I 
108TH CONGRESS 
1ST SESSION H. R. 2813
To provide small businesses certain protections from litigation excesses and 
to limit the product liability of nonmanufacturer product sellers. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 22, 2003
Mr. CHABOT (for himself, Mr. LUCAS of Kentucky, Mr. GOODE, Mr. PENCE, 
Mr. BURR, and Mr. KELLER) introduced the following bill; which was re-
ferred to the Committee on the Judiciary, and in addition to the Com-
mittee on Energy and Commerce, for a period to be subsequently deter-
mined by the Speaker, in each case for consideration of such provisions 
as fall within the jurisdiction of the committee concerned 
A BILL 
To provide small businesses certain protections from litiga-
tion excesses and to limit the product liability of non-
manufacturer product sellers.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Small Business Liability Reform Act of 2003’’. 
(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows:
Sec. 1. Short title; table of contents.
TITLE I—SMALL BUSINESS LAWSUIT ABUSE PROTECTION 
Sec. 101. Findings. 
Sec. 102. Definitions. 
Sec. 103. Limitation on punitive damages for small businesses. 
Sec. 104. Limitation on joint and several liability for noneconomic loss for 
small businesses. 
Sec. 105. Exceptions to limitations on liability. 
Sec. 106. Preemption and election of State nonapplicability. 
TITLE II—PRODUCT SELLER FAIR TREATMENT 
Sec. 201. Findings; purposes. 
Sec. 202. Definitions. 
Sec. 203. Applicability; preemption. 
Sec. 204. Liability rules applicable to product sellers, renters, and lessors. 
Sec. 205. Federal cause of action precluded. 
TITLE III—EFFECTIVE DATE 
Sec. 301. Effective date.
TITLE I—SMALL BUSINESS 
LAWSUIT ABUSE PROTECTION 
SEC. 101. FINDINGS. 
Congress finds that—
(1) the United States civil justice system is in-
efficient, unpredictable, unfair, costly, and impedes 
competitiveness in the marketplace for goods, serv-
ices, business, and employees; 
(2) the defects in the United States civil justice 
system have a direct and undesirable effect on inter-
state commerce by decreasing the availability of 
goods and services in commerce; 
(3) there is a need to restore rationality, cer-
tainty, and fairness to the legal system; 
(4) the spiralling costs of litigation and the 
magnitude and unpredictability of punitive damage
awards and noneconomic damage awards have con-
tinued unabated for at least the past 30 years; 
(5) the Supreme Court of the United States has 
recognized that a punitive damage award can be un-
constitutional if the award is grossly excessive in re-
lation to the legitimate interest of the government in 
the punishment and deterrence of unlawful conduct; 
(6) just as punitive damage awards can be 
grossly excessive, so can it be grossly excessive in 
some circumstances for a party to be held respon-
sible under the doctrine of joint and several liability 
for damages that party did not cause; 
(7) as a result of joint and several liability, en-
tities including small businesses are often brought 
into litigation despite the fact that their conduct 
may have little or nothing to do with the accident 
or transaction giving rise to the lawsuit, and may 
therefore face increased and unjust costs due to the 
possibility or result of unfair and disproportionate 
damage awards; 
(8) the costs imposed by the civil justice system 
on small businesses are particularly acute, since 
small businesses often lack the resources to bear 
those costs and to challenge unwarranted lawsuits;
(9) due to high liability costs and unwarranted 
litigation costs, small businesses face higher costs in 
purchasing insurance through interstate insurance 
markets to cover their activities; 
(10) liability reform for small businesses will 
promote the free flow of goods and services, lessen 
burdens on interstate commerce, and decrease liti-
giousness; and 
(11) legislation to address these concerns is an 
appropriate exercise of the powers of Congress under 
clauses 3, 9, and 18 of section 8 of article I of the 
Constitution of the United States, and the 14th 
amendment to the Constitution of the United States. 
SEC. 102. DEFINITIONS. 
In this title: 
(1) CRIME OF VIOLENCE.—The term ‘‘crime of 
violence’’ has the same meaning as in section 16 of 
title 18, United States Code. 
(2) DRUG.—The term ‘‘drug’’ means any con-
trolled substance (as defined in section 102 of the 
Controlled Substances Act (21 U.S.C. 802)) that 
was not legally prescribed for use by the defendant 
or that was taken by the defendant other than in 
accordance with the terms of a lawfully issued pre-
scription.
(3) ECONOMIC
LOSS.—The term ‘‘economic 
loss’’ means any pecuniary loss resulting from harm 
(including the loss of earnings or other benefits re-
lated to employment, medical expense loss, replace-
ment services loss, loss due to death, burial costs, 
and loss of business or employment opportunities) to 
the extent recovery for such loss is allowed under ap-
plicable State law. 
(4) HARM.—The term ‘‘harm’’ means any phys-
ical injury, illness, disease, or death or damage to 
property. 
(5) INTERNATIONAL
TERRORISM.—The term 
‘‘international terrorism’’ has the same meaning as 
in section 2331 of title 18, United States Code. 
(6) NONECONOMIC
LOSS.—The term ‘‘non-
economic loss’’ means loss for physical or emotional 
pain, suffering, inconvenience, physical impairment, 
mental anguish, disfigurement, loss of enjoyment of 
life, loss of society and companionship, loss of con-
sortium (other than loss of domestic service), injury
to reputation, or any other nonpecuniary loss of any 
kind or nature. 
(7) PERSON.—The term ‘‘person’’ means any 
individual, corporation, company, association, firm,
partnership, society, joint stock company, or any 
other entity (including any governmental entity). 
(8) PUNITIVE DAMAGES.—The term ‘‘punitive 
damages’’ means damages awarded against any per-
son or entity to punish or deter such person, entity, 
or others from engaging in similar behavior in the 
future. Such term does not include any civil pen-
alties, fines, or treble damages that are assessed or 
enforced by an agency of State or Federal govern-
ment pursuant to a State or Federal statute. 
(9) SMALL BUSINESS.—
(A) IN GENERAL.—The term ‘‘small busi-
ness’’ means any unincorporated business, or 
any partnership, corporation, association, unit 
of local government, or organization that has 
fewer than 25 full-time employees as deter-
mined on the date the civil action involving the 
small business is filed. 
(B) CALCULATION
OF
NUMBER
OF
EM-
PLOYEES.—For purposes of subparagraph (A), 
the number of employees of a subsidiary of a 
wholly owned corporation includes the employ-
ees of— 
(i) a parent corporation; and
(ii) any other subsidiary corporation 
of that parent corporation. 
(10) STATE.—The term ‘‘State’’ means each of 
the several States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Virgin Islands, 
Guam, American Samoa, the Northern Mariana Is-
lands, any other territory or possession of the 
United States, or any political subdivision of any 
such State, commonwealth, territory, or possession. 
SEC. 103. LIMITATION ON PUNITIVE DAMAGES FOR SMALL 
BUSINESSES. 
(a) GENERAL RULE.—Except as provided in section 
105, in any civil action against a small business, punitive 
damages may, to the extent permitted by applicable Fed-
eral or State law, be awarded against the small business 
only if the claimant establishes by clear and convincing 
evidence that conduct carried out by that defendant with 
a conscious, flagrant indifference to the rights or safety 
of others was the proximate cause of the harm that is the 
subject of the action. 
(b) LIMITATION ON AMOUNT.—In any civil action 
against a small business, punitive damages awarded 
against a small business shall not exceed the lesser of—
(1) three times the total amount awarded to the 
claimant for economic and noneconomic losses; or
(2) $250,000, 
except that the court may make this subsection inappli-
cable if the court finds that the plaintiff established by 
clear and convincing evidence that the defendant acted 
with specific intent to cause the type of harm for which 
the action was brought. 
(c) APPLICATION BY THE COURT.—The limitation 
prescribed by this section shall be applied by the court 
and shall not be disclosed to the jury. 
SEC. 104. LIMITATION ON JOINT AND SEVERAL LIABILITY 
FOR NONECONOMIC LOSS FOR SMALL BUSI-
NESSES. 
(a) GENERAL RULE.—Except as provided in section 
105, in any civil action against a small business, the liabil-
ity of each defendant that is a small business, or the agent 
of a small business, for noneconomic loss shall be deter-
mined in accordance with subsection (b). 
(b) AMOUNT OF LIABILITY.—
(1) IN GENERAL.—In any civil action described 
in subsection (a)—
(A) each defendant described in that sub-
section shall be liable only for the amount of 
noneconomic loss allocated to that defendant in 
direct proportion to the percentage of responsi-
bility of that defendant (determined in accord-
ance with paragraph (2)) for the harm to the 
claimant with respect to which that defendant 
is liable; and 
(B) the court shall render a separate judg-
ment against each defendant described in that 
subsection in an amount determined under sub-
paragraph (A). 
(2) PERCENTAGE
OF
RESPONSIBILITY.—For 
purposes of determining the amount of noneconomic 
loss allocated to a defendant under this section, the 
trier of fact shall determine the percentage of re-
sponsibility of each person responsible for the harm 
to the claimant, regardless of whether or not the 
person is a party to the action. 
SEC. 105. EXCEPTIONS TO LIMITATIONS ON LIABILITY. 
The limitations on liability under sections 103 and 
104 do not apply—
(1) to any defendant whose misconduct—
(A) constitutes— 
(i) a crime of violence; or 
(ii) an act of international terrorism; 
(B) results in liability for damages relating 
to the injury to, destruction of, loss of, or loss 
of use of, natural resources described in—
(i) section 1002(b)(2)(A) of the Oil 
Pollution 
Act 
of 
1990 
(33 
U.S.C. 
2702(b)(2)(A)); or 
(ii) section 107(a)(4)(C) of the Com-
prehensive Environmental Response, Com-
pensation, and Liability Act of 1980 (42 
U.S.C. 9607(a)(4)(C)); 
(C) involves— 
(i) a sexual offense, as defined by ap-
plicable State law; or 
(ii) a violation of a Federal or State 
civil rights law; 
(D) occurred at the time the defendant 
was under the influence (as determined under 
applicable State law) of intoxicating alcohol or 
a drug, and the fact that the defendant was 
under the influence was the cause of any harm 
alleged by the plaintiff in the subject action; or 
(2) to any cause of action which is brought 
under the provisions of title 31, United States Code, 
relating to false claims (31 U.S.C. 3729–3733) or to
any other cause of action brought by the United 
States relating to fraud or false statements.
SEC. 106. PREEMPTION AND ELECTION OF STATE NON-
APPLICABILITY. 
(a) PREEMPTION.—Subject to subsection (b), this 
title preempts the laws of any State to the extent that 
State laws are inconsistent with this title. 
(b) ELECTION OF STATE REGARDING NONAPPLICA-
BILITY.—This title does not apply to any action in a State 
court against a small business in which all parties are citi-
zens of the State, if the State enacts a statute—
(1) citing the authority of this subsection; 
(2) declaring the election of such State that this 
title does not apply as of a date certain to such ac-
tions in the State; and 
(3) containing no other provision. 
TITLE II—PRODUCT SELLER 
FAIR TREATMENT 
SEC. 201. FINDINGS; PURPOSES. 
(a) FINDINGS.—Congress finds that—
(1) although damage awards in product liability 
actions may encourage the production of safer prod-
ucts, they may also have a direct effect on interstate 
commerce and consumers of the United States by in-
creasing the cost of, and decreasing the availability 
of, products; 
(2) some of the rules of law governing product 
liability actions are inconsistent within and among
the States, resulting in differences in State laws that 
may be inequitable with respect to plaintiffs and de-
fendants and may impose burdens on interstate com-
merce; 
(3) product liability awards may jeopardize the 
financial well-being of individuals and industries, 
particularly the small businesses of the United 
States; 
(4) because the product liability laws of a State 
may have adverse effects on consumers and busi-
nesses in many other States, it is appropriate for the 
Federal Government to enact national, uniform 
product liability laws that preempt State laws; and 
(5) under clause 3 of section 8 of article I of 
the United States Constitution, it is the constitu-
tional role of the Federal Government to remove 
barriers to interstate commerce. 
(b) PURPOSES.—The purposes of this title, based on 
the powers of the United States under clause 3 of section 
8 of article I of the United States Constitution, are to 
promote the free flow of goods and services and lessen the 
burdens on interstate commerce, by—
(1) establishing certain uniform legal principles 
of product liability that provide a fair balance among
the interests of all parties in the chain of production, 
distribution, and use of products; and 
(2) reducing the unacceptable costs and delays 
in product liability actions caused by excessive litiga-
tion that harms both plaintiffs and defendants. 
SEC. 202. DEFINITIONS. 
In this title: 
(1) ALCOHOL
PRODUCT.—The term ‘‘alcohol 
product’’ includes any product that contains not less 
than 1⁄2 of 1 percent of alcohol by volume and is in-
tended for human consumption. 
(2) CLAIMANT.—The term ‘‘claimant’’ means 
any person who brings an action covered by this title 
and any person on whose behalf such an action is 
brought. If such an action is brought through or on 
behalf of an estate, the term includes the claimant’s 
decedent. If such an action is brought through or on 
behalf of a minor or incompetent, the term includes 
the claimant’s legal guardian. 
(3) COMMERCIAL LOSS.—The term ‘‘commercial 
loss’’ means—
(A) any loss or damage solely to a product 
itself; 
(B) loss relating to a dispute over the 
value of a product; or
(C) consequential economic loss, the recov-
ery of which is governed by applicable State 
commercial or contract laws that are similar to 
the Uniform Commercial Code. 
(4) 
COMPENSATORY
DAMAGES.—The 
term 
‘‘compensatory damages’’ means damages awarded 
for economic and noneconomic losses. 
(5) 
DRAM-SHOP.—The 
term 
‘‘dram-shop’’ 
means a drinking establishment where alcoholic bev-
erages are sold to be consumed on the premises. 
(6) ECONOMIC
LOSS.—The term ‘‘economic 
loss’’ means any pecuniary loss resulting from harm 
(including the loss of earnings or other benefits re-
lated to employment, medical expense loss, replace-
ment services loss, loss due to death, burial costs, 
and loss of business or employment opportunities) 
to the extent recovery for that loss is allowed under 
applicable State law. 
(7) HARM.—The term ‘‘harm’’ means any phys-
ical injury, illness, disease, or death or damage to 
property caused by a product. The term does not in-
clude commercial loss. 
(8) MANUFACTURER.—The term ‘‘manufac-
turer’’ means—
(A) any person who—