T. Gorton

Mr. GORTON

Mr. GORTON. Mr. President, what is the pending business?

Mr. GORTON. Mr. President, first I ask unanimous consent that the Senator from North Carolina [Mr. Faircloth] be added as a cosponsor both to S. 565, the Product Liability Fairness Act of 1995, and to the Gorton substitute amendment to H.R. 956.

Mr. GORTON. Mr. President, I think perhaps at this point in the debate, it may be appropriate to speak not so much to the broad nature of the bill but to two or three arguments advanced by the last two opposing Senators, the distinguished Senators from Wisconsin and from California. Together with Senator Hollings, the Senator from Wisconsin was somehow or another implicating the seventh amendment right of trial by jury into this debate and has implied at least that the bill before us somehow or another restricts that constitutional right to trial by jury. This is a curious, perhaps a bizarre argument. It is an argument which is equally applicable to every statute, State or Federal, which sets legal parameters which juries must follow in reaching verdicts. To say somehow or another that a limitation on punitive damages is a violation of the seventh amendment is to say that a jury instruction limiting actual damages to those that have really been suffered by a victim is somehow unconstitutional, that any instructions to any jury as to what the law is under any circumstances are unconstitutional. Even more strange, more bizarre to this Senator, is the proposition coming from Members of this body who when we are dealing with the criminal code want very strict legal limitations on sentences that can be imposed on convicted criminals. I have not heard either of these Senators argue that a jury which finds an individual guilty of a misdemeanor under Federal law should be permitted to impose life imprisonment on that convict, and yet that is exactly the proposition for which they argue here in connection with a civil case. They argue that as a form of punishment, punitive damages, a jury's discretion should be absolutely unlimited, no matter how egregious the conduct; no matter whether we are dealing with an individual, a small company, or a large corporation, the jury's discretion should be untrammeled, and that the jury should be permitted to impose punitive damages of whatever limit. Mr. President, that is analogous to saying a jury ought to be able to sentence a jaywalker to hanging if for some reason or other the discretion of the jury should reach that point. Why is it--this is one question I have not heard answers to, directly or indirectly. Why is it that in our entire criminal code we have as a protection against convicted defendants limits on sentences, but in civil actions in which proof does not need to be adduced beyond a reasonable doubt but only by a preponderance of the evidence in many States, and by clear and convincing evidence should this bill pass, why here alone should that discretion be absolutely unlimited? It is a question I would like to have answered by those who oppose any kind of limitations. A debate against the specific limitations of this bill and adjustment, a feeling that we can do better, is something that I know both the Senator from West Virginia and I are both open to. We may not have gotten the formula exactly right. But the proposition that there should be some kind of limit seems to me to be obvious and has even moved the Supreme Court of the United States to say, without coming up with what those limits are, that there may be some constitutional limits, with the clear implication that Congress could make just exactly such a decision. The next point that I should like to clear up at this stage, Mr. President, is the confusion, I think--and I can only ascribe it to that--which is the inevitable result of listening to opposition speakers about whether or not there is some kind of limitation in this bill on the recovery of all of the damages which an individual actually suffers as a result of the negligence of a manufacturer. Mr. President, the only limitations in this bill are limitations on punitive damages, which by definition are not direct compensation for losses suffered as the result of an accident or of someone's negligence. No limitations are imposed by this bill on the recovery of actual damages--loss of wages, medical expenses, and the like. No limitations are included in this bill on the recovery of noneconomic damages. ``Pain and suffering'' is the usual phrase for such damages. There are those who propose such limitations, but they are not included in this bill, and this Senator does not intend to vote for any. And I believe I also speak for the Senator from West Virginia in that connection. So no individual, none cited by the Senator from California, none cited by the Senator from Wisconsin, none cited by the Senator from South Carolina, will be deprived by the passage of this bill of his or her right to recover all economic and all pain and suffering damages which a jury determines they have suffered in a product liability action. The only limitations are on the amount of punishment to which a negligence defendant can be subjected. And there, as I have already said, we have the curious argument that in the civil courts that punishment should be unlimited while in the criminal courts it should be subjected to very, very real limits. I also found interesting and somewhat curious the argument of the Senator from Wisconsin with respect to joint damages. He said--and I believe I am paraphrasing him correctly--why should an innocent victim be deprived of all of the damages that victim suffered even from a party not responsible for all of those damages? That, if a retailer, for example, is responsible for only 30 percent of the losses of an individual plaintiff, the plaintiff should nonetheless be able to collect 100 percent of his total damages from that retailer. Well, why not from you or me, Mr. President? Under those circumstances, what difference is there? Once we have determined the defendant is responsible for more than what that defendant was responsible for, there really is not any distinction between one citizen and another. Should we, for example, in the Criminal Code, when two brothers, one wealthy and one not wealthy, are sentenced for a crime, each, in addition to a jail sentence, is fined $100,000, say that the wealthy brother should pay the other brother's fine because the other brother cannot pay it? Well, of course not. We would never think of doing that in a criminal case. And yet we do that constantly in connection with joint liability. that the victim should always be fully compensated, then perhaps that is a duty of society as a whole, but it should not be imposed on one party not responsible for the particular harm for which compensation is being sought. I want to congratulate the Senator from West Virginia on his marvelously logical answers to the Senator from California on research and development of new products. Of course, if you look only at a particular victim, that victim and that victim's attorneys want the maximum possible recovery. But when the net result of the system which causes that tells one very large company that it should logically give up AIDS research or contraceptive research lock, stock, and barrel because the flame is not worth the candle, that there are simply too many risks in the development of a new product, it is not an answer to say that there are other companies that are still engaged in research. We in our society want the maximum possible number of people, of individuals and of companies, to attempt to deal with all of the ills which afflict the human race. We were not advantaged, to take another example, when 20 years ago 20 companies made and developed football helmets and now only two are left. That is not an advantage.

Mr. GORTON. The Senator is happy to yield.

Mr. GORTON. Mr. President, I thank the Senator from Oklahoma for that eloquent statement. It does seem to me that the experience of just the past year, since the passage of that small aircraft statute of repose, indicates much more graphically than can any theoretical argument the actual positive impact on jobs, on the availability of new products, of American competitiveness. We do not have to argue theory anymore. We can now argue from fact, and the burden of proof, it seems to me, is on those who say ``that far and no further'' is overwhelming. I must tell you, when the Senator from California stated that she felt that no changes were needed in our product liability laws, and when we got the same implication from the Senator from Wisconsin, I looked up their record last year in voting on that aircraft bill expecting to find they voted against it, but they voted for it. So their position must be that aircraft is the only thing where any kind of reform is needed. Nothing else. It was the only industry adversely affected by product liability litigation. Of course, that proposition is insupportable. If a statute of repose alone could have such a dramatically positive impact on the small aircraft industry, it is obvious that balance changes, such as these are which, as I already said, does not restrict anyone's right to recover all of their actual provable damages in any product liability case, that the positive impact of change is going to be dramatic and significant. For those who look back and say here are terrible things that happened and we want an absolutely risk-free society in any and all circumstances, they see, I think quite erroneously, one set of consequences. Those who feel that we have not developed all of the products that we ought to develop in the history of the United States, that we should encourage new developments and that we should encourage competition, and that while those who make serious mistakes, purposeful or negligent mistakes, should be responsible for the consequences of those mistakes, we are not going to add to that responsibility, absolutely unlimited, unfettered by any discretion, punishment without any of the protections of the believe it does to the Senator from Oklahoma, overwhelmingly obvious. As I said in the beginning, and as the Senator from Oklahoma said so eloquently, we now have one very positive example of how this kind of legislation works. Now let us do more of it, and I think we will see an even more dramatic recovery in many industries which have been constricted on the part of many companies that have abandoned lines of products and many new companies, entrepreneurs who would like to go into new businesses and who are discouraged from doing so by the specter of lawsuits. Mr. ROCKEFELLER addressed the Chair.

Mr. GORTON. Mr. President, I move to reconsider the vote.

Mr. GORTON. Mr. President, what is the pending business?

Mr. GORTON. Has all time for debate expired?

Mr. GORTON

Mr. GORTON. Mr. President, I am going to submit a unanimous-consent which I believe has been cleared by both sides of the aisle. I ask unanimous consent that there be 60 minutes of debate equally divided between Senators Abraham and Hollings, with debate to begin at 5 p.m. on Wednesday, April 26, on amendment No. 598, and that following the debate on the Hollings amendment the Senate proceed to a vote on or in relation to the Hollings amendment, to be followed immediately by a vote on or in relation to the Abraham amendment No. 597, as amended, if amended.

Mr. GORTON. I further ask that following the two stacked votes, the Senate then resume consideration of the Brown amendment, and that following the disposition of the Brown amendment, Senator Dole be recognized to offer his amendment on the subject of punitive damages.

Mr. GORTON. I further ask unanimous consent that the pending Abraham amendment be laid aside in order that an amendment by Senator Brown be offered, regarding rule 11.

Mr. GORTON

Mr. GORTON. Mr. President, I send the Brown amendment to the desk and ask for its immediate consideration.

Mr. GORTON. Mr. President, for the information of all Senators, Members should be aware that there will be two rollcall votes at approximately 6 p.m. on Wednesday. Senators interested in speaking on any of these issues or other issues related to product liability or legal reform should be prepared to speak throughout the day on Wednesday. Amendment No. 599 to Amendment No. 596 (Purpose: To restore to rule 11 of the Federal Rules of Civil Procedure the restrictions on frivolous legal actions that existed prior to 1994)

Mr. GORTON. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. GORTON

Mr. GORTON. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GORTON

Mr. GORTON. Mr. President, the amendment proposed by my friend, the distinguished Senator from Michigan, is the first amendment that has been proposed to this bill in something over 24 hours of debate. It is a most interesting amendment. I hope that any Member who feels that he or she can contribute to the debate on the amendment will appear on the floor and share with Members of the Senate that Senator's views. The amendment is relatively modest in one respect, and in another sense is expansive. It is not directly connected with the other provisions of this bill in that it is not limited to product liability litigation. It is, on the other hand, limited, as I understand it, to actions in Federal court--basically in the U.S. district courts--and applies to all such litigation in those courts. The concept that there should be disclosure, both in the initial stages of an attorney-client relationship and at the end of that relationship, over a particular case is, of course, an appropriate one. On its surface, the amendment seems to be constructive. I hope we will very promptly get the views of other Senators on the subject. I would like to conclude the debate on this relatively narrow amendment before we adjourn this evening.

Mr. GORTON. Mr. President, in the nature of attempting to correct a few, I think, inadvertent misstatements during the course of the last 24 hours, and also in the interest of speaking philosophically on at least one of the points made by my friend and colleague from South Carolina, I would like to speak briefly on three or four subjects. Yesterday in his opening statement, the distinguished junior Senator from Louisiana [Mr. Breaux] commented that although Louisiana State law does not allow punitive damages, S. 565 would preempt this refusal to allow such damages. It is quite important for me to correct that misapprehension, as my own State of Washington, like Louisiana, is one of roughly five in this country that does not permit punitive damages in most civil litigation at all. As I said in my opening statement, if I had my way, I would abolish punitive damages in civil litigation. It amounts to an unlimited form of punishment, the risk of unlimited punishment in civil litigation at the absolute discretion or whim of the jury. My view of civil litigation is that it should be designed to redress grievances, to compensate fully individuals for actual damages that they have suffered, but should not be used for punishment. So I would be extremely disturbed if we were dealing with a bill that included the preemption to which the Senator from Louisiana referred. S. 565, which, in essence, is what we are dealing with in my substitute amendment, does not preempt the ability of a State to restrict punitive damages to a greater extent than are restricted in S. 565 itself. Section 107, subsection (A) reads: General ruling. Punitive damages may, to the extent permitted by applicable State law, be awarded against the defendant in a product liability action that is subject to this title. And then it goes on to limit punitive damages in such actions. That is to say, that it does put certain limitations on punitive damages, but it does not mandate that a State must permit even up to that limitation in product liability litigation in those States. While we are on the subject of preemption, there are two other similar areas in which there is no preemption in the sense, at least, that there is no preemption of a State prohibition against punitive damages. We have in this bill a statute of repose for certain manufactured items of 20 years. But if a State has a statute of repose as broad or broader than the one in this bill with a limit of fewer than 20 years, that statute of repose is not preempted. Section 108, subsection (B)(2) reads: Notwithstanding paragraph 1-- Which establishes a 20-year statute of repose-- If pursuant to applicable State law an action described in such paragraph is required to be filed during a period that is shorter than the 20-year period specified in such paragraph, the State law shall apply with respect to such a period. And, finally, if a State law does not allow joint liability at all, S. 565, which bans joint liability for noneconomic damages, does not require a State to ban joint liability for economic damages. All of this is relevant because in a conversation an hour or so ago on this floor between the distinguished Senators from Louisiana and South Carolina, the criticism was raised that if we are going to go for uniformity, we should require absolute uniformity; that there is something perverse or something wrong about a preemption in one direction without a preemption which is all encompassing in nature. In fact, I believe the Senator from South Carolina went beyond that point to say that if we desired uniformity in product liability litigation, we should transform what is now a State cause of action to exclusively a Federal cause of action and have identical rules applicable in every State in the country. I find it curious that we should so frequently in this body be faced with an argument that because we seek to reach a certain goal, we have to do it absolutely and without exception. I believe that it is the essence of our system that we are constantly adjusting our rules to meet the present needs of the society. I do not believe that we must act mechanistically and, of course, we do not act mechanistically. Usually, this kind of argument is brought up simply because the entire concept is opposed by whoever presents it. I began my remarks on this bill yesterday by saying that obviously there margins come into conflict. Clearly, in connection with this litigation, one is the regressive grievances, is the proposition that courts should be open to citizens of the United States and of the respective States to sue when they feel that they have been wronged. The other is economic efficiency, is the encouragement of the creation of jobs, of research, of development resulting from that research, the marketing of new and improved goods and pharmaceutical drugs, and the prevention of the irrational and unreasonable withdrawal from the market of goods and services which are of great use to most of society but which occasionally are accompanied by adverse reactions on the part of a few consumers. So what we are trying to do here is to deal with the proposition that the proponents of this bill--and I think the clear majority of the Members of this body--feel that the pendulum has swung too far in favor of litigation. This should not be a surprise. We read about this constantly, we hear about it constantly, and we know that we are the most litigious society, literally, in the history of the world. It seems quite evident to most citizens that the operations of our society and of our economy are often inhibited by the amount and the nature of much of the litigation with which the people of America are faced. And so here we seek, in a modest way, in one field of litigation, to put some limits on that litigation. We do not do so by depriving anybody of a cause of action. Every cause of action that exists at the present time will exist if this bill becomes law. But we do put some inhibitions in the way of the pursuit of punitive damages, damages which do not, by their very nature, compensate for an injury. We put limitations on the ability of plaintiffs to recover from defendants beyond the responsibility of those defendants with a particular harm. And, yes--I must correct myself--we do under some circumstances deprive people of causes of action with respect to equipment and manufactured items which are more than 20 years in age. That does not mean that we feel we have done everything that might appropriately be done. We feel that these limitations are reasonable and should be universal in nature. But that does not automatically carry with it the philosophy that no one else, no other State, can feel that other limitations, greater limitations, are also appropriate. We need the experimentation of a federal system in that connection. Nor do we feel that because we desire somewhat greater uniformity in the law, we have to have absolute uniformity. Now, with 50 States and the District of Columbia, each with a different legal code, there is a total lack of imposed uniformity in the law relating to product liability, in spite of the fact that the production and marketing of products is national in nature. Of course, I suppose we can say we should go from no mandatory uniformity at all to 100 percent mandated uniformity. Personally, I think that would be absurd. I think most Members of this body think it would be absurd. There is not the slightest chance that this body, in its wisdom, would federalize the entire product liability system. But that does not mean that a greater degree of uniformity that we have at the present time is not socially desirable. We--and even more important than we--the market thinks that a greater degree of uniformity is essential. So we go toward the center. We attempt to get that pendulum back into a centerpiece. We are seeking balance. So we do not intend to go to the extremes with respect to product liability, and we do not in this bill. We do not intend to go to the extremes with respect to joint liability, and we do not in the course of this bill. We do not adopt the shortest possible statute of repose in this bill, and we do not demand absolute uniformity in this bill. In the four most important elements of this bill, we seek not some kind of pure ideology, but an appropriate balance, a greater degree of encouragement for the economy to create jobs, competitiveness, new and improved products, certain limitations on the kind of litigation problems which plague our society, and we feel it is this middle ground that is the appropriate ground. That is the rationale that, I think, is overwhelmingly appropriate for the way in which we treat preemption in each of these areas. Mr. President, I yield the floor. Mr. HEFLIN addressed the Chair.

Mr. GORTON. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GORTON

Mr. GORTON. Mr. President, I ask unanimous consent that when the Senate completes its business today it stand in recess until the hour of 10:30 a.m. on Wednesday, April 26, 1995; that, following the prayer, the Journal of proceedings be deemed approved to date; the time for the two leaders be reserved for their use later in the day; and the Senate then immediately resume consideration of H.R. 956, the product liability bill.

Mr. GORTON

Mr. GORTON. Mr. President, if there is no further business to come before the Senate, I now ask that the Senate stand in recess under the previous order.

Mr. GORTON

Mr. GORTON. Mr. President, for the information of my colleagues, under the provisions of the agreement entered earlier, at 5 p.m. tomorrow the Senate will begin 60 minutes of debate to be followed by two consecutive rollcall votes. Members should, therefore, be aware that there will be two stacked votes at approximately 6 p.m. There will be no rollcall votes prior to those votes in order to accommodate Members attending the funeral of Senator Stennis.

Mr. GORTON

Mr. GORTON. Mr. President, I ask unanimous consent that the Senate proceed to the immediate consideration of Calendar No. 43, H.R. 421, the Cook Inlet Region bill, that the bill be deemed read a third time, passed, that the motion to reconsider be laid upon the table, and that any statements relating to the bill be placed at the appropriate place in the Record.

Mr. GORTON

Mr. GORTON. Mr. President, I ask unanimous consent that the Subcommittee on Strategic Forces of the Committee on Armed Services be authorized to meet on Tuesday, April 25, 1995 at 2 p.m. in open session to receive testimony on the Department of Energy's Environmental Management Program in review of the defense authorization request for fiscal year 1996 and the future years defense program; Defense Nuclear Facilities Safety Board reauthorization.

Mr. GORTON. Mr. President, I ask unanimous consent that the Committee on Labor and Human Resources be authorized to meet for an executive session, during the session of the Senate on Tuesday, April 25, 1995, at 9:30 a.m.

Mr. GORTON

Mr. GORTON. Mr. President, there are in fact few valid arguments against a greater degree of uniformity and a greater degree of predictability with respect to impacts of such transactions. Estimates of total court costs of litigation and assorted transactional costs range from $80 to $117 billion a year to manufacturers and sellers in this country. It goes without saying that these costs are immediately forced back onto consumers through higher prices for products which Americans use every day. The current product liability system accounts for approximately 20 percent of the cost of the simple ladder and one-half of the cost of a football helmet. Injured parties receive less than half of the money spent in product liability litigation. More than half goes to the lawyers, and those who work with them in prosecuting and defending that litigation. Nearly 90 percent of all manufacturers and many retailers and wholesalers in the United States can expect to become a defendant in a product liability case at least once. The cost of product liability insurance is 15 times greater in the United States United States than it is in Europe. As I have already said, manufacturers can still be sued today for products manufactured in the 1800's, simply because the present potential defendant purchased, at some time or another, the company that was engaged in manufacturing in that century. As I have just pointed out, the product liability system in the United States is the world's most costly. The editors of a book entitled ``The Liability Maze'' published by the Brookings Institute in 1991 notes: Regardless of the trends in tort verdicts, most studies in this area have concluded that, after adjusting for inflation and population, liability costs have risen dramatically in the last thirty years, and most especially in the last decade. Mr. President, the cost of litigation, court proceedings, attorney fees, and expert fees--in other words, transaction costs associated with the current system--are absolutely outrageous. A 1992 study indicates that for every $10 paid to claimants by insurance companies for product liability cases, another $7 is paid for lawyers and other defense costs. That is defense costs only. If the contingent fee of plaintiff's attorneys is factored in, lawyers' fees account for more than 60 percent of the funds expended on product liability cases. Obviously, liability insurance costs reflect these increased transaction costs, and insurance rates rise accordingly. Over the past 40 years, general liability insurance costs have increased at more than four times the rate of growth of the national economy. One small manufacturer in my own State of Washington, Connelly Water Skis, Ltd. pays $345,000 a year for liability insurance, even though that company has never lost a product liability case. Paradoxically, the victims of this system are very often the claimants, the plaintiffs themselves, who suffer by the actual negligence of a product manufacturer, and frequently are unable to afford to undertake the high cost of legal fees over an extended period of time. Frequently, they are forced into settlements that are inadequate because they lack resources to pay for their immediate needs, their medical and rehabilitation expenses, their actual out-of- pocket costs. In 1989, a General Accounting Office study found that on average, cases take 2\1/2\ to 3 years to be resolved, and even longer when there is an appeal. One case studied by the GAO took 9\1/2\ years to move through our court system. In an insurance industry study, it was found that it took 5 years to pay claims with an average dollar lost and that ``larger claims tended to take much longer to close than smaller claims.'' An early insurance offices product liability study found that injured plaintiffs with losses of between $1 and $1,000 received on average 859 percent of their actual losses, while those with losses over $1 million received on average 15 percent of their losses, even before attorneys fees were paid. This is to be contrasted with the results of those lawsuits we often see in the newspapers, or hear about on television, in which a particular plaintiff has received a bonanza, a lottery style set of winnings. In today's system, consumers, manufacturers, and product sellers are trapped in a product liability litigation system that is essentially a lottery. Identical cases in two different States often produce strikingly different results. And, of course, here in the United States we have 51 separate product liability systems--in 50 States and the District of Columbia, while the European Economic Community, Australia, and Japan each have adopted a uniform, predictable product liability statute. In one of the many hearings held on this issue over the years, University of Virginia law professor Jeffrey O'Connell explained, and I quote him: If you are badly injured in our society by a product and you go to the highly skilled lawyer, in all honesty the lawyer cannot tell you what you will be paid, when you will be paid or, indeed, if you will be paid. Three distinguished judges: Chief justice, Richard Neely, of the supreme court of West Virginia; Federal district court judge, Warren Eginton, author of the ``Product Liability Journal;'' and New Jersey Court of Appeals judge, William Dreier, author of the ``Product Liability Journal of New Jersey,'' have presented congressional testimony attesting to the need for uniformity. While they state that there will naturally be different interpretations of any law, conflicting interpretations will obviously be fewer with a single law than with 51 different ones. Uncertainty in the present system is a reason for change. Plaintiffs, those injured by faulty products, need quicker, more certain recovery-- recovery that fully compensates them for their genuine losses. Defendants, those who produced the products, need greater certainty as to the scope of their liability. Mr. President, under the current system, consumers are required to pay increased and unnecessarily high prices on necessary goods. Here again the excessive costs of an out-of-control tort system fall on the shoulders of consumers through increased prices. An example. Lederle Labs, the lone maker of diphtheria, pertussis, and tetanus vaccine, raised its dose from $2.80 to $11.40 simply to cover the costs of lawsuits. According to Prof. George Priest of Yale Law School in testimony before the Senate Judiciary Committee this month, excessive punitive damages awards have increased the general price level for products and services provided in the United States economy, harming consumers--and low income consumers most of all. In addition to higher prices, Americans suffer from the current system because of the lack of choice. At the present time, for example, only one company is willing to supply vaccines for polio, measles, mumps, rubella, rabies, and DPT. In 1984, two of the three companies manufacturing the DPT vaccine decided to stop production because of product liability costs. Can it seriously be asserted that we should abandon that vaccine? Later that same year, the Centers for Disease Control recommended that doctors stop vaccinating children over the age of 1 in order to conserve limited supplies of the DPT vaccines for the most vulnerable infants. Next, product development is hindered in many ways by the existing system. The unpredictability of the product liability system discourages the development of innovative products and cutting edge technology. Innovation is frequently stifled because scientific research essential for advanced product development is foregone or abandoned, due to the excessive costs of product liability. In 1984, a closed claims study by the ISO found that United States industries spent more on product liability defense costs than on buying equipment to boost productivity. In an American Medical Association report titled ``The Impact of Product Liability on the Development of New Medical Technologies,'' we read, and I quote: Innovative new products are not being developed or are being withheld from the market because of liability concerns or inability to obtain adequate insurance. Certain older technologies have been removed from the market, not because of sound scientific evidence indicating a lack of safety or efficiency, but because the product liability suits have exposed the manufacturers to unacceptable financial risks. Rawlings Sporting Goods, Mr. President, a leading manufacturer of competitive football equipment for more than 80 years, announced in 1988 that it would no longer manufacture, distribute or sell football helmets. Joining Spalding, McGregor, Medalist, Hutch, and others who have stopped manufacturing helmets, Rawlings was the 18th company in as many years to give up the football helmet business because of increasing liability exposure. Two manufacturers out of the 20 that existed in 1975 remain in the helmet business today. A recent article in Science magazine reported that a careful examination of the current state of research to develop an AIDS vaccine, and I quote, ``Shows that liability concerns have had negative effects.'' It points out that Genentech, Inc., halted its AIDS vaccine research after the California Legislature failed to enact State tort reform. Only after a favorable ruling did that company resume its research. And consider--perhaps because of its history this is the most important quotation of all--the comment by Jonas Salk, inventor of polio vaccine: believe a U.S. manufacturer will market it because of the current punitive damage system. Think of where we would be had we had the present system when Dr. Salk developed the polio vaccine. Would it not have been marketed? Would we still be faced with that scourge? Not only does the present system hurt medical innovation, it also inhibits small companies from producing everyday goods. Again, in my own State, for example, Washington Auto Carriage of Spokane distributes various kinds of truck equipment throughout the United States. Here is what its owner, Cliff King, says. And I quote him: We have been forced out of selling some kinds of truck equipment because of the exorbitant insurance premiums required to be in the market. As a result, this type of equipment tends to be distributed only by a few very large distributors around the country, who can afford to spread the cost over a very large base of sales. Ultimately, there is much less competition in those markets. In other words, Mr. President, as tough as the present system is on large corporations, it is even tougher on small companies--companies who can be driven out of business by a single lawsuit. Mr. President, I spoke a few moments ago about the undoubted interstate nature of our product manufacturing and distribution system and the overwhelming justification for a greater degree of uniformity than we have today, and for the obvious constitutional basis in the commerce clause for such legislation. One would expect, however, that many of those connected with State government would oppose any further limitation of their control over their tort systems. Yet, the representatives of the top organization of State elected officials, the National Governors Association, recognizes both the need for product liability reform and the necessity of such reform at the Federal level. A resolution adopted by the National Governors Association last January summarizes both the need and the support of State Governors for change in the product liability system here by the Congress of the United States. In part, the resolution adopted by the NGA reads: The National Governors Association recognizes that the current patchwork of U.S. product liability laws is too costly, time-consuming, unpredictable and counterproductive, resulting in severely adverse effects on American consumers, workers, competitiveness, innovation, and commerce. The issues of product liability reform has increasingly pointed to Federal action as a way to alleviate the problems faced by small and large businesses with regard to inconsistent State product liability laws. This lack of uniformity and predictability makes it impossible for product manufacturers to accurately assess their own risks, leading to the discontinuation of necessary product lines, reluctance to introduce product improvements and a dampening of product research and development. American small businesses are particularly vulnerable to disparate product liability laws. For them, liability insurance coverage has become increasingly expensive, difficult to obtain, or simply unavailable. Further, the system causes inflated prices for consumer goods and adversely affects the international competitiveness of the United States. Clearly, a national product liability code would greatly enhance the effectiveness of interstate commerce. The Governors urge Congress to adopt a Federal uniform product liability code. It should be noted at this point, Mr. President, that this resolution reflects the position that former-Arkansas Governor, William Clinton, supported during his many terms as Governor. Mr. President, I believe it appropriate, briefly at this point, to outline for Members the chief reform features of this proposal. While it makes more uniform laws related to product liability in many fields, it continues to defer to the States in many other areas. As such, it retains a balance between Federal and State concerns over this branch of interstate commerce. It does so, however, in a thoughtful and sober fashion by eliminating those elements of the present system that cause the greatest degree of uncertainty and have the most adverse impacts on interstate commerce, on productivity, on the creation of jobs, and on the competitiveness of American business. First, Mr. President, we reform the almost uniform system of joint and several liability. In most States, when there are multiple defendants in a product liability action, a deep-pocket theory applies. Under the joint and several liability rule, any defendant who has contributed in any way, to an injury can be held responsible for the entire amount of the damage award. Such a deep-pocket rule encourages plaintiffs and their lawyers to target the wealthiest defendant in each case, even if that defendant can be, and has been found, by the jury to be only minimally at fault. S. 565 provides for only several liability and not for joint liability on noneconomic damages. This means that each defendant is liable only for his, hers or its portion by reason of its proportion of the fault in causing the injury. This is currently the law in the State of California. It does, however, apply only to noneconomic damages, those that include pain and suffering and emotional distress. Under this bill, States will be permitted to retain joint liability, if they wish to do so, for economic damages--medical costs, lost wages, and so forth--so that an injured plaintiff can be assured of recovering fully, no matter who the source of that recovery, for those actual out-of-pocket damages themselves. Pain and suffering and other noneconomic losses under this bill will be tied to the concepts of both fault, and also responsibility. Mr. President, it is unfair and highly unproductive to make defendants pay for damages of a nature that are literally beyond their control or beyond their fault. In California, it has been found, under this new law, that juries are much more likely to apportion liability fairly according to each defendant's fault. Mr. President, the particular kind of damages about which we read most frequently are punitive damages. Punitive damages, of course, are damages awarded to punish the defendant, rather than to compensate the victim either for the victim's economic or noneconomic emotional damages. As such, they are a troubling concept in our system of law. Generally speaking, we punish for criminal activities through the Criminal Code, a code which provides a multitude of protection for those accused under it--proof beyond a reasonable doubt, a right against self-incrimination, limited sentences designed to fit the crime. None of these concepts, however, applies to the imposition of punitive damages. A handful of States, my own included, do not generally permit punitive damages in civil litigation at all. And, Mr. President, there is nothing to indicate that justice is denied in those States, that recoveries on the part of the injured plaintiffs are inadequate, or that companies operate in a less safe and responsible fashion. I can express a personal preference, dating from the time at which I was admitted to the bar for such a system, for the use of nonpunitive damages only, in civil litigation. But because the vast majority of the States utilize such a system, this bill continues to permit it in States that allow it at the present time, but with a number of limitations. Under this law, claimants would be required to provide, by clear and convincing evidence proof, that a defendant engaged in egregious misconduct and there would be a degree of proportionality in punitive damages--a cap of $250,000, or three times the economic damages awarded, whichever is greater. A separate jury consideration of punitive damages would also be required from the determination of the jury for compensatory damages. Reforms of this nature are supported by mainstream academic groups in the American Bar Association and the American College of Trial Lawyers. More recently, these reforms were recommended in a 5-year report studied by scholars of the prestigious American Law Institute. Third, this bill deals in general terms with exactly the subject of last year's aviation product liability bill, a statute of repose. Under the current product liability system, manufacturers are liable for injuries caused by products without regard to the age of these products, even when the equipment has been rebuilt, altered, or used improperly. Mr. President, it is clearly unreasonable to hold a manufacturer liable for a product that may have been made 30 or more years ago, particularly when it has no control over the use or maintenance of that product. workplace durable goods, or less if State law provides a lower statute of repose. By this provision, we inject a degree of predictability in a system, which literally at the present time calls for endless liability. One example, Mr. President. Since 1830, the firm of Davis & Ferber was one of the largest textile machinery manufacturers in the world. Recently, that company was required to defend itself against a claim involving a machine that left its plant in 1895 and had been modified again and again by different owners for 88 years. In 1982, Davis & Ferber was forced out of business because of the high cost of settlement in this case. There is one other element of this bill notable for this opening debate, and that element arises out of the fact that at the present time, consumers can sue, not only the manufacturer of an alleged faulty product, but also the retailer who sold it or the firm that rented or leased the product. In over 95 percent of all such actions, the manufacturer ultimately pays any judgment that is awarded, but the web of litigation adds to spiraling unnecessarily legal costs to the wholesaler or the retailer that are ultimately paid for by the consumer. Under S. 565, product sellers, as well as those who engage in the leasing and renting of products, will be liable for their own negligence or failure to comply with an expressed warranty but not for the negligence of the manufacturer. These provisions will reduce litigation among retailers, wholesalers, distributors, lessors, renters and manufacturers saving legal costs that, at the present time, are passed on to the consumer in the form of higher prices. Unless they are directly responsible for product failure due to negligence or misrepresentation, a seller, lessor, or renter shall not be held liable for injuries caused by a product. If the manufacturer is negligent, that manufacturer should be liable. Mr. President, in summary, this proposal is aimed at a very real challenge and a very real problem in our society today. It is aimed at spiraling costs of litigation, far more often than not, on the part of manufacturers and sellers in successful litigation, but costly and risky nevertheless. It is aimed at limiting recovery to those who are responsible by their own negligence for injury to a far greater extent than is the case today; to providing an end to that responsibility after two decades, in the case of certain manufactured equipment; to limiting the arbitrary nature of punitive damages, as the Congress has been invited to do by the Supreme Court of the United States and fundamentally to seeing to it that a greater share of the recovery in litigation of this sort gets to the injured party and less to transactional costs, the present division of which is a disgrace. Mr. President, as I said at the beginning, I am gratified that for the first time in a debate, which has lasted in the Congress of the United States for almost two decades, we are actually discussing the merits of this kind of legislation. I look forward to a spirited and contested debate, but I also look forward to a conclusion, which creates a greater degree of balance and restores a degree of fairness, competitiveness and common sense to American industry and to its employees. Mr. HOLLINGS addressed the Chair.