticholesterol drug. In a case litigated, Toole versus RichardsonMerrell, Inc., in the California court of

appeals, the evidence was that there

had been fictitious reports filed by the

company, that none of the abnormal
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5903

blood changes encountered in experiments was disclosed and that there was

a falsified chart prepared under protest

by one of company’s employees which

was included in the application. One

advertising brochure stated that MER/

29 was ‘‘virtually nontoxic and remarkably free from side effects, even on prolonged clinical use.’’

The evidence further showed evidence of high-level management with

knowledge of the concealment of MER/

29’s known defects. There were 1,500

civil suits filed after there were guilty

pleas by the company’s executives.

Three scientists pleaded nolo

contendere to criminal fraud charges

and were fined a total of $80,000 in the

context of the criminal conduct which

seriously injured an estimated 5,000

consumers.

Of the 1,500 civil cases which were

filed in the wake of those criminal

pleas, juries awarded punitive damages

in three of those cases.

Another case of some concern noted

in the Iowa Law Review article is one

involving the Dalkon shield put out by

A. H. Robins, in a case captioned Plaintiff versus A. H. Robins Co. The Supreme Court of Colorado found evidence upholding a punitive damage

award with the following statement:

Robins’ marketing program which occurred over a long period of time was directed to a vast array of unwary consumers

and was accompanied by false claims of safety and a conscious disregard of a life-threatening hazard known by it to be associated

with its product. Robins accumulated gross

revenues which exceeded $11 million from

the shield alone and its net worth nearly

doubled during the marketing period of this

device.

Another case worthy of special note,

although there are many cited in this

law review article, is a case captioned

Duddleston versus Syntex Labs, Inc.,

which involved the company’s failure

to test a soy-derived baby formula

which resulted in thousands of infants

suffering brain damage. The company

had removed salt from its product

without considering the effect on child

development, and that was a causative

factor in brain damage and learning

disabilities.

Another case worthy of special note

is captioned Batteast versus Wyeth

Laboratories in which there was an assessment of substantial punitive damages for failure to warn physicians of

certain propensities dangerous to children in the chemical composition of a

drug, and the basis for the punitive

damages was the company’s failure to

market the suppository in compliance

with Federal Drug Administration adverse-reaction guidelines.

Among many of the other cases cited,

my final reference is to the Minnesota

Supreme Court decision in a case captioned Gryc versus Dayton-Hudson

Corp. as follows:

In April 1968, a letter from an official of

[the defendant] explained that satisfactory

runs were made with flame-retardant

flannelette using various chemicals, but that

[the defendant] was not going to use these

products until Federal law so required because of the cost factor. . . [T]he decision not

to use flame-retardant cotton flannelette

was merely an economic one for the benefit

of [the defendant]—

This gave rise to the imposition of

punitive damages.

In reviewing a number of cases, and

these are only illustrative, Mr. President, of what exists in the field of tort

liability, the famous case involving the

Pinto automobile which had the gas

tank in the rear and was justified in a

letter from Ford Company to the Administrator of the National Highway

Traffic Safety Administration which

sought to justify the dangerous condition, because it was more cost-effective

to suffer 180 burn deaths with 180 serious burn injuries and 2,100 burned vehicles at a total cost of $49.5 million, contrasted with the cost of repairing 1.5

million light trucks, 11 million cars at

a unit cost of $11 per car, which would

cost $137 million. This has already been

placed in the RECORD, Mr. President, so

I will not further burden the RECORD by

asking that it be printed.

Another matter of some notoriety involved the American Motors Corp. and

its product, the Jeep, when there was

an internal American Motors Corp.

memo dated January 7, 1982, acknowledging a defect with the shackle system of the Jeep, which was known for

many years to the company, and the

following sentence from the memo is of

some significance:

Not to retrofit will subject Jeep Corporation to possible punitive damages on a component which has previously been the subject

of several causes of action.

I ask unanimous consent that this

intracompany correspondence be printed in the RECORD for its probative

value in showing that the possibility of

punitive damages is something to be

considered in retrofitting a vehicle to

make it safer.

There being no objection, the material was ordered to be printed in the

RECORD, as follows:

INTRACOMPANY CORRESPONDENCE

From: Mr. J.E. MacAfee,

To: R.M. Huffstutler

Subject: C.J. Shackles,

Location—Ext: AMTEK/33223

Date: January 7, 1962

Copy to: C.S. Sklaren, W.C. Jones, C.E. Merritt.

Confirming our telephone conversation of

this P.M., we understand that vehicle 1609

will soon be tested. This test will be the

fourth in the series of 1461, 1477, and 1484, a

test we presume will meet with the complete

satisfaction of you and your engineering

staff.

Upon successful completion of testing on

the new shackle design, we would appreciate

the ECR being with obsolescence and the

new design being incorporated at the earliest

possible time. Assuming the shackle is released for CJ–5, CJ–7, Scrambler, and various

export models, I will press for retrofit of all

CJ–7 and Scrambler vehicles produced in the

1982 model year. This action I believe is warranted since the FMYSS 101–75 movable barrier 20 mon test which indicated a problem

was completed July 22, 1981, three weeks

prior to the 1982 production. Not to retrofit

will subject Jeep Corporation to possible punitive damages on a component which has

previously been the subject of several causes

of action. Our legal staff has, to date, not

seen the merits of testing the current design

before a jury; it is my belief that the new design will have to be tried and thus Jeep

Product Engineering should have a sufficient

data file to convince not only engineers but

lay persons as well.

Any action by Engineering to our purchasing group to forestall their dilatory tactics

in this matter would be appreciated. An

early warning to them that the design will

be changed may preclude Jeep Corporation

from having to pay for stock ahead of our

production requirements.

R.M. HUFFSTUTLER.

Mr. SPECTER. Mr. President, an internal memo from the Cutter Co.,

which was involved in manufacturing

blood factors for hemophiliacs, is of

considerable interest. To the extent

that an internal Cutter memorandum

dated December 29, 1982, recommended

several steps to warn about AIDS

transmission through its factor concentrate product, this memo reads as

follows, from one Ed Cutter to Jack

Ryan and others:

It appears to me to be advisable to include

an AIDS warning in our literature for certain factors.

And there is a second document by a

Dr. Bove, January 1983:

This case increases the probability that

AIDS may be spread by blood. Further, the

CDC—

That is the Centers for Disease Control.

continues to investigate the current cases

aggressively and may even have a few more.

While I believe our report reacts appropriately to the data at hand, I also believe

that the most we can do in this situation is

to buy time.

Until these documents were disclosed, the Cutter Co. argued that the

obligation to warn did not arise until

the spring of 1984. This same case has a

cost/benefit analysis by the American

Red Cross which concluded that it

would cost more to make a correction

than to treat the AIDS patients, with

the testing costs being in the range of

$13 to $67 million, whereas an evaluation of each AIDS case at $500,000

would require the prevention of some

30 to 134 AIDS claims to be cost-effective. This suggests to me, Mr. President, a wholly inappropriate evaluation of cost analysis dealing with a

deadly subject like AIDS.

I ask unanimous consent that these

internal corporate documents be printed in the RECORD.

There being no objection, the material was ordered to be printed in the

RECORD, as follows:

CUTTER

To: Jack Ryan, Carolyn Patrick, Wayne

Johnson, Ralph Roussall, George Akin

From: Ed Cuttar

Date: December 25, 1982

Copes To: Arnold Laong

Subject: AIDS.

It appears to me to be advisable to include

an AIDS warning in our literature for Factor

IX and Factor VIII. I realize that very little

is known about AIDS and the relationship

the products we manufacture have in causing
S5904 CONGRESSIONAL RECORD — SENATE May 1, 1995

the syndrome. However, litigation is inevitable and we must demonstrate diligence in

passing along whatever we do know to the

physicians who prescribe the product. In my

opinion, three steps are called for, once we

agree on the wording of our message.

1. Include it in the package insert.

2. Educate the sales force.

3. Since MDs won’t be reading the package

insert in most cases, send a letter to hematology specialists informing them of the

warning we are putting in the insert.

ED CUTTAR.

To: AIDS Working Group, Dr. Dood, Ms.

Baum

From: Dr. Cumming

Date: 3/20/84

Subject: Meeting request and report on:

Progress on AIDS marker testing marketing research.

SUMMARY

Our review of AIDs marker testing issues

to date brought into question the value or

continuing to proceed along lines or developing a non scientific opinion research survey.

Specifically:

Objectively it is difficult to make a case

for adoption of AIDS marker testing,

Plasma industry projected adoption or

such a test is a rather obvious marketing

initiative which will serve to increase pressure on us, and

ARCBS decision-making criteria are complicated by considerations of ethics and public welfare as distinct from competitive response.

This last issue can be summarized nicely

by reference to ‘‘false positives’’. Essentially

all anti core test results are likely to be

false positives. Specifically, it is estimated

that over 6,000,000 annual units are donated

by 4,000,000 persons. With 5% normal population incidence of anti core positive results

this means 200,000 people may be labelled as

likely to get AIDS. Contrast this with a possible 50 cases per year of AIDS avoided

(0.00025 of all positives). Assuming these

200,000 people have additional testing done,

costs to society may be from $20,000,000 to

$100,000,000 (based on $100 to $500 per false

positive). And this does not ascribe any

value to mental anguish, time off work, etc.

These figures and issues make the direct cost

of testing minimal in comparison.

It is from this perspective that we question

the value of continuing to develop a non projectable sampling effort and request a meeting to clarify as precisely as possible where

we are heading and why.

BACKGROUND

Attached for your information, review, and

comment are:

(1) A background document summarizing

various marker tests for AIDS, and estimating effectiveness and costs, and

Three draft questionnaires designed to

elicit the opinions of various interest groups

on marker tests for AIDS.

The background document explores some

of the costs and benefits of implementing

screening marker testing for AIDS amongst

blood donors. On the descriptive matrix,

characteristics such as effectiveness, ease of

use, availability, etc. are estimated, as well

as other potential advantages and public relations effects.

The latter is an area of grave importance

which must be further explored. As you are

aware, the possibility exists of creating

panic in the (normal) donor population from

positive test results, and incurring unnecessary costs to the health care sector as these

donors pursue further medical evaluation, as

well as reducing the size of the donor pool.

These effects must be carefully weighed

against the possible benefit of reassuring the

blood recipient population and the hypothetical benefit of reducing the incidence of

transfusion-associated AIDS (trx-AIDS).

The cost matrix addresses the potential

costs associated with implementation of the

various marker tests. Review of this matrix

indicates that costs for testing in all ARC

Blood Service regions would range from $15

million to $67 million. If we assume that

each average AIDS case has a value of $1M,

then to justify use of one of the tests would

require an expected reduction in trx-AIDS

from ARC blood of 15 to 67 cases. Since trxAIDS patients have averaged 50 years of age,

average earnings per worker are approximately $20,000 per annum, and treatment for

AIDS victims has averaged about $80,000

* * * about $500,000. This lower benefit would

indicate a need to prevent 90 to 134 trx-AIDS

cases from ARC blood to justify use of a

marker test exclusively on economic considerations. In addition, these averted cases

would have to be over and above the number

of cases prevented by currently implemented

screening measures.

As an example, to economically justify

anti-HBc testing in all Blood Service regions, we would need to demonstrate an anticipated rate of trx-AIDS (not prevented by

screening measures) of 1.75 cases per week,

assuming an 88% effectiveness rate of the

test. This rate is considerably above previous

and current rates.

PROPOSAL

To summarize the background document,

implementation or any AIDS marker test

will be extremely expensive. Given the fact

that tax-AIDS is still a hypothesis, that

there has been no effective measurement or

the success of the screening procedures

which have already been implemented, and

that cost justification or testing would rest

on a considerably higher incidence or taxAIDS than is currently being observed, the

following recommendations are proposed for

further exploration.

(1) Implement the confidential self-exclusion procedure, currently used by New York

Blood Center (NYBC), in all ARC Blood Service regions.

(2) Implement one of the marker tests in

Los Angeles and any other regions where

there is reason to suspect a high concentration of AIDS carriers.

(3) Continue to evaluate the non-economic

considerations inherent in implementing one

of the marker tests systemwide.

It is in keeping with the last recommendation that the three questionnaires are attached. The non-economic considerations are

primarily the opinions and beliefs of the various publics which are served by ARC Blood

Services. The questionnaires which are attached are targeted at physicians who prescribe blood, the general public including

blood donors and recipients, and third party

payers such as Medicare/Medicaid agencies

and insurers. We intend to modify or add to

these questionnaires to also target hospital

administrators and other signatores of annual hospital/blood region contracts.

Relative to these questionnaires, we would

appreciate information or comments on the

following:

Decision making criteria given results of

the survey, i.e. what influence will the results of the survey have on a decision whether or not to implement marker testing?

Method of sampling and sample sizes

Content and phrasing of questions

Target audiences

PURPOSE OF MEETING

Answers to this first question are essential

for further development of the survey. Admittedly if public opinion could determine

that ARC implement testing, a very large

sample would be required, whereas if the

questionnaires are designed merely to ‘‘test

the waters’’, a small screening sample would

suffice. At this point, we really can’t see too

much value in a small, non-scientifically

projectable sample. For such a sample to be

useful for other than field testing of an instrument, we would have to observe a high

degree of unanimity or opinion. Given the

subject matter this is unlikely. For a large

and statistically valid and reliable sampling

effort to be most useful, we need to be very

specific as to how we intend to use results

from each likely outcome of the sampling. I

suggest that a meeting of the group plus Dr.

Doda and Ms. Baum is in order to gain this

specificity or select another course of action.

REPORT TO THE BOARD COMMITTEE ON

TRANSFUSION TRANSMITTED DISEASES

The major report of your Committee on

Transfusion Transmitted Diseases has been

issued as our recommendations to the Association. These few additional paragraphs are

more my current views and concerns than a

formal committee report. Nonetheless, because of my recent experiences I am anxious

to share some thoughts with you.

The report that we have submitted to our

members is, in my view, appropriate considering the data at hand. Since we met, however, an additional child with AIDS has been

admitted to a Texas hospital. At birth the

child had received seven transfusions, one of

which came from a donor who now seems to

have AIDS. This case increases the probability that AIDS may be spread by blood.

Furthermore, the CDC continues to investigate the current cases aggressively and

may even have a few more. While I believe

our report reacts appropriately to the data

at hand, also believe that the most we can do

in this situation is buy time. There is little

doubt in my mind that additional transfusion related cases and additional cases in

patients with hemophilia will surface.

Should this happen, we will be obliged to review our current stance and probably to

move in the same direction as the commercial fractionators. By that I mean it will be

essential for us to take some active steps to

screen out donor populations who are at high

risk of AIDS. For practical purposes this

means gay males.

The matter of arranging an appropriate

screening program is delicate and difficult.

We have had excellent cooperation from individuals in the gay community and our deliberations have been made easier by their

knowledge and ability to help us. I have no

doubt that they will continue to support us

and, should we need to be more aggressive in

this area, will help us do it in a way that is

socially responsible.

Blood banks that wish to sell plasma for

further fractionation already face the need

to do something. Perhaps our Committee

should prepare guidelines with suggested

wording for them to use. We are reluctant to

do this since we do not want anything that

we do now to be interpreted by society (or by

legal authorities) as agreeing with the concept—as yet unproven—that AIDS can be

spread by blood.

All in all this is a knotty problem and one

that we will not solve easily.

I want to make a few comments about the

process by which our joint document developed. We spent a great deal of time and energy and did the best we could in attempting

to reach a consensus. The difficulty was to

get AABB,ARC, CCBC and all the other

groups to adopt a position which was acceptable to each other. It was impossible to have

a small meeting; everybody wanted to attend. When we got the group together we

were able to hammer out a statement that

pleased the attendees. Unfortunately, the
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5905

statement had to go through several iterations with our own Board and the Boards of

the other involved organizations. In all probability these modifications resulted in a better statement, but the process of getting

these changes incorporated and run back and

forth through the three organizations was

difficult. We have had a good start at working together on this and we hope to keep it

up. The mechanism was a little less smooth

when it came to releasing the statements

and the public relations that went with it.

I hope that we are equipped psychologically to continue to act together. I have

been in contact with ARC (Dr. Katz) and

CCBC (Dr. Menitove) and believe that the

three of us can, together, work out whatever

new problems may arise. We plan frequent

conference calls to keep each other informed.

I want to comment about the Committee.

They worked well together and I was particularly pleased with the input of advisory

members. Having individuals who are not associated with the blood banks nor a traditional part of the blood banking community

proved most useful to us. Their comments

and suggestions were excellent. In a like

manner, we were helped by participants from

the National Gay Task Force. As we continue to react to the various challenges before us, I am sure that their help will be essential. Finally, let me acknowledge the help

from the Central Office and, in particular

from Lorry Rose.

No immediate end to the publicity is in

sight and we will get continued calls for us

to act more aggressively. We need to do

whatever is medically correct. In addition,

we may have to do a little more, since we are

accused of burying our heads in the sand. We

are not being helped by the spate of publicity

about this illness, but will continue to react

responsibly to whatever scientific and medical information we have.

JOSEPH R. BOVE,

Chairman, Committee on Transfusion

Transmitted Diseases, American Association

of Blood Banks.

Mr. SPECTER. Mr. President, another very important product involved

the Bjork-Shively heart valve where

internal company documents show the

company was notified by the inventor

in 1982 of the manufacturing defect,

with the handwritten notations on the

memo by the inventor to try to ‘‘settle

him down,’’ a defect which was not

fixed for years resulting in damages to

thousands of people who used these

heart valves.

Again, I ask unanimous consent that

this corporate document be printed in

the RECORD.

There being no objection, the material was ordered to be printed in the

RECORD, as follows:

15242 SHILEY 64,

March 24, 1982.

Attn: Paul Morris.

Last night a 60 year old man, with a double

valve (mitral and aortic valve) replacement

performed—August 24, 1981 with

a * * * degree, 25 mm in aorta and 31 mm in

mitral, had rupture of the smaller strut and

pulmonary edema.

During the night, I re-operated the broken

mitral valve and the * * * strut was localized in the pulmonary vein. The patient has

now woken, but has neurological seguele.

It is evident by now that the manufacture

of the prosthetic valve is not acceptable. The

small strut must be made in one piece and

much more effort and priority must be put

on this than has been done so far.

Your programmed conferences, in Atlanta

and California in the end of August, are extremely ill timed—before an acceptable production can be achieved.

Dear friends, I am serious.

VIKING O. BJORK.

P.S. By airmail I am sending you the piece.

HANDWRITTEN NOTES BY RECIPIENT

* * * also suggested we go to Sweden to

talk to Bjork.

I’d like to avoid if possible as it won’t help

solve problem.

Paul * * *

Kjell called to discuss * * *. Wants us to

call Bjork and attempt to settle him down

and convince him we are oing everything

possible to get the monostrut faster—I suggest we use the ‘‘double side’’ EB Wolf method to get him valves fast! They have to be

stronger than the welded strut on 70° cc.

BRUCE.

P.S. I have all employee meetings at 10

a.m. and 11 a.m.—Please call Bjork and try

to settle him down and convince him that we

are doing everything possible.

BS.

Mr. SPECTER. Mr. President, some

of the cases disclosed procedures which

would result in additional safety which

were left uncorrected for very considerable periods of time, and I refer now to

an intracompany memorandum of the

Ford Motor Co., dated September 19,

1967, which reports:

When properly worn, the three-point diagonal shoulder belt system has been demonstrated to offer much greater protection

to the vehicle occupant than does a singlelap belt alone since it prevents injuries from

jack-knifing.

And in the same document:

A properly worn three-point system clearly

protects the occupant better than a lap-beltonly system.

But it was not corrected until 1987 as

reflected in intracompany correspondence of Ford. This is dated May 2, 1986:

I believe we should consider optional rear

seat shoulder belts for reasons described in

the attached memo to you from Al Slechter

as a defense against future product liability

claims.

These are a series of internal memos,

Mr. President, which have come to public light in the course of litigation and

show that litigation of product liability cases with the potential for punitive damages is a significant factor

leading to product safety, which I

think has to be evaluated as we consider this legislation. Further evaluation of the cost benefit occurred by

General Motors in a memo dated June

29, 1973, where as a result of their cost

analysis, they made a substantial

change, showing that where there was

concern about fatalities and damages,

safety features were added.

I ask unanimous consent that this

document be printed in the RECORD.

There being no objection, the material was ordered to be printed in the

RECORD, as follows:

VALUE ANALYSIS OF AUTO FUEL FED FIRE

RELATED FATALITIES

Accident statistical studies indicate a

range of 650–1,000 fatalities per year in accidents with fuel fed fires where the bodies

were burnt. There has been no real determination of the percent of these people

which were killed by the violence of the accidents rather than by fire. The condition of

the bodies almost precludes making this determination.

Based on this statistic and making several

assumptions, it is possible to do a value

analysis of automotive fire related fatalities

as they relate to General Motors.

The following assumptions can be made:

1. In G.M. automobiles there are a maximum of 500 fatalities per year in accidents

with fuel fed fires where the bodies burnt.

2. Each fatality has a value of $200,000.

3. There are approximately 41,000,000 G.M.

automobiles currently operating on U.S.

highways.

Analyzing these figures indicates that fatalities related to accidents with fuel fed

fires are costing General Motors $2.40 per

automobile in current operation.

500 fatalities times $200,000 per fatality divided by 41,600,000 automobiles equals $2.40

per automobile.

This cost will be with us until a way of preventing all cash related fuel fed fires is developed.

If we assume that all crash related fuel fed

fires can be prevented commencing with a

specific model year another type analysis

can be made.

Along with the assumptions numbered

above the following assumptions are necessary:

1. G.M. builds approximately 5,000,000 automobiles per year.

2. Approximately 11% of the automobiles

on the road are of the current model year at

the end of that model year.

This analysis indicates that for G.M. it

would be worth approximately $2.20 per new

model auto to prevent a fuel fed fire in all

accidents.

500 fatalities times 11 percent new model

autos equals 55 fatalities in new model autos.

55 fatalities times $200,000 per fatality divided by 5,000,000 new model autos equals

$2.20 per new model auto.

This analysis must be tempered with two

thoughts. First, it is really impossible to put

a value on human life. This analysis tried to

do so in an objective manner but a human fatality is really beyond value, subjectively.

Secondly, it is impossible to design an automobile where fuel fed fires can be prevented

in all accidents unless the automobile has a

non-flammable fuel.

E.C. IVEY,

Advance Design

Mr. SPECTER. Mr. President, another similar modification occurred by

the Pitman-Hutsik Co., relating to

boom tip contacts used on cherry pickers with an analysis that a large number of accidents occurred with these

boom tip contacts, and as a result of

the jury awards in product liability

cases, the design was changed.

I ask unanimous consent that the

last item be printed in the RECORD.

TYPICAL ACCIDENTS

1. Boom tip contact: Metallic portion of

upper boom contacted a line, and the operator touched these metal parts as well as another line.

2. Boom contact or crane contact: A non-insulated boom or lower boom of an insulated

device contacted a line, resulting in injury

to personnel on the ground.

3. Phase/phase contact: Operator in the

bucket personally touched two phases or a

phase and ground, resulting in an injury, but

the machine carried no current.

4. Tipovers: Machine turned over because

of: (1) improper outrigger placement; (2) outrigger malfunction or breakage; (3) outriggers were not used; (4) driving accident;

(5) overload; (6) et al.
S5906 CONGRESSIONAL RECORD — SENATE May 1, 1995

5. Controls contacted foreign object: Controls

malfunctioned or contacted foreign object,

forcing machine to continue to move against

the object.

6. Leveling cable failures: Bucket leveling

system broke for some reason, causing operation to fail.

7. Boom collapse: Component in boom system broke due to overload, poor maintenance, etc., allowing the boom to collapse.

8. Boom collision: Boom collided with personnel during operation of the machine.

Boom collision is sometimes the result of a

boom collapse, also.

DISCUSSION OF PERTINENT DATA

Electrical accidents account for 29 percent

of the total number of accidents, but account

for 77 percent ($21,500,000.00) of the active

claims.

The largest single type of electrical accident is ‘‘Boom Tip Contact.’’ It accounts for

40 percent of the number of electrical accidents and 67 percent of the total dollar value

of the active claims. ($18,500,000.00) Those

electrical accidents involving metal boom

machines usually do not lead to lawsuits and

represent only 9 percent ($2,500,000.00) of the

dollar value of our active claims. The same

is true for ‘‘Phase-Phase’’ contacts, which

account for only 1.5 percent ($500,000.00) of

the active claims.

Contractors have fewer numbers of accidents than utilities, but contractors have a

higher accident rate per machine. (This

statement may be somewhat inaccurate, because it is felt that utilities, in some cases,

tend to hide some of their accidents.)

Contractors account for 76 percent

($21,200,000.00) of the active claims against

the A.B. Chance Company, while utilities account for only 15 percent of the active claims

($4,300,000.00). Of the $21,200,000.00 claims

from the contractors, $18,000,000.00 resulted

from electrical accidents, $15,000,000.00 of

which was attributed to ‘‘Boom Tip Contact.’’

There being no objection, the material was ordered to be printed in the

RECORD, as follows:

COST TO IMPLEMENT TECHNICAL

RECOMMENDATIONS

(A) Estimated cost to design a machine

with the following features:

1. Insulated boom tip.

2. Insulated lifting attachments.

3. Boom interlock system.

4. Tip-over warning system.

5. Improved leveling system.

6. Improved hydraulic control system.

7. Improved placards.

Estimated time: 2 years:

Design Prototype Test, Document;

$200,000.00.

Tooling: $10,000 to $25,000.00.

(B) Estimated Cost Increase of Machine:

$2,000.00.

(C) Dollar value of active lawsuits as result

of ‘‘Boom Tip Contact’’: $18,500,000.00.

(D) Assuming average awards paid out

equal to 2.5 percent of total claims dollar

value (.025 18,500,000): $462,500.00.

CONCLUSION

If $225,000.00 could be spent to alleviate the

liability exposure due to ‘‘boom tip contact’’,

it would appear that this expense could be

justified.

Mr. SPECTER. Mr. President, finally, in a confidential legal opinion on

a matter involving the Clark Equipment Co., Hancock Division, is the following statement.

* * * the lack of a back-up alarm presents

a substantial product liability exposure to

Clark that far exceeds any requirements of

State safety laws or OSHA. In every case in

which we have had an injury involving a person struck by a machine, the absence of a

back-up alarm has been very crucial.

* * * The customer is not in the same position as the manufacturer and Clark must

take all steps necessary to protect itself—

Showing the safety and precaution

taken as a result of the liability imposed in product liability cases.

I ask unanimous consent that the

full text of that document be printed in

the RECORD.

There being no objection, the material was ordered to be printed in the

RECORD, as follows:

BUCHANAN, MI,

August 29, 1974.

CONFIDENTIAL LEGAL OPINION

To: Phil Hoel, Hancock Division.

I have received your memo concerning

making back-up alarms standard on all

scrapers. I disagree with you that the decision concerning making back-up alarms

standard should be made by the Sales Department.

Although there are many states that do

not require a back-up alarm at this time,

and, in fact, OSHA would make it optional

since you can also provide a flagman to signal when to back up, the lack of a back-up

alarm presents a substantial product liability exposure to Clark that far exceeds any

requirements of state safely laws or OSHA.

In every case in which we have had an injury

involving a person struck by a machine, the

absence of a back-up alarm has been very

crucial. I must conclude that it is a very substantial fact in the mind of any juror that if

the machine had had a back-up alarm, the

injury might have been prevented. This

thought must be in the minds of the jurors

no matter how great the evidence is that the

back-up alarms are not required by state

safety laws or are not effective because the

engine noise is too loud.

I think this must be an overall management decision and should not be left to the

Sales Department since that department

only gives basically a reflection of what the

customer wants. The customer is not in the

same position as the manufacturer and Clark

must take all steps necessary to protect itself, whether the customer wants it or not.

Accordingly, I again strongly suggest that

you consider making back-up alarms standard on all scrapers. I was informed yesterday

by Walt Black that Benton Harbor has decided to make such alarms standard on all

loaders, and I applaud them for that decision. I would hope you could reach the same

conclusion.

STEVE ANDERSON,

Assistant Counsel.

Mr. SPECTER. Mr. President, in the

Iowa Law Review article that I have

referred to, there is a lengthy listing of

protective measures which were taken

after litigation disclosed a substantial

problem. They have a special probative

value in showing that when product liability litigation occurs, there is a

very practical impact on safety for the

consumers.

For example, when the CJ–7 Jeep was

found to have inadequate roll-over protection on the off-road vehicle, punitive damages caused a safety measure

to be taken to redesign the product and

add a new warning.

When the Toyota Corona was found

to have a fuel integrity problem due to

the placement of tanks with injuries

and deaths, there was a redesign.

When power lines were found to have

uninsulated components causing electrocutions, there was a multi-milliondollar safety program.

When there was a television manufacturer with tubes made of wax and

paper which posed a fire risk, despite

the company’s knowledge of numerous

house fires, it did not warn or redesign

until the litigation in effect compelled

a redesign.

There is a long list which appears at

pages 81 and 82 of the Iowa Law Review

article, which I shall not take the time

to read now, but are worthy of special

note, because once there is an aggravating factor determined in the litigation of product liability cases, there

are safety measures which are taken.

Mr. President, I have taken this time

to put into the RECORD some concrete

cases, where the presence of liability

and the presence of punitive damages

has had a profound effect on influencing the conduct of the producers. I

think these are matters which have to

be taken into account that I have included in the RECORD so my colleagues

will have access to this information

when the CONGRESSIONAL RECORD is

printed tomorrow. That will be in

ample time for consideration of this

kind of material in their legislative

judgments.

Mr. President, I see that my colleague, Senator DEWINE, has come to

the floor, so I will yield the floor to

him and also the duties involved in

wrap-up, which I have agreed to undertake thinking I would be the last

speaker.

I yield to my colleague, Senator

DEWINE, at this time.

Mr. DEWINE. Mr. President, I suggest the absence of a quorum.

The PRESIDING OFFICER. The

clerk will call the roll.

The assistant legislative clerk proceeded to call the roll.

Mr. DEWINE. Mr. President, I ask

unanimous consent that the order for

the quorum call be rescinded.

The PRESIDING OFFICER. Without

objection, it is so ordered.

Mr. DEWINE. Mr. President, I rise

today to discuss in general terms the

underlying product liability this Senate has now been debating for several

days, and to also discuss the medical

malpractice amendment that is pending before the Senate.

I intend to discuss tonight some of

the concerns that I have with these

bills, but also I hope to talk a little bit

about some of the hopes that I have in

regard to the things that I hope a wellcrafted bill can, in fact, achieve, and

some improvements that we can make

in our current legal system.

Mr. President, I do not pretend to be

an expert in this area. I have spent a

considerable period of time in the last

2 to 3 months reading, talking, and

more importantly, listening—listening

to business men and women, listening

to others who have concerns about our
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5907

current system, and some who have

concerns about this particular bill.

Some people, Mr. President, have

been, I think, surprised, some amazed,

that this Senator from Ohio did not

automatically jump on this bill, saying

we will approve everything in it just

because it was labeled a ‘‘reform’’ piece

of legislation.

We do need reform. I think the question before the Senate today, tonight,

tomorrow, next week, will be what

really constitutes reform? What will

truly help the small companies, small

manufacturers in Ohio and other

States who are threatened by the current system? But what reform, also,

will we utilize that will not take away

the victim’s rights, nor will it stop the

deterrent effect that I find to be an essential part of our system today?

I believe that we have to approach

this debate cautiously and carefully.

Let me first start tonight by listing a

few reasons why I believe we do have to

approach this very serious, very important debate from a point of view of caution. Let us make no mistake about it,

even the relatively narrowly drafted

bill that was introduced, that we began

this debate with, even if it was passed

and nothing more—no amendment,

none of the amendments that we have

heard about to expand the bill—if the

bill was passed in its original form, it

would still constitute the most radical,

the most dramatic change in our civil

justice system in the history of this

country.

For over 200 years the tort law in this

country, the civil justice system, has

developed not primarily at the Federal

level. Rather, it has been a homegrown product. It has been developed in

State after State—in Ohio since 1880—

both by statute, by action taken by the

State legislature, but also in court case

after court case after court case. We

have developed a fairly fine-tuned tort

system to handle disputes between individuals, to handle tortious conduct.

Clearly the system does not work

perfectly. By and large it does work.

The proposal before us is, for the first

time, to federalize that tort system.

The only example I can think of where

this Congress really became involved

in the tort law, civil justice law, was

when Congress passed—and I think it

was a correct decision—a bill to give

help to the general aviation industry in

this country. Congress acted only after

it was clear that general aviation had

been driven overseas. The results of

that bill have been positive. We have

seen jobs come back to this country.

That industry now, instead of contracting in this country, is expanding. But

with that exception, Congress has

never gotten into this area.

I believe there are some very sensible

reasons for this past reluctance on the

part of the U.S. Congress. A simple way

to express Congress’ concern is to invoke the concept of Pandora’s box.

Once you open up this area of law to

congressional interference, congressional control, where does that stop?

Where does the debate stop?

If anyone doubts this is a legitimate

concern, I ask them to look at some of

the amendments that have already

been offered or will be offered in the

next few days. Should there be a Federal cap for lawyers’ fees? What should

be the contractual relationship between employers and employees? What

sort of evidence should be admissible

at trial? That is just the beginning.

Having said this, that it is a dramatic change and we should proceed

with caution, that does not necessarily

mean we should not proceed at all. But

what it does mean is that we should go

into this debate with our eyes wide

open, and we should understand what

we are tackling, and we should understand how significant a change in our

law this will be.

Let me next turn to another reason I

think we, particularly in the year 1995,

need to approach this debate with caution. There is some irony that this historic Congress, a Congress which is devoted to thinking and talking about

State prerogatives and States rights

and the value of returning power to the

people, the value of returning power to

the States, that this Congress should

today be debating a bill that does just

the opposite, that really says the U.S.

Congress in certain areas—product liability, medical malpractice—will impose its will, will impose a national,

uniform standard on all the States in

the Union.

Merely because it is strange, again,

Mr. President, does not mean we

should not necessarily do it. But,

again, I think it points up how cautious we have to be as we begin this

task. It is somewhat ironic that the

very qualities we value, particularly

those of us on this side of the aisle—

self-help, market forces, local as opposed to national authority being better—are basically present in our current system. But they would in fact be

changed and be compromised by this

legislation.

Let me cite what to me is an interesting example. We have been considering in committee a regulatory reform

bill. One of the complaints I have heard

from business men and women, particularly small businesses, as I travel

across Ohio, is how overregulated they

are. I totally agree. If there is one

thing this Congress needs to do it is to

get the Federal Government off the

backs of small business men and

women. The bill we have reported out

of our committee makes an attempt at

doing that and I think it will improve

the law. I think the bill as we report it

could actually be improved. I am going

to work to do that when it reaches the

floor.

But there is, again, some irony here.

The bill that this Congress has proposed to help business men and women

get the Federal Government to back off

and to stop overregulating puts more

power in the hands of business men and

women to sue the Federal Government,

to sue the regulators. It is almost a

self-help, self-enforcing provision. And

the basic principle behind this bill, I

believe, is that if you really want to

get control of the Federal regulators,

about the only way you can do it—you

cannot do it by changing the law and

changing the regulations—the most effective and efficient way to do that is

to open up the court system and to rely

on business men and women to go into

court and sue the bureaucrats, sue the

regulators. Again, back to some of the

basic principles I talked a moment ago,

self-help being one of them.

This bill, in a sense, does move in the

other direction. So, again, another reason to be cautious.

This bill in its various forms, depending on which amendment we look at,

caps punitive damages. I believe we

need to have a very, very fine balancing test as we approach this particular issue. Punitive damages have

been with us for a long time. Punitive

damages—let us be very plain about

it—are intended to punish. There have

been some Members who have talked

on the floor almost in surprise that punitive damages are used to punish.

That is what they are intended to do.

That is what the definition of punitive

damage is.

But the real benefit to society in regard to punitive damages is not the

punishment inflicted on the wrongdoer.

The real value to society is that punitive damages in some cases, and in

some very important cases, serve as a

deterrent for some small minority of

people in this country who put a product into circulation and then who, in

spite of evidence to the contrary, evidence that should indicate to them

they should either make a change in

that product or withdraw the product

or notify consumers, still go ahead and

do none of the above. Punitive damages, the threat of punitive damages in

some cases can serve as a deterrent.

When a jury awards punitive damages in a product liability case, that

jury may in fact be saving lives. The

historic purpose of punitive damages is

to punish and also to deter. Here is

what the Supreme Court said. I quote:

The purposes of punitive damages are to

punish the defendant and protect the public

by deterring the defendant and others from

doing such wrong in the future.

Let me read it again:

. . . protect the public by deterring the defendant and others from doing such wrong in

the future.

The purpose of punitive damages is

to deter conduct that hurts people, but

the product liability legislation we are

considering does seek to limit the

jury’s use of that vitally important deterrent. Now, the real question,

though, Mr. President, for this Senator

at least, is what kind of cap, what dollar amount will achieve the legitimate,

desired results that the proponents of

this bill want to achieve without really

hurting or eliminating this deterrent

effect? That I think is one of the key
S5908 CONGRESSIONAL RECORD — SENATE May 1, 1995

and most important questions that this

Senate faces.

Let us talk a minute about how punitive damages work in real life. A tampon manufacturer received studies and

medical reports that linked high absorbency tampon fibers to toxic shock

syndrome. Other tampon manufacturers responded to the warning by either

altering or withdrawing their product.

But the manufacturer in question that

I am talking about did not do that.

This manufacturer tried to profit from

the disadvantage of its competitors

and, frankly, tried to profit from the

good works of its competitors and the

fact that they did the right thing. This

manufacturer advertised how effective

this product was at a time when its

competitors were reducing the absorbency of their products because of this

health warning.

The court in this particular case

came to the following conclusion:

Our review of the record reveals abundant

evidence that [they] deliberately disregarded

studies and medical reports linking high-absorbency tampon fibers with increased risk

of toxic shock at a time when other tampon

manufacturers were responding to this information by modifying or withdrawing their

high absorbency products . . . that [they] deliberately sought to profit from this situation by advertising . . . [And this] occurred

in the face of [their] awareness that [their]

product was far more absorbent than necessary for its intended effectiveness.

The jury in the case awarded $10 million in punitive damages. The manufacturer then withdrew the product.

Tragically, Mr. President, that is what

it sometimes takes—a small minority

of cases—to deter people. It takes punishment. It takes punitive damages. So

I think we need to proceed very carefully in this area.

The Senator from Maine has offered I

think a very appropriate amendment.

The Snowe amendment is an attempt

to preserve the punitive and deterrent

function of punitive damages while at

the same time placing a cap, a cap that

will, in fact, bring some predictability

to business decisions that are made by

manufacturers, by other business men

and women, a cap that will achieve a

goal of not only bringing predictability

but allowing the manufacturer to expand and allowing them to move into

other markets and to do things that

will benefit the public that they would

not be able to do but for the cap.

Mr. President, I support the Snowe

amendment. If for some reason this

Senate would vote down the Snowe

amendment and proceed to adopt the

product liability legislation in its current form, then I believe the punitive

and deterrent effect of these damage

awards could be seriously weakened.

By basing punitive damage awards only

on economic damages, the product liability legislation does an injustice,

the current bill does an injustice in

those cases where the plaintiffs suffer

only minor monetary losses but—but—

severe and other permanent harm of a

nonmonetary kind. The Snowe amendment would rectify that. That is why I

intend to vote for it.

That being said, I should mention

that I do have a concern about the equity of the Snowe formula as regards

small companies versus large companies; that while in fact this cap may be

appropriate for the huge companies, it

may not be appropriate in regard to

small companies, and we may need to

provide them more assurance and more

protection. I am concerned that under

this particular formula small companies are punished somewhat disproportionately. A small company may well

be destroyed outright by a damage

award that would serve merely as an

appropriate deterrent to a much larger

company. This is a concern that we

might want to address during the

amendment process.

In fact, one way of looking at it was

expressed to me by a small businessman from Ohio several weeks ago. This

is what he told me: A punitive award

that might just be a serious deterrent

to a big company might really be a

death penalty for a smaller company.

Let me list some other concerns that

I do have about this bill. Earlier today

on this floor, I offered an amendment

concerning the civil penalties for sex

abuse by doctors. I am sure that even

those who strongly favor the passage of

this bill will join me in making it clear

that we do not want to cap damages in

cases in which a doctor sexually abuses

a patient. I think it would be wrong for

this Senate, for this Congress to impose a national cap and to tell each

State in the Union to tell the juries of

each State in the Union that there is a

limit on the punitive damages you can

award against a doctor once you have

already found that doctor has sexually

abused a patient.

Let me talk about another area of

concern. I intend to offer another

amendment to preserve the right of juries to consider the financial status of

defendants in product liability cases.

As currently written, the product liability bill would forbid juries from

considering the assets of the corporation while considering what the proper

punitive damages should be. This provision would drastically weaken the

punitive and deterrent effect of damage

awards, and that is why I will be working to amend that part of the bill.

I can find no logical reason, Mr.

President, why this Congress should, in

this particular case, override the settled law in virtually every State in the

Union that does, in fact, allow a jury

to take that into consideration.

If the jury, in the punitive, as is their

job, is trying to make a punishment

and is trying to deter, then it seems to

me it would be wrong to deny the jury

the knowledge of exactly what assets

that company does in fact have, because, Mr. President, if that knowledge

is denied to the jury, the jury could err

either way. They may assume, incorrectly, that a company has a lot of assets and it may turn out the company

does not have a lot of assets. And so

when they impose that award to get

the company’s attention, to deter future conduct, it may not be an appropriate amount. It may be too much. It

may impose an unbelievable burden on

that company; or, on the other hand, it

may not be enough.

Mr. President, let me make it very

clear. The current system is not all

good. It is not perfect. If it were, I do

not think we would be here today. If it

were, I would not have heard from so

many people that I have heard from in

Ohio about this particular problem.

What we are really doing, Mr. President, and what we should be doing, I

think, ultimately, is a balancing test.

That is what I think we have to do. We

have to balance the benefits and costs

of the current system versus the benefits and costs of this bill; or, maybe a

better way of saying it, the benefits

and costs of the bill that we finally do,

in fact, pass.

Mr. President, I am concerned that

the current system in some cases deters innovation. And I think one of the

strongest—no, I think the strongest—

argument for changing the current system, and the strongest argument for

imposing some caps in regard to punitive damages is that the current system does deter innovation.

We all know and are aware, Mr.

President, of products that have been

kept off the market because of our current law. We have all heard how no

company will make an antinausea drug

for pregnant women. I talked yesterday

to a lawyer from a major company who

said no one is going to do it; simply not

going to do it. ‘‘We have the technology; we could put it on the market.

But we are not going to take the risk.

We are not going to accept the risk

that we have to accept because of lawsuits.’’

So if we can give some relief in this

area, then products such as the

antinausea drug for pregnant women

may be able to come onto the market.

Another example, in 1992, a company

stopped testing a vaccine for preventing the transmission of the AIDS virus

from an infected mother to her unborn

child. Think of that. I have no idea,

Mr. President, whether or not that

product would have made it onto the

market. I have no idea whether that

product would have worked. But heavens, the last thing in the world we

want to do is to stop innovation in the

research in regard to AIDS. What a

tragedy it would be if we had the ability to move forward and to develop this

particular vaccine that would keep

that unborn child from being infected.

That is another, I believe, argument

for some change.

Also, liability concerns have hindered the development of microbicides

used to prevent the spread of AIDS.

Mr. President, during this debate, we

have all heard and will continue to

hear provisions about lawyer’s fees.

There are going to be several other

amendments also offered. I may support some; some I may not. I am not
May 1, 1995 CONGRESSIONAL RECORD — SENATE S5909

too concerned about the lawyers. Lawyers can generally take care of themselves.

But, Mr. President, I think what we

have to look at when we look at some

of these limitations on fees is what impact it will have on the market, what

impact it will have on poor people’s

ability to get into the ball game. And

in this case, getting into the ball game

means getting into court.

If some of these well-intentioned,

well-sounding amendments do in fact

hinder poorer people from having access to the courthouse door, then I

think the right thing to do would be to

oppose them. We need to preserve access to the courtroom for people who

have been harmed. We should do this to

their benefit, not for the benefit of the

lawyers.

Last week, Mr. President, I voted for

an amendment that would force lawyers to disclose their fees. I think that

is a good idea. I voted for another

amendment that would make sanctions

mandatory in cases when lawyers bring

lawsuits that are legally determined to

be frivolous by a trial judge. I think

that is a good idea, too.

But I do part company with the proponents of this legislation when they

do things that would limit the legal

rights of indigent plaintiffs. I believe

that that is precisely what some of

these amendments would have the effect of doing.

Mr. President, over the last 4

months, I have had more than 55 meetings with concerned Ohioans and others about the faults and merits of this

legislation. I intend, Mr. President, to

be working over the next couple of

days and probably weeks to improve

the system—to improve the system,

but also to make sure we do not abandon some of the extremely positive effects of the legal system we have built

up over the last 200 years.

Mr. President, that concludes my

statement this evening on this issue.

Mr. President, at this point, on behalf of the leader, I ask unanimous

consent that the pending amendment

be set aside.

The PRESIDING OFFICER. Without

objection, it is so ordered.

AMENDMENT NO. 616 TO AMENDMENT NO. 603

(Purpose: To provide for uniform standards

for the awarding of punitive damages)

Mr. DEWINE. Mr. President, I send

an amendment to the desk on behalf of

Senator DODD.

The PRESIDING OFFICER. The

clerk will report the amendment.

The assistant legislative clerk read

as follows:

The Senator from Ohio [Mr. DEWINE], for

Mr. DODD, proposes an amendment numbered

616 to amendment No. 603.

Mr. DEWINE. Mr. President, I ask

unanimous consent that reading of the

amendment be dispensed with.

The PRESIDING OFFICER. Without

objection, it is so ordered.

The amendment is as follows:

Strike section 15 of the amendment and

insert the following new section:

SEC. 15. UNIFORM STANDARDS FOR AWARD OF

PUNITIVE DAMAGES.

(a) GENERAL RULE.—Notwithstanding any

other provision of law, punitive damages

may, to the extent permitted by applicable

State law, be awarded against a defendant in

an action that is subject to this Act if the

claimant establishes by clear and convincing

evidence that the harm that is the subject of

the action was the result of conduct that was

carried out by the defendant with a conscious, flagrant indifference to the safety of

others.

(b) BIFURCATION AND JUDICIAL DETERMINATION.—

(1) IN GENERAL.—Notwithstanding any

other provision of law, in an action that is

subject to this Act in which punitive damages are sought, the trier of fact shall determine, concurrent with all other issues presented, whether such damages shall be allowed. If such damages are allowed, a separate proceeding shall be conducted by the

court to determine the amount of such damages to be awarded.

(2) ADMISSIBLE EVIDENCE.—

(A) INADMISSIBILITY OF EVIDENCE RELATIVE

ONLY TO A CLAIM OF PUNITIVE DAMAGES IN A

BIFURCATED PROCEEDING.—Notwithstanding

any other provision of law, in any proceeding

to determine whether the claimant in an action that is subject to this Act may be

awarded compensatory damages and punitive

damages, evidence of the defendant’s financial condition and other evidence bearing on

the amount of punitive damages shall not be

admissible unless the evidence is admissible

for a purpose other than for determining the

amount of punitive damages.

(B) PROCEEDING WITH RESPECT TO PUNITIVE

DAMAGES.—Evidence that is admissible in a

separate proceeding conducted under paragraph (1) shall include evidence that bears on

the factors listed in paragraph (3).

(3) FACTORS.—Notwithstanding any other

provision of law, in determining the amount

of punitive damages awarded in an action

that is subject to this Act, the court shall

consider the following factors:

(A) The likelihood that serious harm would

arise from the misconduct of the defendant

in question.

(B) The degree of the awareness of the defendant in question of that likelihood.

(C) The profitability of the misconduct to

the defendant in question.

(D) The duration of the misconduct and

any concealment of the conduct by the defendant in question.

(E) The attitude and conduct of the defendant in question upon the discovery of the

misconduct and whether the misconduct has

terminated.

(F) The financial condition of the defendant in question.

(G) The total effect of other punishment

imposed or likely to be imposed upon the defendant in question as a result of the misconduct, including any awards of punitive or

exemplary damages to persons similarly situated to the claimant and the severity of

criminal penalties to which the defendant in

question has been or is likely to be subjected.

(H) Any other factor that the court determines to be appropriate.

(4) REASONS FOR SETTING AWARD AMOUNT.—

(A) IN GENERAL.—Notwithstanding any

other provision of law, with respect to an

award of punitive damages in an action that

is subject to this Act, in findings of fact and

conclusions of law issued by the court, the

court shall clearly state the reasons of the

court for setting the amount of the award.

The statements referred to in the preceding

sentence shall demonstrate the consideration of the factors listed in subparagraphs

(A) through (G) of paragraph (3). If the court

considers a factor under subparagraph (H) of

paragraph (3), the court shall state the effect

of the consideration of the factor on setting

the amount of the award.

(B) REVIEW OF DETERMINATION OF AWARD

AMOUNT.—The determination of the amount

of the award shall only be reviewed by a

court as a factual finding and shall not be

set aside by a court unless the court determines that the amount of the award is clearly erroneous.

Mr. DEWINE. Mr. President, I have

only offered this amendment for Senator DODD so that it would qualify

under the consent agreement, in that

Senator DODD, at this point, is unable

to be on the floor.

Mr. DE

MORNING BUSINESS

WINE. Mr. President, I ask

funanimous consent that there now be a

period for the transaction of morning

business, with Senators permitted to

speak for up to 5 minutes each.

The PRESIDING OFFICER. Without

objection, it is so ordered.

MEASURES PLACED ON THE

fCALENDAR

The following bill was read the second time and placed on the calendar:

S. 735. A bill to prevent and punish acts of

terrorism, and for other purposes.

EXECUTIVE AND OTHER

COMMUNICATIONS

fThe following communications were

laid before the Senate, together with

accompanying papers, reports, and documents, which were referred as indicated:

EC–746. A communication from the Assistant Secretary of Defense (Economic Security), transmitting, pursuant to law, the report on the Metric Transition Program; to

the Committee on Commerce, Science, and

Transportation.

EC–747. A communication from the Secretary of Transportation, transmitting, a

draft proposed legislation entitled ‘‘The

Commercial Space Launch Act Amendments

of 1995’’; to the Committee on Commerce,

Science, and Transportation.

INTRODUCTION OF BILLS AND

JOINT RESOLUTIONS

fThe following bills and joint resolutions were introduced, read the first

and second time by unanimous consent, and referred as indicated:

By Mr. THOMAS (for himself, Mr. MURKOWSKI, Mr. HELMS, Mr. LAUTENBERG,

Mr. GRAMS, and Mr. CRAIG):

S. 738. A bill to amend the Helium Act to

prohibit the Bureau of Mines from refining

helium and selling refined helium, to dispose

of the United States helium reserve, and for

other purposes; to the Committee on Energy

and Natural Resources.

By Mr. PACKWOOD:

S. 739. A bill to authorize the Secretary of

Transportation to issue a certificate of documentation with appropriate endorsement for

employment in the coastwise trade for the

vessel SISU, and for other purposes; to the

Committee on Commerce, Science, and

Transportation.