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[Congressional Record Volume 141, Number 73 (Thursday, May 4, 1995)]
[Senate]
[Pages S6148-S6155]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

          COMMONSENSE PRODUCT LIABIL- ITY AND LEGAL REFORM ACT

  The PRESIDING OFFICER. Under the previous order, the Senate will now 
resume consideration of H.R. 956, which the clerk will report.
  The assistant legislative clerk read as follows:

       A bill (H.R. 956) to establish legal standards and 
     procedures for product liability litigation, and for other 
     purposes.

  The Senate resumed consideration of the bill.

       Pending:
       (1) Gorton amendment No. 596, in the nature of a 
     substitute.
       (2) Abraham amendment No. 600 (to amendment No. 596), to 
     provide for proportionate liability for noneconomic damages 
     in all civil actions whose subject matter affects commerce.
       (3) Kyl amendment No. 681 (to amendment No. 596), to make 
     improvements concerning alternative dispute resolution.
       (4) Hollings amendment No. 682 (to Amendment No. 596), to 
     provide for product liability insurance reporting.

  Mr. GORTON. Mr. President, I yield 10 minutes to the Senator from 
Arizona.
  Mr. KYL. Mr. President, I thank the Senator from Washington for 
yielding. First, I want to begin by saying that the comments of the 
Senator from Georgia just now are right on the mark in terms of the 
amendment that we will be voting on. I certainly subscribe both to what 
he said and what the Senator from Washington has previously said about 
this.
  My conversation, Mr. President, this morning, has to do with a very 
specific amendment which we will be voting on, the Kyl-McCain 
amendment, which will have the effect of striking section 103 of H.R. 
956.
  This amendment preserves State law on alternative dispute resolution 
procedures and ensures the plaintiffs and defendants are treated 
equally through the ADR, or alternative dispute resolution process.
  The amendment strikes section 103, which says when alternative 
dispute resolution procedures are employed, these procedures are 
enforceable only against the defendant, not against the plaintiff. 
Currently, of course, under the State laws under which this would be 
applied, ADR provisions are equally applicable to the plaintiffs and to 
the defendants. Of course, it should remain that way.
  Mr. President, a fundamental tenet of American jurisprudence is that 
all parties go into court with equal rights. As a matter of fact, 
Americans, I submit, would not submit their disputes, their lives, and 
their fortunes to a decision by the judge or a jury if they knew that 
the deck was stacked against them when they began.
  That is precisely what this section 103 of the bill does today. That 
is why we are striking this section.
  What this section says is that when a State has an alternative 
dispute resolution procedure, the parties may use it. Well, that adds 
nothing to current law. That is the law of the States. Parties can take 
advantage of those alternative dispute procedures, and they should.
  As a matter of fact, we are trying to encourage more alternatives to 
proceeding through the actual trial of the case. The second part of 
section 103 provides for the notice by one party or the other that that 
party wants to invoke those procedures. Again, this amendment or this 
bill changes nothing in that regard.
  The part that changes the law and that we wish to strike is titled 
``Defendant's Penalty for Unreasonable Refusal,'' meaning unreasonable 
refusal to go through the alternative dispute resolution process. 
Defendant's penalty; there is no concomitant plaintiff's penalty.
  In other words, the authors of this section have provided that, 
although 
[[Page S6149]] the defendant would suffer the consequences of refusing 
to go through alternative dispute resolution, if the defendant wishes 
to go through that process--and we all encourage them to do so--and the 
plaintiff unreasonably refuses to do so, there is no penalty on the 
plaintiff.
  Mr. President, that is fundamentally unfair. It is exactly the kind 
of thing the American people wish Members to reform in this litigation 
process that we engage in in our country.
  The whole idea of reform here, the whole notion of what we are 
debating, is fairness. This provision would inject a fundamental 
element of unfairness where one party is penalized for not going 
forward with alternative dispute resolution, and the other party 
suffers no adverse consequences at all. It is fundamentally unfair.
  Now, what the provision states is that the court shall assess 
reasonable attorney's fees and costs against a defendant who refuses to 
proceed; final judgment is entered against that defendant that that 
refusal was unreasonable or not made in good faith.
  That is typical of the State alternative dispute procedures here, 
that where either parties says, ``Let's go to alternative dispute 
rather than going all the way through trial'', and the other party 
says, ``No, I do thought want to do that,'' and it turns out the other 
party loses and the court finds that that party's refusal to go through 
the alternative dispute resolution procedure was unreasonable or not 
made in good faith, then costs and attorney's fees can be assessed 
against that losing party. That is the law in many States today. We 
should preserve that law.
  This section of the bill changes that procedure in State law. It 
says, ``No, even though you say that the losing party who refuses to go 
through the alternative dispute resolution in good faith should have a 
penalty, we are going to strike that in the case of only one-half of 
the parties, the plaintiff.'' The plaintiff gets a free ride. The 
plaintiff can refuse alternative dispute resolution in bad faith and 
still not be penalized. A defendant who refuses alternative dispute 
resolution and who loses, and the court determines he has done that in 
bad faith, has a penalty rendered against him.
  Mr. President, I could argue either way that there should or should 
not be a penalty. I do not want to change the State law in that regard. 
That is why, instead of saying that the penalty would lie to both the 
defendant and the plaintiff, which we could have done with this 
amendment, we have simply said ``Let's strike the section and leave 
State law the way it is. State law treats both parties fairly. That is 
the way it should be.''
  So I urge all my colleagues who for the last several days have been 
arguing that this is not something that the Federal Government should 
be involved in, that we should let the States experiment, that we 
should let them decide their own procedures here--I urge them to 
support this resolution, my amendment, because my amendment allows the 
State law to be preserved as it is today with no change on alternative 
dispute resolution. I think we want to encourage alternative dispute 
resolution. We will certainly not be encouraging it if we say we 
believe in it but only if it is a stacked deck, only if it can be used 
against the defendant but not against the plaintiff.
  It is fundamentally unfair, and we should never be a party to 
changing the law of the States in a way that will result in unfairness 
to one side or the other in litigation. So I urge my colleagues when we 
vote in about an hour on these various amendments to the bill to 
support the Kyl-McCain amendment to strike section 103 and thus 
preserve State ADR proceedings and preserve the balance between 
plaintiffs and defendants proceeding under those procedures.
  I yield the floor, Mr. President.
  Mr. HEFLIN. I wonder if the Senator can respond to a question or two?
  Mr. KYL. I will be happy to reply.
  Mr. HEFLIN. I have come to somewhat agree with the Senator in regards 
to this. I have always been sort of puzzled as why that was put in 
there.
  Of course, in original ideas on alternate dispute resolution methods, 
some of the States have had what they call court-annexed arbitration, 
and they put a penalty relative to the failure to bind on the claimant, 
plaintiff, when this occurs, which raises an issue that it could be a 
violation of the seventh amendment, of the right to a trial by jury, by 
saying anything is mandatory under the concept of court-annexed 
provisions. Previous bills, as I recall, said if the judgment that 
occurred was less than what the award had been in an arbitration 
proceeding which is a part of the alternate dispute resolution, that 
then plaintiff would have to pay the reasonable attorney's fees and 
court costs and so on. And that raised the question of whether that was 
causing a claimant to be deprived of the right of trial by jury.
  This language here has, in section 103(a)(1), that they can have an 
offer to proceed to voluntary, nonbinding alternate dispute resolution. 
If it is voluntary and nonbinding, I do not understand why you would, 
in effect--unless it is sort of an effort to have an encouragement for 
defendants, realizing that claimants would be the ones who would 
probably want a nonbinding, voluntary alternate dispute procedure to 
start in order to more rapidly dispose of their claims. In particular, 
in the States that have had procedure, they usually have a dollar 
amount limitation.
  Actually, this is already authorized under existing law which we 
voted on several years ago, the Biden Civil Justice Act. I do not 
remember the specific title and name of it, but it authorized 
nonbinding alternate dispute resolutions in the Federal courts. You 
could have such a proceeding under this existing statute.
  So, I have been puzzled why proponents attempted to have the 
provision for a possible defendants' penalty. The only reason I see is 
I thought they were probably doing it for window dressing, purely for 
the purpose of trying to say we are giving something to the claimant; 
while we are taking away 100 different things, we are going to give you 
1 with the alternative dispute resolution provision.
  Of course they use the word ``unreasonable'' in this section which 
allows for some leeway on behalf of a defendant.
  But overall, in fairness, I sort of tend to support the Senator's 
amendment here to strike the provision from the underlying Gorton 
substitute. I do not know what the others will do but as it is right 
now, unless I am convinced otherwise, I may well vote with you.
  Mr. KYL. I appreciate the comments of the Senator from Alabama. That 
helps to give us more background on this as well. I think he is 
absolutely correct, that as a matter of States rights many States have 
these procedures today. If they have them, we leave them in place. But 
to the extent that we change them by saying in effect they only apply 
to one party, we, at the Federal Government level, will have injected 
an element of unfairness and I just do not think we want to be a party 
to doing that.
  I know the Senator from Washington wishes to proceed so that is all I 
will say about that, but I appreciate the comments of the Senator from 
Alabama. I certainly agree with him on that.
  The PRESIDING OFFICER. The Senator from Washington.
  Mr. GORTON. Mr. President, we are at this last half-hour or 45 
minutes before a series of votes, speaking to several amendments: The 
underlying broad amendment by the Senator from Michigan to extend the 
joint liability provisions of this bill to all litigation; the 
amendment proposed by the Senator from Arizona and discussed during the 
course of the last few minutes; and an amendment by the Senator from 
South Carolina on insurance data collection and reporting requirements.
  While he spoke briefly to that last night, I think it important to 
outline for the benefit of my colleagues who will soon be voting on it 
what that amendment actually does. The amendment is not so much an 
insurance reporting act, though it does add inevitably to the huge 
amount of paperwork with which our society and economy is already 
burdened, as it is another skillful attempt for all practical purposes 
to kill this bill, this whole idea.
  What the amendment would do would be to sunset all of the substantive 
provisions of the proposal which is now before us. I want to repeat 
that. It would sunset all of them.

[[Page S6150]]

  I am sorry. Mr. President, I apologize. The notes I have here--the 
Senator from South Carolina has crossed those provisions out of this 
provision. Now, it simply requires costly and unnecessary reporting 
requirements and institutes a brandnew Government bureaucracy.
  It stems from the proposition from the opponents to this bill that 
the only goal of the bill is to lower insurance costs. Yet, I do not 
believe that either the Senator from West Virginia or I have ever 
included lower interest costs as one of the rationales for the passage 
of this bill. We hope that it might well be an incidental impact of the 
passage of the bill. But it is not central to our arguments.
  To go back to the beginning, each of us has said that it is designed 
to improve the competitiveness of American businesses, large and small, 
to increase economic growth and to create more jobs, to make the 
present system more fair by making it more open to small claims through 
an alternative dispute resolution mechanism and by creating a uniform 
and in many cases in many States a more generous statute of limitation 
on claims and to reduce overall liability costs. But whatever the 
situation may have been 25 or 30 years ago, overall liability costs are 
a large universe, of which insurance premium costs are only one and one 
increasingly less important element. Why? For three reasons:
  First, in many States, punitive damage awards cannot be insured 
against. It is not true in all cases but it is true in many States. It 
is the arbitrary nature of punitive damage verdicts, which is a major 
goal of the reforms contained in this bill.
  Second, several years ago through a solution developed in the 
Commerce Committee, of which both the Senator from South Carolina and I 
are members, a market solution was created for the nonresponsiveness of 
insurance premiums to market changes by a Federal Risk Retention Act 
which allows small businesses to pool themselves together to self-
insure in the area of product liability, an act which has been utilized 
by thousands of small businesses across the country. So they are 
outside of the insurance field entirely.
  Finally, of course, most very large businesses, many of the business 
enterprises which have abandoned product lines or decided not to 
continue to develop new product lines, are self-insurers. They do not 
go to insurance companies to insure themselves against product 
liability costs. They make their own business judgments about what they 
will develop and what they will market.
  My friend and colleague from West Virginia is constantly brought up 
as being originally a sponsor of a bill like this a number of years 
ago. It is true that he was. But as I trust is the case with all of us, 
changing circumstances and greater thoughtfulness change our minds on 
particular courses of action. It has changed my mind on the substance 
of this bill. There was at least one previous product liability bill in 
the Commerce Committee which I opposed in the committee, one quite 
different from this. But when Senator Rockefeller, several Congresses 
ago, offered an amendment like this, the product liability bill that we 
were dealing with included strict limits on liability, caps on pain and 
suffering damages, which this one does not. We did not have the Risk 
Retention Act in existence at that time. It was a much better argument 
at that point that this proposal would have a clear cost-cutting effect 
on insurance.
  Mr. HEFLIN. Mr. President, will the Senator yield for a question?
  Mr. GORTON. Yes; I am happy to yield for a question.
  Mr. HEFLIN. I was interested in what the Senator had to say about 
whether the Senator really does anticipate that the passage of this 
bill would reduce insurance costs. The Senator has given a couple of 
reasons why certain things are outside. But as I understand it, one of 
the main ideas has been that this would cut transaction costs, which I 
question, because it bifurcates a trial requiring additional hearings. 
But basically, will the Senator agree that where companies have 
liability insurance that there is in practically all policies no limit 
on transactional costs? The defense that occurs to the company as a 
result of liability insurance is borne by the insurance companies. 
Therefore, I raise the issue.
   One of the arguments is the cost. I have heard the Senator talk 
about it--defense fees, the deposition fees, and those things from the 
defense side which really would be borne by the insurance companies. 
Therefore, it would have some relationship to the overall cost of 
insurance, would it not?
  Mr. GORTON. I am not entirely certain what the question from the 
Senator from Alabama consists of. But I think I understand it. I will 
do the best that I can to answer it.
  Yes; one of the goals of this bill is to reduce transaction costs. It 
is to see to it that more of the money that goes into the legal system 
goes to actual victims, whether product liability as the bill is now 
more inclusive, medical malpractice. We find it an absolute scandal 
that for every dollar that goes into the product liability system only 
40 cents or so gets to victims. And 60 cents goes to transaction costs, 
most of which goes to lawyers.
  We have not separated out how much of those lawyer fees are 
defendants' fees. That is a matter I suspect of indifference to the 
victim. It is 60 percent. Of course, for most insurance policies there 
is no limit on the amount that the insurance company will spend in 
defending the defendant in such a case. There hardly could be. Under 
those circumstances the claimant's attorney would simply drive the 
engine until that level had been reached and then no longer would have 
any opposition.
  What we are attempting to do in this bill is, one, create more 
situations in which there was a prompt settlement through something 
less than full litigation through the ADR provisions in the bill; 
second, by limiting to in some respects consistent with the 
Constitution--in fact, a response to the invitation from the Supreme 
Court of the United States under the Constitution to do so--somehow 
limiting the possibility of huge punitive damage verdicts causing cases 
to settle earlier, and at a more reasonable price and at a lower 
transaction cost; third, of course, simply doing more justice in the 
system. We hope that it will modestly cut back on the number of 
lawsuits that are brought in the first place, especially frivolous 
ones, and cause the meritorious lawsuits to be settled more quickly and 
even when they go to trial to be settled less frequently with lengthy 
appeals to appellate courts.
  This Senator did not say, I report, Mr. President, to my friend, that 
we did not believe that there would be any reduction in liability 
insurance costs. The Senator said that we were not utilizing that, we 
were not making that prediction as an argument in favor of the bill. 
The argument in favor of the bill is greater justice, especially for 
smaller claims, the increase in economic growth and the creation of 
jobs, and the encouragement of the development of new and improved 
products on the part of the American business community.
  If you ask this Senator does he think that liability insurance costs 
will go down, he does. He certainly hopes so. But the point is that if 
they do not, unlike the situation 8 or 10 years ago, those who have to 
purchase the insurance or who face product liability claims will have 
an alternative, an alternative that we created for them in risk 
retention pools.
 If the competitive market among big insurance companies does not lower 
the costs, those risk retention pools certainly will, and they are not 
a subject of this amendment.

  Mr. HEFLIN. I might inquire of the Senator if there was testimony--I 
do not know whether it was this year or last year--from the American 
Insurance Association, one of their officers, which basically said that 
passage of the bill would not, I repeat, not, bring about any reduction 
in liability insurance premiums? Some words are that there would be 
insurance cost savings. I do not remember right offhand the person who 
said it, but I remember seeing that in a previous report of the 
Commerce Committee.
  Does the Senator remember that testimony?
  Mr. GORTON. I do not remember that testimony this year. I believe the 
Senator from Alabama is probably correct about some such testimony for 
years past. But to exactly the extent that that is true, the amendment 
which we are discussing is irrelevant and has no impact other than 
probably 
[[Page S6151]] to drive up costs because it drives up the paperwork 
involved in the entire system.
  Mr. HEFLIN. In regard to the alternate dispute resolution, if I 
recall right--I do not have it before me right now--there was a GAO 
study which indicated that they thought the bill would increase the 
transaction costs and that one of the reasons for it was the way the 
alternate dispute resolution provision was contained in the bill. Does 
the Senator recall that testimony?
  Mr. GORTON. I am sorry; I was distracted.
  Mr. HEFLIN. I was speaking of the GAO report. I do not have it before 
me. But as I recall the GAO report indicated that the provisions of the 
bill--maybe it was a predecessor of it--in their judgment would not 
reduce transactions costs, and that one of the reasons was they felt it 
could possibly increase it was because of the alternate dispute 
resolution methods that were there--increasing it another hearing as 
well as the provisions dealing with bifurcation, separate hearings that 
you would have to go through--thereby bringing about additional 
lawyer's fees in regards to those proceedings, particularly on the 
defendant's side where there is an hour billable approach.
  Does the Senator recall that?
  Mr. GORTON. I have to say to my friend from Alabama I do not recall 
that. As the alternative dispute resolution provisions in these bills 
have changed from year to year, certainly no such report has been filed 
in connection with the alternative dispute resolution proceedings, or, 
rather, sections in this bill.
  I see, Mr. President, it is now 5 minutes after 12. I know my 
colleague from West Virginia wishes to speak, and I yield the floor.
  Mr. ROCKEFELLER addressed the Chair.
  The PRESIDING OFFICER (Mr. Thomas). The Senator from West Virginia.
  Mr. ROCKEFELLER. Mr. President, as one of the managers of what was 
once solely a bill to reform our product liability system, I wish to 
speak to my colleagues, those who share in a general sense the purpose 
of what we are trying to do here, about at least my views on the 
business before us.
  At 12:15, in 10 minutes, the Senate will vote on three pending 
amendments to this bill, and then vote on the first of two cloture 
motions. The second cloture motion vote is expected at 2 o'clock, maybe 
2:15. I am not sure.
  I am going to make a motion to table both the Abraham amendment on 
joint and several liability and the Kyl amendment that tries to delete 
the alternative dispute resolution section of this bill, alter it in 
ways which I find distasteful, but the message I wish to get across 
most strongly is that I will vote against both cloture motions. I will 
vote against the one at--whenever the first one comes, and I will vote 
against the second one. I will not vote for one and against the other, 
against one and for the other. I will vote against both. I want both to 
fail because there are those of us who believe that this bill needs to 
be kept to product liability--and I think there are many of us--so that 
we can at least get some tort reform accomplished, which we will not in 
any other event. Those folks need to vote in their conscience, if that 
is where their conscience dictates, against both cloture motions, to 
vote no on both cloture motions. And I hope anybody interested in 
achieving actual results on product liability reform will do the same 
and vote no on both cloture motions today.
  This past week, frankly, has been rather astonishing to me, Mr. 
President. One would think, when a majority of Senators get the chance 
finally, without a filibuster on the motion to proceed, when we finally 
get to work on a bipartisan, balanced, focused piece of legislation to 
deal with this very serious problem, that is precisely how they would 
spend their time here.
  But, no, instead, we have watched Senator after Senator come eagerly 
to the floor to add one more ornament to the tree. As I have said 
before, anyone who has ever decorated a Christmas tree knows that if at 
some point you put too many ornaments on, too many bows on one side of 
the tree, that tree is going to fall over and crash down and you lose 
the ornaments, the tree, the Christmas spirit, and it is a terrible 
vacation. That is the situation I see before us right now. And the 
amendments from Senators Abraham and Kyl are going to assist in sending 
this tree to the ground.
  The Senate has had absolutely no opportunity that I know of to 
consider whether the joint and several provisions in the product 
liability bill make sense for the rest of civil actions. I do not know 
of any hearing on the topic. I do not see a bill from the Judiciary 
Committee on the topic, or a report laying out the arguments on an idea 
as significant as this one. Yes, the House of Representatives made a 
sudden decision to throw the idea into their stew of legislation on 
tort reform that passed a couple weeks ago. But this body is supposed 
to keep a standard of actually thinking about what it is on which we 
vote. We pride ourselves on that. And the idea of deleting the section 
in this bill that promotes alternative dispute resolution is appalling 
to me.
  Maybe I need to restate the obvious. Legislation becomes law when 
interests are balanced, when legislators work out difficult problems 
together, when problems are addressed with practical remedies.
  The alternative dispute resolution provision in our product liability 
bill is there for these reasons. Here is one of the parts of this bill 
designed solely and specifically to deal with one of the most maddening 
problems in product liability. Victims have to wait too long for 
compensation. The system is too slow and too inefficient. If I am a 
small farmer from West Virginia or some other place and I do not have 
any money, and I do not have any money to hire lawyers or any money to 
pay for time for 3 years to go by, I can avail myself of the 
alternative dispute resolution.
  We want to encourage that small farmer who does not have the 
resources, the small business person, the person of very modest means. 
And this is the way we do it, by allowing him this particular 
advantage. That is why we want to promote alternative dispute 
resolutions in a way that will speed things up so that that small 
farmer will, in fact, come in and probably just speak for himself and 
the case will be simply handled right there on the spot, no lawyer, no 
problem, no time, no expenditure of money.
  I really do not think we have to apologize for devising an approach 
that is slanted toward the victim when we are talking about encouraging 
them to resolve their cases earlier. Remember, they have wait to 3 
years now. We are trying to encourage people to get that amount of time 
down.
  So in the strongest possible terms, I urge my colleagues to defeat 
both of these amendments. And I urge my colleagues, again, to vote 
against cloture, not just the first cloture vote but also the second 
one that will take place this afternoon at about 2 o'clock.
  We now have a bill that has become deformed, disfigured. A small 
group of Senators has refused to follow the discipline of working out 
with the rest of us who are interested in enacting product liability 
reform what we will do to accomplish that. Until they do, we should 
bring this bill to a halt.
  A majority of Senators are clearly interested in a balanced, moderate 
product liability reform bill--I am convinced of that; I deeply believe 
that--that serves consumers, victims of defective products, and 
business in a balanced way. We still have that opportunity. The pending 
cloture votes will demonstrate what it takes to succeed.
  Mr. President, I thank the Chair and yield the floor.
  Mr. HEFLIN addressed the Chair.
  The PRESIDING OFFICER (Mr. Thomas). The Senator from Alabama.
  Mr. HEFLIN. Mr. President, I am delighted to hear Senator Rockefeller 
state that the way the bill stands now, it is deformed and disfigured. 
That reminds me that this bill, as it stands right now, is pretty much 
similar to what the House passed. I do not think whatever we pass here 
in the Senate, when it goes to conference, is going to come out much 
different from the House bill. I think we know that the Speaker over 
there has great influence.
  I just feel that, basically, whatever we do here which passes the 
Senate and goes to conference will reflect the Speaker's position on 
this overall issue. I think the key battle is the battle here in the 
Senate and the Senate's 
[[Page S6152]] role to be deliberate and to prevent unwise, unfair 
legislation.
  Now, if there is a disfigurement and a deformity by extending the 
language pertaining to punitive damages, by extending the language 
eliminating joint and several liability to cover all civil actions, 
then that is a recognition that there is a fault with that extension, 
there is a fault with the overall underlying principle that is being 
brought forth here in regard to punitive damages and also to 
eliminating joint and several liability.
  The PRESIDING OFFICER. Under the order, a vote is to occur at 12:15.
  Mr. HEFLIN. Mr. President, I ask unanimous consent that I be allowed 
to proceed for 3 more minutes.
  Mr. GORTON. No objection.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. HEFLIN. I send to the desk and will ask to have printed in the 
Record a letter, dated May 25, 1990, to the Honorable Richard H. Bryan, 
then chairman of the Subcommittee on Consumer Affairs, Committee on 
Commerce, Science, and Transportation, pertaining to the GAO study.
  One of the questions that he asked was:

       In your research of the current product liability system, 
     have you found any evidence that would support the argument 
     that the current tort system has led to an increase in 
     transaction costs?

  And they ended up saying: ``We believe that S. 1400''--which was a 
predecessor bill--``is unlikely to reduce transaction costs in product 
liability suits.''
  I send that letter to the desk and ask unanimous consent that it be 
printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                    General Accounting Office,

                                     Washington, DC, May 25, 1990.
     Hon. Richard H. Bryan,
     Chairman, Subcommittee on Consumer, Committee on Commerce, 
         Science, and Transportation, U.S. Senate.
       Dear Mr. Chairman: Enclosed are my responses to your 
     questions regarding my February 28, 1990, testimony on 
     product liability. If you have additional questions or if I 
     can be of further assistance, please call me, or Cynthia 
     Bascetta.
           Sincerely yours,
                                                Joseph F. Delfico,
                                 Director, Income Security Issues.
       Enclosure.
       1. In your research of the current product liability 
     system, have you found any evidence that would support the 
     argument that the current tort system has led to an increase 
     in transaction costs? What are the major factors that 
     contribute to the level of transaction costs? Do you believe 
     that S. 1400 would reduce transaction costs in product 
     liability suits?
       In our review, we did not collect data over time to assess 
     whether the current tort system has led to an increase in 
     transaction costs. We reviewed a 1987 study by the Rand 
     Corporation, however, that reported that between 1980 and 
     1985, the annual growth rate for the amount of tort 
     litigation was about 3 or 4 percent. Expenditures for this 
     litigation grew at about 6 percent for automobile-related 
     litigation and about 15 percent for other tort claims, 
     including product liability.\1\ Although the literature is 
     replete with general concerns about the costs of litigation, 
     we did not find any other research documenting trends in 
     transaction costs associated with the current tort system.
     \1\Hensler, Deborah R. et al, ``Trends in Tort Litigation: 
     The Story Behind the Statistics,'' Rand Corporation, 
     Institute for Civil Justice, Santa Monica, CA, 1987, p. 25.
       The major factor affecting the level of transaction costs 
     is the length of litigation. As we reported, cases we 
     reviewed took years to process--almost 2-\1/2\ years to move 
     from filing of a complaint to the beginning of the trial. On 
     average, appealed cases took 10 more months. In our review, 
     we noted two possible reasons for lengthy litigation in 
     product liability cases. First, the law has been evolving in 
     many states, which may increase the complexity of the legal 
     decisionmaking process. Breaking new ground and establishing 
     new precedents, for instance, take more time than cases where 
     the law is clearer and requires little deliberation or 
     interpretation. Second, both plaintiffs and defendants have 
     little incentive to cut corners. Although plaintiffs have 
     incentives to expedite the process so that they can receive 
     compensation, their attorneys may want to invest substantial 
     resources in developing cases to deter manufacturers from 
     making harmful products. Defendants may prefer not to settle 
     cases to deter further suits over the same product. Pretrial 
     discovery--a time-consuming and expensive feature of 
     litigation--therefore becomes an important part of product 
     liability suits for both parties.
       We believe that S. 1400 is unlikely to reduce transactions 
     costs in product liability suits. For cases that are 
     litigated, the procedural features of the tort system would 
     not be changed by the bill. It is also not clear that the 
     bill provides strong incentives for alternative dispute 
     resolution, which could cut litigation costs. Moreover, the 
     alternative dispute resolution mechanisms that may be used 
     are left to the discretion of the states. If these mechanisms 
     are not binding, then they may add to rather than substitute 
     for litigation. If this happened, costs could actually 
     increase.
       2. Your study found that product liability cases were quite 
     time consuming:
       A. Could you please identify the specific factors that make 
     these cases time consuming?
       B. Are there any benefits to the judicial process for 
     having prolongated cases? For example, is lengthy litigation 
     ever justified in order to insure an accurate record in a 
     complicated case?
       C. What are the disadvantages for having lengthy 
     litigation?
       D. Do you believe S. 1400 would reduce litigation time in 
     product liability cases?
       A. Specific factors that make these cases time-consuming 
     are the steps required in the legal process. In the vast 
     majority of cases we reviewed, we noted that defendants often 
     used the maximum amount of time legally required. Delays 
     caused by defendants were also common. In most cases, 
     manufacturers have little incentive to settle cases, as we 
     said in response to the first question, although some may be 
     concerned about adverse publicity regarding their products.
       In the typical case in our review, the defense was first 
     granted 30 days to respond to a petition. The defense 
     typically argued, at the end of the 30 day period, that the 
     plaintiff did not use the product or that negligence was the 
     cause, at least in part, of the harm. This began the legal 
     process known as discovery, in which the burden was on the 
     plaintiff to build a record by collecting data on product 
     design, specifications, and other (often proprietary) 
     information from defendants. The preparation of 
     interrogatories--testimonial evidence from eyewitnesses, 
     expert witnesses, and others--was another lengthy process 
     needed for the record. We also found frequent motions to 
     extend and delay court dates.
       B. In any case, a complete and accurate record would be 
     necessary to ensure a fair legal outcome. In this sense, 
     lengthy litigation and its attendant costs might be 
     justified. Generally, however, we believe litigation should 
     be shorter, and as a result, we would expect lower overhead 
     costs and higher net compensation for injured parties. In our 
     report, we concluded that we cannot determine the degree to 
     which the benefits of the judicial process balance 
     substantial administrative costs. We also noted that benefits 
     thought to accrue from the judicial process include providing 
     incentives for product safety. The Rand Corporation noted in 
     its 1987 study that ``there is no ready measure of the 
     inherent reasonableness of the system's transaction costs. 
     Especially when we focus on the tort system's goal of 
     deterrence, we might encounter circumstances in which we find 
     very high transactions costs acceptable.''\2\
     \2\Ibid., p. 25.
---------------------------------------------------------------------------
       C. There are two primary disadvantages of lengthy 
     litigation. First, as we have already discussed, time greatly 
     increases costs. Second, protracted litigation means that 
     injured parties wait longer for compensation.
       D. S. 1400 will probably not reduce litigation time in 
     product liability cases because discovery and other legal 
     processes would not be affected by the bill. And, because the 
     effect of S. 1400 on alternative dispute resolutions is 
     unclear, we cannot predict the extent to which lengthy 
     litigation could be avoided if product liability reform were 
     enacted.
       3. Your study indicated that the data needed to give a 
     complete evaluation of the effects of tort reforms is not 
     readily available. Do you have any recommendations on how the 
     relevant and necessary data might be collected? If so, what 
     is your projection of the length of time it would take to 
     collect such data?
       When we began our review, we found that with the exception 
     of ongoing work at the Rand Corporation, very little data had 
     been gathered in any systematic way about the outcomes of 
     tort reforms. According to researchers at Rand, neither 
     critics nor defenders of the civil justice system have much 
     solid evidence to support their views. In fact, the legal 
     system is notorious for its fragmentation and dearth of 
     records on finances and workloads. Our review confirmed 
     serious inadequacies in available databases, methodological 
     difficulties in designing rigorous studies, and an overall 
     lack of empirical evidence that impede efforts to evaluate 
     the effects of tort reforms.
       For a comprehensive assessment of research prospects in 
     this area, we refer you to the following Rand Corporation 
     publications: (1) Hensler, Deborah R., ``Researching Civil 
     Justice: Problems and Pitfalls,'' Summer 1988; (2) Reuter, 
     Peter, ``The Economic Consequences of Expanded Corporate 
     Liability: An Exploratory Study,'' November 1988; and (3) 
     Carroll, Stephen J., ``Assessing the Effects of Tort 
     Reforms,'' 1987.

  Mr. HEFLIN. Senator Hollings is unable to be here. He was called down 
to the White House on a budget matter.
  In regard to his amendment, he has asked that I point out that his 
same amendment was accepted by unanimous consent last year. The 
proponents of the bill, Senator Gorton 
[[Page S6153]] and Senator Rockefeller, accepted the amendment by 
unanimous consent in the last Congress. So I am just repeating that at 
the request of Senator Hollings relative to this matter.
  But overall, this bill is a very unfair bill. It has added to it to 
make it much more encompassing, to make this matter of punitive damages 
now extend to other suits far into what it does.
  There are other provisions, such as the Abraham amendment, that, in 
effect, extends the elimination joint and several liability to all 
sorts of suits. Now, in our courts, you either have criminal cases or 
you have civil cases. Under this, it extends it to all civil suits 
brought under any theory whatsoever. So it is very broad and 
comprehensive, and very much covering almost every conceivable type of 
civil lawsuit that you might have, including such things as State 
antitrust laws.
  Sexual harassment in State laws would be covered; disability 
protections in State laws; Americans with disabilities would be 
covered, as it would apply, by State laws relative to this; automobile 
accident cases, all sorts of things in regard to it.
  It is an extremely broad and encompassing bill. I think it ought to 
be defeated.
        abraham amendment no. 600 on joint and several liability

  Mr. LEVIN. Mr. President, I intend to vote against the Abraham 
amendment to extend limitations on joint and several liability for 
noneconomic damages to all civil actions.
  The sponsors of this bill, and this amendment, have pointed out that 
there are problems with joint and several liability. In some cases, a 
defendant who has only a marginal role in the case ends up holding the 
bag for all of the damages. That doesn't seem fair.
  On the other hand, there are good reasons for the doctrine of joint 
and several liability. We all know that cause and effect cannot 
accurately be assigned on a percentage basis. There may be many causes 
of an event, the absence of any one of which would have prevented the 
event from occurring. Because the injury would not have occurred 
without each of these so-called but for causes, each is, in a very real 
sense, 100 percent responsible for the resulting injury.
  This bill and this amendment, however, do not recognize that in the 
real world, multiple wrongdoers may each cause the same injury. They 
insist that responsibility be portioned out, with damages divided up 
into pieces. Under this approach, the more causes the event can be 
attributed to, the less each defendant will have to pay.
  Unless the person who has been injured can successfully sue all 
guilty parties, he or she will not be compensated for his or her entire 
loss. The real world result is that most plaintiffs will not be made 
whole, even if they manage to overcome the burdens or our legal system 
and prevail in court. Wouldn't it be more fair to say that any 
wrongdoers who caused the injury should bear the risk that one of them 
might not be able to pay its share? Put another way, isn't it more fair 
for all of the wrongdoers who cause an injury to bear this risk than 
for the victim to carry the burden of uncompensated loss?
  More than 30 States either maintain the doctrine of joint and several 
liability or have come up with creative approaches to address the 
potential unfairness of imposing joint and several liability in some 
cases without unfairly hurting the injured party. Because these State 
laws are more favorable to the injured party than the approach adopted 
in this amendment, so they would all be preempted.
  As far as I am aware, no hearings have been held on this broad 
proposal to abolish joint and several liability for noneconomic damages 
in all civil cases. There has been no discussion of the range of State 
laws that would be overridden by this amendment and the effect that 
overriding them would have. This amendment is unfair and unbalanced, 
and I cannot support it.
               Punitive Damage Caps For Small Businesses

  Mr. BRADLEY. Mr. President, I rise today to express my support for 
the amendment offered by my colleague from Ohio, Senator DeWine, and 
accepted by the Senate yesterday. The amendment provides for a $250,000 
cap on punitive damages for individuals whose net worth does not exceed 
$500,000 and corporations, partnerships, associations, and units of 
local governments with fewer than 25 employees.
  Mr. President, small businesses are the engine that drives the 
American economy and provide for at least half of this country's new 
employment opportunities. As such, Mr. President, as we debate the 
issue of imposing a punitive damages cap, we need to ensure that small 
businesses are not punished disproportionately when they take actions 
which call for the imposition of such damages.
  Mr. President, punitive damages are designed to punish the offender 
and protect the public by deterring conduct that is harmful. I am, 
therefore, a strong proponent of the right of courts to police 
egregious conduct through the award of punitive damages. Thus, while a 
cap on punitive damage awards should be sufficient to punish and deter 
future action, it should also reflect the fact that a cap that may be 
sufficient to punish a large corporation may in fact push a small 
business into the abyss of bankruptcy.
  Mr. President, I have spoken to small business owners in New Jersey 
on this issue. What I have heard over and over again is that if they 
commit offenses that merit an award of punitive damages, they should be 
punished; however, the punishment and deterrent effect should reflect 
the economic situation of the small business offender. Mr. President, a 
$250,000 punitive damage award against a small business with assets of 
$400,000 may drive the owner out of business, while a $5 million 
punitive award against a large corporation with assets in excess of 
$500 million will have less of a deterrent effect. I cannot support 
such a disproportionate impact on small businesses struggling to meet 
their bottom line.
  Therefore, Mr. President, I am pleased to support the amendment 
offered by my colleague from Ohio which serves to balance our national 
interest in punishing and deterring harmful conduct and protecting the 
viability of small businesses.
  Mr. DODD. Mr. President, I have been working on product liability 
reform for more than a decade. During that time, a wide range of my 
constituents--consumers, manufacturers, small businesses, and workers--
have told me about the serious problems with the present system.
  Injured people are upset about both the length of time it takes to 
receive fair compensation and the high cost of legal fees. 
Manufacturers are reluctant to introduce new products because of the 
inconsistent product liability laws in the 50 States. Small businesses 
are hurt by the costs of defending themselves against unjustified 
lawsuits. Workers fear that the costs in the present system will drag 
the economy down. Consumers question whether they are getting high 
quality products at a fair price.
  We need reform that will improve the system for everyone. To do that, 
we must strike a balance between many competing interests. We must not 
adopt reform that tips the balance too far in any direction. In the 
past, I have opposed measures that unfairly limited the rights of 
consumers, and I will continue to do so.
  Because 70 percent of all products move in interstate commerce, this 
is an appropriate area for Federal standards. A national, more uniform 
system would lower costs and speed the resolution of disputes. At the 
same time, we need to be careful about making other changes in the 
legal system that have not been as carefully thought out.
  The original bill, crafted by Senators Rockefeller and Gorton, 
offered the kind of carefully focused, balanced reform that would 
improve the system for everyone. I am a cosponsor of that bill. I am 
concerned, however, about a number of changes that were made to the 
legislation during the past week.
  For example, the bill now contains a separate title on medical 
malpractice reform. I agree that there are significant problems with 
medical malpractice litigation and that Congress should enact carefully 
considered reforms. The proposal that was added to the product 
liability bill, however, is flawed.
  It contains, for example, a provision that would make it harder to 
bring lawsuits against obstetricians who are seeing the patient for the 
first time. This provision might not have much of an effect on 
wealthier patients who 
[[Page S6154]] would have a primary doctor supervising the obstetric 
services. But what about those poor women who only see the doctor 
during the actual delivery of the baby? If they were injured, they 
would have a difficult time receiving compensation.
  The Gorton-Rockefeller bill was expanded in other ways. For example, 
there is now a cap on punitive damages in all civil cases--not just 
product liability cases. There have been a number of studies and 
commentaries about the problems with punitive damages in product 
liability cases. Those analyses suggest that some reform is needed for 
those cases. However, it is not clear that we need to reform punitive 
damage awards in all civil cases. In my view, we ought to engage in 
more extensive debate before taking such drastic steps.
  Additionally, I have concerns about putting arbitrary limits on 
damages. Because caps limit flexibility, they can lead to unjust 
results in some cases. I have filed an amendment that would address 
this problem. Under my amendment, the jury would determine whether 
punitive damages are appropriate, but the judge would set the amount. 
Hopefully, we will resume debate on the bill and consider this 
amendment.
  Because of these and other concerns, I will vote against cloture. 
There is still much work that needs to be done on this bill, and this 
is not the time to cut off debate. I still support product liability 
reform and will work with my colleagues to enact careful, balanced 
reforms. But I will not support efforts to ram through other changes in 
the legal system that go far beyond the balanced product liability bill 
I co-sponsored.
  We have a real chance to actually pass meaningful and fair product 
liability reform this year, and I will not support anything that 
endangers those chances. In my view, there is a bipartisan majority of 
Senators that would support that approach, and I look forward to 
working with them to pass a good bill.
               Vote on Motion to Table Amendment No. 600

  The PRESIDING OFFICER. Under the previous order, the question now 
occurs on amendment No. 600.
  Mr. GORTON. Has a rollcall been ordered?
  The PRESIDING OFFICER. It has not.
  Mr. GORTON. I ask for the yeas and nays.
  Mr. ROCKEFELLER. If the Senator will yield for a moment, I move to 
table the Abraham amendment, and I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second? There appears to 
be a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. Under the order, the question now occurs on 
the motion of the Senator from West Virginia [Mr. Rockefeller] to table 
amendment No. 600, offered by the Senator from Michigan [Mr. Abraham].
  The yeas and nays have been ordered. The clerk will call the roll.
  The legislative clerk called the roll.
  Mr. FORD. I announce that the Senator from Rhode Island [Mr. Pell] is 
absent on official business.
  I further announce that, if present and voting, the Senator from 
Rhode Island [Mr. Pell] would vote ``aye.''
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
who desire to vote?
  The result was announced--yeas 51, nays 48, as follows:

                      [Rollcall Vote No. 148 Leg.]

                                YEAS--51

     Akaka
     Baucus
     Biden
     Bingaman
     Boxer
     Bradley
     Breaux
     Bryan
     Bumpers
     Byrd
     Cohen
     Conrad
     D'Amato
     Daschle
     Dodd
     Dorgan
     Exon
     Feingold
     Feinstein
     Ford
     Gorton
     Graham
     Harkin
     Heflin
     Hollings
     Inouye
     Jeffords
     Johnston
     Kennedy
     Kerrey
     Kerry
     Lautenberg
     Leahy
     Levin
     Mikulski
     Moseley-Braun
     Moynihan
     Murray
     Nunn
     Packwood
     Pryor
     Reid
     Robb
     Rockefeller
     Sarbanes
     Shelby
     Simon
     Specter
     Stevens
     Thompson
     Wellstone

                                NAYS--48

     Abraham
     Ashcroft
     Bennett
     Bond
     Brown
     Burns
     Campbell
     Chafee
     Coats
     Cochran
     Coverdell
     Craig
     DeWine
     Dole
     Domenici
     Faircloth
     Frist
     Glenn
     Gramm
     Grams
     Grassley
     Gregg
     Hatch
     Hatfield
     Helms
     Hutchison
     Inhofe
     Kassebaum
     Kempthorne
     Kohl
     Kyl
     Lieberman
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Murkowski
     Nickles
     Pressler
     Roth
     Santorum
     Simpson
     Smith
     Snowe
     Thomas
     Thurmond
     Warner

                             NOT VOTING--1

       
     Pell
       
  So the motion to lay on the table the amendment (No. 600) was agreed 
to.
  Mr. ROCKEFELLER. Mr. President, I move to reconsider the vote.
  Mr. GORTON. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.

                       Vote on Amendment No. 681

  The PRESIDING OFFICER. The question now occurs on amendment No. 681, 
offered by the Senator from Arizona.
  Mr. GORTON. Mr. President, I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The clerk will call the roll.
  Mr. FORD. I announce that the Senator from Rhode Island [Mr. Pell] is 
absent on official business.
  I further announce that, if present and voting, the Senator from 
Rhode Island [Mr. Pell], would vote ``nay.''
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 60, nays 39, as follows:

                      [Rollcall Vote No. 149 Leg.]

                                YEAS--60

     Abraham
     Ashcroft
     Baucus
     Bennett
     Bond
     Brown
     Bumpers
     Burns
     Campbell
     Chafee
     Coats
     Cochran
     Coverdell
     Craig
     D'Amato
     DeWine
     Dole
     Domenici
     Faircloth
     Frist
     Gramm
     Grams
     Grassley
     Gregg
     Harkin
     Hatch
     Hatfield
     Heflin
     Helms
     Hollings
     Hutchison
     Inhofe
     Jeffords
     Kassebaum
     Kempthorne
     Kyl
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Murkowski
     Nickles
     Nunn
     Packwood
     Pressler
     Reid
     Roth
     Santorum
     Shelby
     Simpson
     Smith
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Warner
     Wellstone

                                NAYS--39

     Akaka
     Biden
     Bingaman
     Boxer
     Bradley
     Breaux
     Bryan
     Byrd
     Cohen
     Conrad
     Daschle
     Dodd
     Dorgan
     Exon
     Feingold
     Feinstein
     Ford
     Glenn
     Gorton
     Graham
     Inouye
     Johnston
     Kennedy
     Kerrey
     Kerry
     Kohl
     Lautenberg
     Leahy
     Levin
     Lieberman
     Mikulski
     Moseley-Braun
     Moynihan
     Murray
     Pryor
     Robb
     Rockefeller
     Sarbanes
     Simon

                             NOT VOTING--1

       
     Pell
       
  So the amendment (No. 681) was agreed to.
  Mr. GORTON. Mr. President, I move to reconsider the vote by which the 
motion to lay on the table was agreed to.

               Vote on Motion to Table Amendment No. 682

  The PRESIDING OFFICER. Under the order the question occurs on 
amendment 682 offered by the Senator from South Carolina [Mr. 
Hollings].
  Mr. GORTON. Mr. President, I move to table the Hollings amendment, 
and I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the motion of 
the Senator from Washington to lay on the table the amendment of the 
Senator from South Carolina. On this question, the yeas and nays have 
been ordered, and the clerk will call the roll.
  The legislative clerk called the roll.
  Mr. FORD. I announce that the Senator from Rhode Island [Mr. Pell] is 
absent on official business.
  I further announce that, if present and voting, the Senator from 
Rhode Island [Mr. Pell] would vote ``nay.''
  The PRESIDING OFFICER (Mr. Kyl). Are there any other Senators in the 
Chamber who desire to vote?
  The result was announced--yeas 56, nays 43, as follows:
              [[Page S6155]] [Rollcall Vote No. 150 Leg.]

                                YEAS--56

     Abraham
     Ashcroft
     Baucus
     Bennett
     Bond
     Brown
     Burns
     Campbell
     Chafee
     Coats
     Cochran
     Coverdell
     Craig
     D'Amato
     DeWine
     Dodd
     Dole
     Domenici
     Dorgan
     Exon
     Faircloth
     Frist
     Gorton
     Gramm
     Grams
     Grassley
     Gregg
     Heflin
     Helms
     Hutchison
     Inhofe
     Jeffords
     Kassebaum
     Kempthorne
     Kyl
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Moseley-Braun
     Murkowski
     Nickles
     Pressler
     Pryor
     Robb
     Rockefeller
     Roth
     Santorum
     Smith
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Warner

                                NAYS--43

     Akaka
     Biden
     Bingaman
     Boxer
     Bradley
     Breaux
     Bryan
     Bumpers
     Byrd
     Cohen
     Conrad
     Daschle
     Feingold
     Feinstein
     Ford
     Glenn
     Graham
     Harkin
     Hatch
     Hatfield
     Hollings
     Inouye
     Johnston
     Kennedy
     Kerrey
     Kerry
     Kohl
     Lautenberg
     Leahy
     Levin
     Lieberman
     Mikulski
     Moynihan
     Murray
     Nunn
     Packwood
     Reid
     Sarbanes
     Shelby
     Simon
     Simpson
     Thurmond
     Wellstone

                             NOT VOTING--1

       
     Pell
       
  So, the motion to lay on the table was agreed to.
  Mr. GORTON. Mr. President, I move to reconsider the vote by which the 
motion was agreed to.
  Mr. LOTT. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.

                          ____________________
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