John Dingell

Mr. DINGELL

Mr. DINGELL. I thank the gentleman for yielding this time to me. Mr. Chairman, this is a fair amendment. It treats American corporations and foreign corporations in American courts exactly the same way. If you are interested in fairness, this is an amendment to vote for because it says foreign corporations must make the same disclosures in American courts under discovery process that must be made by American corporations. If you are interested in competitiveness, this is an amendment on which you should vote. The argument for this legislation is that it is going to contribute to competitiveness. Well, if it is going to do so, it should do it fairly and completely. This says that foreigners do not get a greater advantage in dealing with American courts and American litigants than the foreign corporation. It says they have got to make the same discovery. Discovery is absolutely essential to the judicial process. Without fair discovery, there can be no fair judicial process, and without discovery in product liability suits, there can clearly be no discovery. Without this amendment, what the bill will say is American corporations in court on product liability suits involving perhaps the same matter that might be involved with the litigation by a foreign corporation, have to disclose their whole case, but foreign corporations do not. If you want American corporations to be competitive in a market in which foreigners sell better than $500 billion vote for this amendment. It is fair, it protects American corporations, it contributes to competitiveness, and it is in the interest of the United States. Vote for the Conyers amendment.

Mr. DINGELL

Mr. DINGELL. It was filed last night?

Mr. DINGELL

Mr. DINGELL. Mr. Chairman, I yield 2 minutes to the gentleman from Virginia [Mr. Scott].

Mr. DINGELL. I yield 4 minutes to the gentleman from California [Mr. Waxman]. (Mr. WAXMAN asked and was given permission to revise and extend his remarks.)

Mr. DINGELL. Mr. Chairman, how much time remains on both sides, please?

Mr. DINGELL. Mr. Chairman, I yield 3 minutes to the distinguished gentleman from North Carolina [Mr. Watt].

Mr. DINGELL. Mr. Chairman, I yield 1 minute to the gentleman for Louisiana [Mr. Tauzin], a member of the committee.

Mr. DINGELL. Mr. Chairman, I yield 3 minutes, my remaining time, to the distinguished gentleman from Michigan [Mr. Conyers].

Mr. DINGELL. Mr. Chairman, the House a little earlier rejected an amendment which would have denied discovery to American firms which were involved in product liability cases where foreigners were taking advantage of them and where they were receiving shelter under the bill. Note that the vote was 258 in favor of that amendment, an overwhelming win. This amendment would, and language of section 109, eliminate the requirement that foreign companies inside this country appoint an agent for purposes of receiving service in the case of product liability suits. I say that the House has once rejected that principle and should again reject it. Under the previous amendment, you could not get discovery. Now you cannot even get into court under this amendment. Let us talk about something other. In eliminating the joint and several liability, a man hires two hoodlums to kill his mother-in-law. The woman is horribly disfigured. Judgment is collected ultimately by the woman against the husband and the two hoodlums. She can only collect approximately a third because no longer is there joint and several liability. Another case: A Member of Congress is liabled by his local newspaper, charged with contributing to the delinquency of a minor. No longer under this amendment is there joint and several liability. He sues the newspaper and the two reporters. Because joint and several liability is no longer there, we can only collect approximately a third of the damages which would have been appropriately assessed against the wrongdoers. This is a bad amendment. It is an admirable reason for why we ought not write legislation of this kind on the floor. It carries the question of liability. It carries the question of compensation well beyond the question of product liability. It carries it into all civil wrongs and all civil litigation. The amendment should be rejected. It favors foreigners, it favors wrongdoing. It puts the innocent at risk. It denies people proper recovery for serious wrongs, intentional or otherwise. I urge the amendment be rejected.

Mr. DINGELL. I yield to the gentleman from Texas.

Mr. DINGELL. Mr. Chairman, I yield 3 minutes to the gentleman from California [Mr. Berman].

Mr. DINGELL

Mr. DINGELL. Mr. Speaker, I rise in strong opposition to this oppressive rule and urge Members to defeat the previous question. It is no secret that this important legislation--that I have worked on for many years--is being grossly mishandled. There was but one subcommittee hearing on an extreme bill introduced 1 week earlier. There was no subcommittee markup--an important step in ensuring well- crafted and defensible legislation. We were given three completely different substitutes in as many days before the committee markup. Even before we received a draft of the committee report, a new bill--H.R. 1075--was introduced last week by Chairmen Hyde and Bliley. Before the ink was dry on H.R. 1075, Chairman Solomon stood here and announced the Rules Committee would meet this week ``to grant a rule which may restrict amendments.'' It is clear the Republican leadership decided sometime ago they would ram this bill through without adequate debate and without regard to the rights of Members to debate the issues and offer amendments to the bill. We asked for an open rule, but have been given a closed rule. The Republicans have picked amendments they want to debate and foreclosed the ability of Democrats to offer and debate other important ones. Moderate or bipartisan amendments have been completely excluded by this closed rule. For example, Mr. Oxley and Mr. Gordon filed an amendment to raise the cap on punitive damages to $1 million. And the gentleman from Florida, a member of the Judiciary Committee, Mr. McCollum, has an amendment to raise the cap to $500,000. Instead of making these moderate and bipartisan amendments in order, the Republicans are instead only giving the House the stark choice between an extreme $250,000 cap on the one hand and no cap at all on the other. It seems the Republican leadership was very worried that the Oxley-Gordon or McCollum amendments would pass. I urge Members to defeat the previous question to give the House an opportunity to vote on these middle ground alternatives. Even worse, the rule allows Republican amendments that go far beyond product liability reform. For example, Mr. Gekas' amendment on medical malpractice and Mr. Cox's amendments to severely limit damages for pain and suffering in all State and Federal cases will be in order if this rule passes. There has not been one hearing on these amendments by this Congress. There has not been one day of committee meetings on these amendments by this Congress. No Member has been given adequate notice or time to consider these sweeping changes to our legal system. This unfair and ill-advised process erodes bipartisan efforts. It produces legislation fraught with defects, inconsistencies and errors. This is not about common sense, as the authors of the bill want us to believe. It is the herd mentality in action. I stand ready to work with all of my colleagues to craft fair, balanced, and appropriate legislation in this area. But the rule before us denies me and all Members of that opportunity. As all Members of this body know: we are here to legislate, not to punch holes in laminated cards. We should be working to produce a products liability bill that we fully understand, in which we can take pride, and which we may defend without reservation. Vote ``no'' on the previous question so that we can consider the Oxley-Gordon and McCollum amendments on punitive damages. Vote ``no'' on the rule if the previous question is approved.

Mr. DINGELL

Mr. DINGELL. One last point, this amendment does not roll back the statute of limitations.

Mr. DINGELL. Mr. Chairman, the purposes of the amendment are very simple, to permit counties and local units of government, States, to continue to sue under existing law for 3 years. If we are concerned about frivolous litigation, that is not a matter of concern here. Mr. Chairman, the purpose of the amendment is very simple, to permit cities, States, local units of government to continue suing under existing practices for a period of 3 years. This will not afford any professional litigant, any sly lawyer to run around forming class- action suits. It simply allows communities to have the same protection that Orange County would have to sue where wrongdoing is done them using the new derivatives. I would urge my colleagues to support this legislation. Mr. Chairman, I yield to my friend and colleague, the gentleman from Pennsylvania [Mr. Klink], a cosponsor of the amendment.

Mr. DINGELL. Mr. Speaker, I offer an amendment.

Mr. DINGELL. I am happy to yield to my good friend from Texas, for whom I have greatest regard.

Mr. DINGELL. Mr. Chairman, I rise in support of the amendment. Mr. Chairman, this amendment would remedy a problem that is being largely ignored throughout this society, and is largely being ignored in connection with this legislation. This is a problem of huge investments by pension funds, investment funds, mutual funds, and State and local governments across the country in the high-risk derivative securities. These investments are often made without purchasers being informed by their brokers of the true nature or the great risk of these investments or, in some cases, without the brokers even informing the purchaser that they are making these investments at all. The amendment would exempt derivative securities from the bill. Those are the securities which caused the collapse of the investment pool run by Orange County. Americans are only beginning to understand the risks associated with these things, which are little investments in derivatives which caused one of the wealthiest communities in the country, Orange County, CA, to go belly up in a matter of months and now be in bankruptcy, has the public begun to focus on the huge risks associated with these kinds of investments. In Orange County the derivative losses have forced cutbacks in vital Government services such as health care, education, and even road maintenance. In some cases, county employees have been laid off completely, or else have had their hours of pay reduced. Mr. Chairman, Orange County is not alone, as the ``60 Minutes'' expose on Sunday night dramatically highlighted. A particularly chilling moment in that piece toward the end was when ``60 Minutes'' asked their expert whether there may be other Orange counties out there, and he responded with this warning: ``It is not a question of whether there are others out there. There are, and many other municipalities are out there sitting on huge derivative timebombs, without any of them even knowing that they confront this great peril on behalf of themselves and their constituents.'' As we debate this bill in only 7 hours, literally hundreds of local municipal governments scattered all over the country are just beginning to discover the extent of their exposure to high-risk derivative securities. Many of them are seeking to avoid this disaster and to climb out of the pit after suffering colossal losses on their investments. From Auburn, Maine, to the State of Florida, from Charles County, MD, to Odessa College, TX, to Aspen, CO, and to Orange County, State and local governments are suffering staggering losses due to incredibly complex, incomprehensible high-risk securities whose risk cannot only not be calculated, but not even understood. There is a chart here which explains and shows the communities and public institutions across the United States which have just so far reported losses from investments in speculative derivatives. Look at the list: Orange County, $1.7 billion in losses; Louisiana State pension fund, $50 million; Georgia Municipal Electric Authority, $49 million; City College of Chicago, $46 million; Minnetonka fund in Minnesota, over $90 million; New Hampshire State pension fund, $25 million; the Virginia State retirement system, $66 million, and West Virginia investment pool, up to $279 million. How would the Members from all these States and all the others who might be afflicted with this situation explain to their constituents that they have voted to prevent their county governments and their governments from acting to recover from wrongdoers for their failure to properly advise, or their failure to properly reveal facts associated with the speculative and risky character of the investment? We just got over paying $150 billion to bail out the savings and loans institutions from a financial disaster, largely caused by legislation that was rushed through this body because big business came in here pleading for relief. If Members will recall, they came in saying that they had to have the ability to engage in all kinds of businesses so that they would then be able to go out and make money and get themselves out of a hole which they had rapidly been digging. The same situation is here. Mr. Chairman, in a nutshell, this is deja vu all over again. I urge my colleagues to support the Markey amendment. Vote to protect the American people against derivatives. Vote to allow them to engage in proper self-help, to retrieve ill- gotten gains from wrongdoers who carelessly and recklessly disregard their responsibility to investors, to taxpayers, and to this country.

Mr. DINGELL. But under the current law, however, there is no requirement that a city, county, State, or local unit of government post a bond. Mr. Chairman, I thank my friend for yielding.

Mr. DINGELL. I yield to the gentleman from Massachusetts.

Mr. DINGELL. Matters of the sort that you see on the poster in the well. You are looking there at, I would say, probably 40 or 50 cities, States, and local units of government as well as possibly a number of State governments where they would be compelled to sue now on matters which might involve derivatives under the new law as opposed to the old law. The amendment permits them to sue under the old law for a period of 3 years. That is because the derivatives situation is growing and expanding, and every day we find some new situation which requires, quite frankly, great concern. For example, the Barings Bank which just collapsed, Orange County, other places as listed on the chart that my good friend has just shown to the House.

Mr. DINGELL. I was aware of the apprehensions of my good friend from Texas. I wanted to ease them as best I could.

Mr. DINGELL. Mr. Chairman, I move to strike the requisite number of words. Mr. Chairman, I rise to oppose the substitute. I rise first to commend the gentlewoman from California for her amendment. It should be adopted. Second of all, this curious piece of paper that has been passed around should be rejected. The gentleman from California has presented us with an amendment that was never before seen. This is not inconsistent with the practices that we have observed. But I want to take my colleagues through what is going on here. What is at stake here is the rights of investors, not a bunch of slippery lawyers, but investors, investors who were hurt in things like Orange County, things like the Milken, Boesky defalcations and a large number of other items of rascality, also in questions like we saw in connection with the savings and loan debacles where lawyers and accountants gave bad opinions, where they audited improperly, where they failed to keep track of property, where they did not find that property which was carried on the books did not exist, or where they failed to find that it was overvalued. Those matters have been found to be reckless, reckless by the courts, and actionable. Now we find that there is an attempt to get away from the problem of these people by defining recklessness to essentially be deliberate misbehavior. At question is not the issue of negligence or even of fraud. It is simply of reckless misbehavior. The amendment which is offered by the gentleman from California would say that if the failure to investigate was not deliberate, such conduct shall not be considered to be reckless. We are talking here about lawyers giving opinions as to suitability. We are talking here about accountants who are failing to ascertain that the property which is carried on the books and which is filed in the reports which are submitted to the shareholders and the SEC, in fact, does not exist or does not have the value which is assigned to it. Is that fraud? Quite probably. Is it reckless? Absolutely. These people have a fiduciary duty, a fiduciary duty, a duty of the highest responsibility to the shareholders, and they have a responsibility which they must carry out to the Federal Government and to the State regulators to file their reports truthfully and to use due care and proper care to find out that the value is there, that the property exists, that it is not overvalued in some kind of a fraudulent evaluation. That is what is at stake. This is an attempt to reduce the amendment offered by the gentlewoman from California [Ms. Eshoo] as an attempt to reduce the responsibility and to define recklessness now as some kind of deliberate misbehavior. That is not it. What is at stake here is the question of whether or not the individual has carried out his proper fiduciary relationship, whether he has been reckless, and recklessness comes to the brink of, but does not include, deliberate wrongdoing. This is an attempt to get a little more protection for wrongdoers and to strip a little more of the protection from the ordinary citizen who has invested his or her life savings in a stock or a security which can be converted to worthlessness by the kind of wrongdoing that this amendment offered by the gentleman from California [Mr. Cox] would sanctify. That is what is at stake here. Now, the original amendment offered by the gentlewoman simply struck out dicta, struck out a footnote. The committee was largely agreed that what we should do was to address this within the framework of the Sundstrand decision. The gentleman from California now finds that inadequate. He essentially would seek now to repudiate the language which he pushed in the committee. That is perhaps right, and I think that he should be commended for retreating from it, but not for retreating to something which raises the burden on the litigants to a still higher level, to address the problem of wrongdoing by people who are failing to carry out their fiduciary responsibility to investors and investing public of this country.

Mr. DINGELL. Those matters, I would observe to the gentleman, are not relevant to the kind of litigation that we are discussing here.

Mr. DINGELL. Mr. Chairman, I rise in support of the Manton amendment. Mr. Chairman, I commend the gentleman from New York [Mr. Manton] on his amendment on fee shifting. I rise in support of that amendment. As reported by the committee, H.R. 1058 would provide for fee shifting when the court determines that the loser's case was not substantially justified. The bill, however, would require the court to order a bond from a plaintiff in a securities case. These are high hurdles in front of the courthouse door for any person, including those who have legitimate claims. Let us talk first about the bond requirement. This section provides no guidance to the court on the amount of the bond or the form of the bond. It appears to me that a judge could require a middle-class plaintiff to post his or her house as collateral, or their retirement account, or the children's college savings as collateral. That is a high admission fee to the Federal courts. I would remind my colleagues, the requirement for the bond is mandatory. It is absolute. The ``substantially justify'' test, as we are told, comes from the Equal Access to Justice Act. This act requires Government agencies to pay back attorney's fees to small businesses they sue when their case is not substantially justified. That is, I would note, however, a quite different case, Government against a small defendant. Here we are talking about a little investor against a large and wealthy wrongdoer who has every incentive to run up the costs of the litigation. When the SEC brings a case, it does so only after it completes an investigation. That investigation involves the use of the investigative authority, including the subpoena power, which is possessed by the SEC. Middle-class citizens have no such abilities. They do not possess subpoena powers. They should not be held, then, to the same standard as the SEC, nor should they be held to the same standard as the Federal Government. Prof. Arthur Miller of Harvard Law School, who is perhaps the foremost expert in the area of civil procedure, has testified that fee shifting is almost invariably an intimidation device against plaintiffs. It is used to intimidate device against plaintiffs. It is used to intimidate plaintiffs and to preclude them from proceeding with the protection of their rights, using the courts as they properly should. This is especially true in the class action cases where one investor, the class representative, could find himself responsible for the fees incurred by huge corporations defending against the claims of the entire class. Remember, these corporations use enormous numbers of lawyers to litigate. Whole floors of hotels are peopled with attorneys whose sole function is to run the plaintiff out of money and out of resources. Who could then afford to bring an action against Merrill Lynch or Charles Keating or Baring Bank or the people who brought the Orange County debacle if, at the end of the day, there was not just a chance but an almost certainty that the investor would be required to foot the entire legal bill for a corporate defendant, if it were certain that he had to post a bond amounting to enormous sums of money to assure that his lawsuit was not frivolous, and that he would be able to pay if the lawsuit went against him? Here we see a significant difference between a suit that is unsuccessful and one that is frivolous. We are all opposed, I think, in this body to frivolous lawsuits, and indeed, we should be. The Manton amendment makes a clear distinction. Not all lawsuits are successful, and many that are not should have been. It does not have to be done to American citizens this way. We do not have to have unfair, harsh, and restrictive bonding requirements. We do not have to impose enormous burdens on American citizens seeking to use their courts to protect their rights against wrongdoing and against the loss of assets taken from them by malefactors of great wealth. I urge my colleagues to support the Manton amendment. I urge them to be fair to the little people of this country.

Mr. DINGELL

Mr. DINGELL. Mr. Chairman, I thank the distinguished gentleman from Louisiana for yielding. Mr. Chairman, I have supported product liability reform for over a decade. In 1988 I presided over the infamous ``torts class from hell'' when the Committee on Energy and Commerce spent 10 long days in a markup to report a product liability reform bill. Regrettably, that bill died when other committees failed to take action. Since then, I have repeatedly cosponsored other major legislation on this subject law. I observed that this is a painful process to me because it is my view that the bill is being rammed through the House. Unlike previous efforts, there has been little meaningful attempt to work out a bipartisan piece of legislation, fair and balanced. The rush to judgment has produced a number of defects, inconsistencies, and errors, and indeed it has been fraught with what I view as being procedural errors and failures. Despite my misgivings about the process and certain provisions, I voted in favor of the Committee on Commerce bill. I did so because the core of the bill was consistent with those that I had previously supported and because there were assurances made at the markup that some of the bill's shortcomings would be corrected. I will note, however, that under the probable rule, opportunities to correct some of the defects which I seek will become much smaller and much less opportune, but before the ink on the Committee on Commerce bill was dry, Chairman Hyde and Chairman Bliley introduced yet another bill, H.R. 1075. This new bill differed significantly from the bill I voted for in committee. One major change is the punitive damages provisions of H.R. 1075. They apply to all actions for harm, not just product liability actions. I am curious why this is so. It is possible it is motivated by any of a number of reasons, one, to protect all wrongdoers from punitive actions and two, to open up the bill so perhaps more extreme legislation unrelated to product liability reform might be considered. I hope that that second course will not be followed. The idea of limiting punitive damages and product liability actions is something I am willing to consider carefully but I do not believe that this legislation should be use to enact wholesale changes to all of our Federal and State law with regard to civil actions in the courts of the Federal Government or the several States. I am particularly concerned about the amendments that might arise to limit medical malpractice liability and to put severe limits on noneconomic damages in all civil cases. I believe that something should be done about medical malpractice liability, but I believe it should be done carefully and with consistency in terms of good practice of the kind that we have seen over the years. This bill should be about product liability reform, not about rewriting liability laws for all State and Federal cases. Amendments that go to key provisions in this bill on product liability reform should be debated on and they should be voted on and sufficient time should be given. If the bill becomes an attempt to rewrite all civil liability law without hearings, without consideration in the committees of jurisdiction, and without proper notice and opportunity to participate for all Members, it will certainly diminish bipartisan support for the bill and threaten support for product liability reform. That would be a shame because we worked too long to try to achieve reform of what is a serious economic, social, and other problem. I will participate in the debate allowed by this rule. I intend to listen to the arguments on all sides. I hope that fair and balanced debate will lead to fair and balanced product liability reform legislation, as I have for many years. But this bill cannot become a vehicle for another attempt to deal with issues outside the needed reform.