I
106TH CONGRESS
1ST SESSION
H. R. 2366
To provide small businesses certain protections from litigation excesses and
to limit the product liability of nonmanufacturer product sellers.
IN THE HOUSE OF REPRESENTATIVES
JUNE 25, 1999
Mr. ROGAN (for himself, Mr. HOLDEN, Mr. BURR of North Carolina, and Mr.
MORAN of Virginia) introduced the following bill; which was referred to
the Committee on the Judiciary, and in addition to the Committee on
Commerce, for a period to be subsequently determined by the Speaker,
in each case for consideration of such provisions as fall within the juris-
diction 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 1999’’.
(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 several liability for noneconomic loss for small busi-
nesses.
Sec. 105. Exceptions to limitations on liability.
Sec. 106. Preemption and election of State nonapplicability.
Sec. 107. Effective date.
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.
Sec. 206. 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 civil justice system have
a direct and undesirable effect on interstate com-
merce 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 ac-
cordance 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’’ includes phys-
ical, nonphysical, economic, and noneconomic losses.
(5) HATE
CRIME.—The term ‘‘hate crime’’
means a crime described in section 1(b) of the Hate
Crime Statistics Act (28 U.S.C. 534 note).
(6) INTERNATIONAL
TERRORISM.—The term
‘‘international terrorism’’ has the same meaning as
in section 2331 of title 18, United States Code.
(7) 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.
(8) 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.
(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.
(9) 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, 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 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 through willful mis-
conduct or 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 shall not ex-
ceed the lesser of—
(1) 3 times the total amount awarded to the
claimant for economic and noneconomic losses; or
(2) $250,000.
(c) APPLICATION BY COURT.—This section shall be
applied by the court and shall not be disclosed to the jury.
SEC. 104. LIMITATION ON SEVERAL LIABILITY FOR NON-
ECONOMIC LOSS FOR SMALL BUSINESSES.
(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 the 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 to any misconduct of a defendant—
(1) that constitutes—
(A) a crime of violence;
(B) an act of international terrorism; or
(C) a hate crime;
(2) that results in liability for damages relating
to the injury to, destruction of, loss of, or loss of use
of, natural resources described in—
(A) section 1002(b)(2)(A) of the Oil Pollu-
tion Act of 1990 (33 U.S.C. 2702(b)(2)(A)); or
(B) section 107(a)(4)(C) of the Com-
prehensive Environmental Response, Compensa-
tion, and Liability Act of 1980 (42 U.S.C.
9607(a)(4)(C));
(3) that involves—
(A) a sexual offense, as defined by applica-
ble State law; or
(B) a violation of a Federal or State civil
rights law; or
(4) if the defendant was under the influence (as
determined under applicable State law) of intoxi-
cating alcohol or a drug at the time of the mis-
conduct, and the fact that the defendant was under
the influence was the cause of any harm alleged by
the plaintiff in the subject action.
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, except that this
title shall not preempt any State law that provides addi-
tional protections from liability for small businesses.
(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.
SEC. 107. EFFECTIVE DATE.
(a) IN GENERAL.—This title shall take effect 90 days
after the date of enactment of this Act.
(b) APPLICATION.—This title applies to any claim for
harm caused by an act or omission of a small business,
if the claim is filed on or after the effective date of this
title, without regard to whether the harm that is the sub-
ject of the claim or the conduct that caused the harm oc-
curred before such effective date.
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 Act, 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