Jon Kyl

Mr. KYL

Mr. KYL. I suggest the absence of a quorum.

Mr. KYL. Unless there is someone else who wishes to speak at this time, I ask unanimous consent that the time consumed in the quorum call be equally divided.

Mr. KYL. Mr. President, I would like to advise Members that under the unanimous consent agreement for the consideration of this bill there is a period of 2 hours general debate and 4 hours equally divided on the Feinstein amendment. We would like to ask Members who have comments to make about this legislation to come to the floor and express themselves so that we can conclude this bill today under the unanimous consent. I will continue to discuss the bill. But if other Members would like to come, I will yield the floor to them. I would ask that those who have amendments that are authorized by the unanimous consent agreement to lay those amendments down so Members who wish to speak to those amendments could also address that. In the meantime, let me continue some of the conversation Senator Schumer and I had before. We are talking about a bill which would plug a loophole in the existing law--the Foreign Intelligence Surveillance Act--which currently authorizes warrants to be obtained in two specific situations. We make it clear that there is a third situation as well. The two specific situations are where you either have somebody you suspect is involved in international terrorism because they work for a foreign government--that is a situation like the old Soviet spy--or they work for some international terrorist organization. Remember that this law was created at the time when we had organized groups such as the Red Brigade and the Meinhof gang, and those types of groups. That is why those two definitions in the statute were included in the way they were. What was not anticipated is that we would also have people coming from abroad to the United States to commit acts of terrorism against American citizens as part of this rather amorphus Islamic Jihad movement rather than an organization of people affiliated around a culture or an idea or a movement. As a result, the statute needs to include that third group of people, as we know, after September 11. We have specific cases of people in which warrants were sought but were not obtained because we couldn't make that connection to either a specific country or a very specific terrorist organization. Instead, the individual had relationships with various people and organizations involved in terrorism but certainly we couldn't say he was a card-carrying member in the sense that the statute was originally drafted. So the same requirements, as Senator Schumer said, would pertain. It doesn't apply to U.S. citizens. It only applies to foreign terrorism. But it would include a person coming here from another country--not a U.S. citizen--and we have probable cause to believe is engaged in or about to engage in an act of terrorism. In that case, the law enforcement authorities can go to the court and seek a warrant just as they do in any other criminal court. But the difference here is the Foreign Intelligence Surveillance Act. One of the reasons a special court is set up for that is because the information which the Justice Department frequently presents is highly classified. Clearly, here you are dealing with foreign threats--either an international spy spying on us from another country or some kind of terrorist like Zacarias Moussaoui, and the information you have that enables the warrant to be sought was obtained obviously through intelligence work. You don't want to compromise either the sources or the methods of intelligence. As a result, you can't just file publicly in the regular court system for a warrant. That is why the Foreign Intelligence Surveillance Act court was established. These are judges just like any other judge, but they have special intelligence clearances. They have been cleared to handle classified material. By the rules of the court, that material is kept in the court. Once allegations have been filed against people, then the matter can be debated in camera, which is to say in private--not in public hearings. Proceedings remain classified, at least until the matter is included; perhaps thereafter as well. This is the way in which these highly sensitive intelligence matters are handled. It takes a special procedure and a special court to do that. But there is nothing antithetical to a constitutional right simply because we have to handle it that way. There are other situations, as well, in which in our court system can handle things nonpublicly. There are sometimes sensitive matters between litigants that have to be handled in camera; that is to say, in effect in the judge's chambers and not out in public. Certainly, I think everybody can recognize that in some of the big spy cases and international terrorism cases you just can't take the evidence you gathered by the intelligence mechanism which we have and produce all of that information in open court. That is why you have these special procedures. But the underlying legal requirements to obtain the warrant remain essentially the same. They are slightly different in the classified court than in a regular court. In all candor, they are a little bit easier to obtain. But the basic element of probable cause and belief that a crime is being committed or is about to be committed or is planned remains. Nothing is changed. As Senator Schumer pointed out, our legislation doesn't change anything relating to the standard of proof, the burden of proof, or anything of that sort in the existing law that works so well. What we do is ensure that the warrant can be obtained not just against the spy for a specific country, or the terrorist whom you can identify as a member of a particular terrorist organization--sort of an anachronistic concept in today's terrorist situation--but also pertains to the non- U.S. citizen, a foreign person who comes here from abroad with the intent to commit some act of terrorism against U.S. citizens. When you have those elements, you have the same foreign terrorist nexus to the law that our Constitution permits included within the Foreign Intelligence Surveillance Act for purposes of obtaining warrants or obtaining other surveillance of the individuals. That is all we do. That is all that is done by this legislation. So those of us--including I think every one of us on the Judiciary Committee--who consider ourselves civil libertarians need not be concerned that this statute or that this legislation, in any way, would impact on our constitutional rights, nor that it would diminish the constitutional rights of non-U.S. persons who are not engaged in terrorism. But if we have probable cause to believe you are engaged in an act of terrorism, then, yes, you would be subject to provisions of this law. This legislation has an interesting history, as I alluded to earlier, because it was assigned to the Intelligence Committee, and it was almost included as a part of the Intelligence Authorization Act of last year. And the chairman of the Intelligence Committee this year was kind enough to offer to include it in this year's legislation as well. Since we were able to also have the bill marked up in the Judiciary Committee and brought to the floor as a result of that markup, that was not deemed necessary. That is why the bill is here--actually as a result of action by the Judiciary Committee. So both the Intelligence Committee and the Judiciary Committee have been involved in this legislation, the former having a hearing and the latter having marked up the bill. Having been a member of the Intelligence Committee and sitting, as I do, on the Judiciary Committee, I can tell you it was also the subject of additional comments and hearings that were held for broader purposes of examining the terrorism issue. That is why I mentioned the fact that the legislation had actually been supported publicly by various Government officials who testified before either the full Judiciary Committee or the subcommittee I chair on terrorism and technology. They had testified before our committee on terrorism issues generally, and I specifically asked whether they supported the legislation in question; the response to the questions, of course, was that they did. Another interesting hearing, which was a joint hearing, as I recall, between the Judiciary and the Intelligence Committees had testimony from Coleen Rowley, referred to by Senator Schumer earlier. You will recall, she was the agent from Indianapolis who was very exercised about the fact that she could not get a warrant against Zacarias Moussaoui and complained bitterly that the FBI headquarters had prevented her from doing that. She thought the conditions warranted the issuance of the warrant. It is a debatable point. But it would not have been debatable if our proposal had been law. It would have been very clear. We had the probable cause. The only question was, Can we tie this person to some international terrorist organization? As I said before, we spent a lot of time and a lot of effort trying to run around tracing his contacts with Chechen rebels, and at the end of the day it just was not specific enough to be able to use the statute to get the warrant against him. Right after 9/11, when essentially the same warrant was sent forward, then we had additional information of contacts this individual had, as a result of which the warrant was obtained. But that would not have occurred had September 11 not occurred--or at least it is doubtful it would have occurred. Let me put it that way. Would that have prevented the September 11 attacks? No one knows for sure. I suspect not, but at least a plausible case can be made that we would have known a lot more about the planning of September 11 had we been able to get into Moussaoui's computers and questioned him and ascertained what he was up to and, furthermore, traced the contacts we were later able to trace from Moussaoui to others involved in the al- Qaida movement that would have painted a much clearer picture of what was being planned prior to September 11 than the information that we had. The point is, we do not want to be in that position again. So whether it would have prevented 9/11 is really beside the point. We had the ability to get information which can protect the American people against acts of international terrorism. Why wouldn't we want to take advantage of that opportunity? As I said, the Judiciary Committee unanimously voted this bill out of committee to send it to the floor so we could deal with that precise issue. I am certain my colleagues will agree that this is important to do and that we will do it a little bit later on this day. When we do, I think we can be very proud of the fact that this is another in a series of things we will have done to help prepare our country against the international terrorist threat. We know that in the whole matter of homeland security you can only provide so much defense, that it really is about taking the fight to the enemy. Because our country is so big, it is so open, we have such broad freedoms in this country--and thankfully so--it is virtually impossible to absolutely protect us from a terrorist who would come here to do us harm. One of the ways we can help to protect against that is by getting good intelligence on people who come here from abroad and who we find out mean us ill. This provision today is a way to help us do that. So this is a tool in the war on terror that will really help us ensure that we deal with as many of these threats as we possibly can. Are we always going to find out enough to even get a warrant? Not necessarily so. That is why the efforts of the administration to go after these terrorists all around the world are so important. But what has helped us in that regard is that we have had cooperation from other governments. And as much as we have been critical of some of our allies for not supporting us as we would like to have had them do-- such as the situation in Iraq--I will tell you, virtually every country in the world has been supportive in one way or another in supplying us with information about terrorists in their countries or terrorists of whom they are aware who might be affiliated in some way in this international movement that threatens us all. One of the things we discovered, however, in talking to legislators and parliamentarians from these other countries, and intelligence officials, and law enforcement officials, is that they have legal inhibitions just like the United States does. Their laws only permit them to go so far in tracking down these terrorists in their country. In the case of Germany, for example, which has been very helpful to the United States, they were able to change one of their laws to make it easier for them to go after these terrorists. There was another law they also needed to change, and at last count I do not recall whether they were able to get that done. But the point is, if we are able to change our law, as we did with the Border Security Act and the USA Patriot Act, we can demonstrate a seriousness of purpose to these other countries to convince them that all of us need to make these kinds of changes in our laws so that we can go after these terrorists. The analogy is, we won the war in Iraq in a most amazing way. We sent our troops with the best equipment and the best training ever in the history of the world. And I wish I could share some of that, the information about that equipment publicly. But I think we have all, through the embedded reporters, come to appreciate how just one American soldier, with all of the technology at his disposal, can make a tremendous difference. We also have helped protect them. They have special flak vests, bulletproof vests that protect them against a lot of incoming. We try to protect them with the special chemical gear in the event of a chemical attack, and so on. We want to send our troops into battle protected in the very best way and with the very best means of accomplishing their mission. Why would we deny our law enforcement and intelligence officials the very same kinds of weapons in the battle that we send them out to win? I guarantee you that the next time there is a case like Zacarias Moussaoui or some other terrorist about whom we have some information but we don't go after strongly enough, and he does something to us, the recrimination will be great. Oh, the accusations will fly: Why didn't we do something about that when we could have? So our response today is going to be: We did. We came together as a Senate and we enacted another law, another piece--it is a small piece, but it is an important piece--to help us fight this war on terror. We did not shirk our responsibility. When we became aware of the loophole in the law, we acted to fill it. Now, we have to do that in order to be able to take this credit, obviously, but I believe strongly that the House of Representatives will act similarly and that we will be able to get this to the President's desk in very short order, so at the end of the day today we can say we have done something very important to advance our ability to fight the war on terror and protect the American people. Again, I urge my colleagues, if there is no opposition--and I hope there isn't--that is fine. But anybody, either in opposition or in favor of the legislation, come forward so that we can have whatever debate is necessary. And I especially ask the proponents of amendments to come forward so that we can begin to debate them. I will take this moment to press some of the comments that will be made about the two amendments. Senator Feingold has proposed an amendment that we will accept and the Senate should accept which requires that the warrants obtained under this law generally--not just the provision we are talking about today, but if we obtain a warrant under either of the other provisions as well, that the information be compiled and shared with the Senate; specifically, that the information be sent to the Intelligence Committee--it is classified information, obviously--and that the cleared people on the Judiciary Committee who are appropriate to view the information have full access to that so we can evaluate whether these provisions are being used, abused, how often they are being used, how effectively, and so on. I believe his amendment calls for an annual report which we could examine. That is very useful information for us to have. One thing we found was that prior to 9/11, this statute had not been used very often. It is not a particularly easy statute with which to comply. You do really have to have your information together before you seek the warrant because you don't ever want to be turned down. I don't believe the Justice Department ever was turned down. That is evidence of the fact that they were careful. Since 9/11, there have been a lot more cases in which this has been used. That information will be available to us, and therefore I will support Senator Feingold in offering the amendment. The other amendment that is in order under the unanimous consent agreement, with all due respect to my great friend and colleague Senator Feinstein, would gut the bill and would be bad. It would really undermine the whole FISA process. We should reject it. I know she offers this amendment not for that purpose. Of all the people in the Senate with whom I have worked who share my strong conviction that we need to do everything we can to support our intelligence and law enforcement communities, Senator Feinstein is equaled by none. She is the ranking member of the Terrorism Subcommittee, and she and I have cosponsored numerous bills or amendments designed to enhance law enforcement and intelligence capabilities. She is a very strong advocate of giving our intelligence and law enforcement communities the very best tools possible. She just has a different point of view about how this FISA warrant process should work. I will let her describe it. I will offer my view that it has no place in the FISA situation. What her amendment purports to do really might have some applicability in a court setting because it talks about a presumption. As lawyers know, presumptions arise when you have two parties to litigation and one party comes forward with a particular piece of evidence or allegation which then changes the burden of going forward with the evidence or the burden of proof in the case. A presumption is established, and then the other side has to overcome it. That has no place in an ex parte hearing where the Government is seeking a warrant against a party who is not even aware that the warrant is being sought. Obviously, you don't get a search warrant by notifying him that you are about to do that. What her amendment pertains to does not really have application to the situation presented in an application for a FISA warrant and would seriously undermine the Government's ability to obtain it. You could either read it one of two ways. Either it would be totally meaningless--and I know that that is not intended--or else it would be very pernicious because it would create the suggestion in court that the material presented to it is not, is no more than a presumption, that it is not to be accepted on its face. Specifically, the Government would be asserting that the person against whom the warrant is sought is a non-U.S. citizen, a foreign person under the definition of the statute. If that information is presented in sufficient form for a court to issue the warrant, it makes no sense at all to have the information merely a presumption that the individual is a foreign person. How does that advance the ball? How does it help the court? How does it protect anybody? The court is still going to have to answer the very same question: Do I believe the information the Government is presenting to me that this is a non-U.S. citizen? Either he is or he isn't. It is not a matter of a presumption. If the court is not convinced that the Government's information is correct, then the court is not going to issue the warrant. It would be improper to do so. If the court is convinced that the person is a non-U.S. citizen, then the court can issue the warrant if the other requirements are met. I don't believe Senator Feinstein attacks the other requirements. Either you are a foreign-born person, or a non-U.S. person, or you are not. The court has to make that decision. And creating a presumption about it is really irrelevant to this particular process. If it is more than irrelevant, there is some kind of a problem. Obviously, you don't want the court to have to somehow independently verify the information that is presented to it by the Justice Department. That is not a part of; that is not the way the court works. The court does not do this sua sponte, or on its own. The court has the information before it, and it either has to accept the information or not. It doesn't have to accept the Justice Department's word for it. The Justice Department cannot simply make the assertion. It has to offer the proof. If the proof is not satisfactory, the warrant will not issue. Later, if it is found that the evidence was not satisfactory, then there is always some question about whether the evidence obtained, of course, could be used, say, in a later prosecution. The bottom line is that that amendment does not help. It could seriously hurt the application of the entire FISA statute. It is not just limited to the amendment we are offering today. I urge my colleagues, when the time comes, to reject the Feinstein amendment, not because it is not well intended--I am confident that it is--but, rather, that its effects are ill understood at best and, at worst, would be pernicious to the application of the statute. I have said all I need to say at this point on the legislation. I would note that time will run against the time allotted under the bill. Since both Senator Schumer and I control the time, anyone who wishes to come to speak to the legislation either for or against, I ask unanimous consent that if neither Senator Schumer nor I are here, they should be permitted to do so without specific acquiescence by Senator Schumer or myself.

Mr. KYL. Mr. President, I ask unanimous consent that in the debate on the pending business involving the Foreign Intelligence Surveillance Act, a letter from the Department of Justice dated July 31, 2002, be printed in the Record.

Mr. KYL. Mr. President, I ask unanimous consent that Senator DeWine be recognized at 1 p.m. for 15 minutes of morning business.

Mr. KYL. Mr. President, I appreciate the opportunity to take up this bill. It is under a unanimous consent agreement. Pursuant to that agreement, we are going to have some opening statements. I will take about 15 minutes and then Senator Schumer, the cosponsor of the amendment, will be presenting his remarks. After that, anyone who would like to speak for or against this bill can do so. There will be two amendments in order. One will be an accepted amendment offered by the Senator from Wisconsin, Mr. Feingold, and another will be offered by Senator Feinstein of California on which there is, I believe, a total of 4 hours authorized for debate. I do not think we will need that much time, but when the time comes, I urge my colleagues to oppose and defeat the Feinstein amendment so we can go to final passage of this legislation. I will briefly describe what the bill does and why we need it. Then I will get into some of the procedure involved. It is actually very simple. It involves an existing law that we passed in 1978 called the Foreign Intelligence Surveillance Act, known by the acronym FISA. FISA allows us to get warrants, among other things, and allows us to surveil people we suspect of committing acts of terrorism against us; for example, to get a warrant to search their computer or their home. There are two instances where the law currently applies. The underlying predicate is that there has to be probable cause that somebody is committing, about to commit, or planning to commit some kind of criminal act, a terrorism kind of act. It applies to two kinds of people: somebody who is either working for a foreign government or somebody who is working for a foreign terrorist organization. That leaves a little loophole because there are some terrorists who are not on the membership list, shall we say, or who are not card- carrying members of a foreign terrorist organization or a foreign government; people such as Zacarias Moussaoui, for example, whom we now believe to have been loosely involved in the al-Qaida attack of September 11. At the time, it was not possible to prove that he was involved with a foreign intelligence organization. It may well be that at the end of the day he was, in fact, a lone wolf, operating on his own, but very loosely affiliated with the radical Islamic movement which has underpinned a lot of the terrorism which threatens the United States and the rest of the world today. The law as written in 1978 was intended to apply to a very specific group of people, the Soviet spies, for example, or the Baader-Meinhof gang or the Red Brigade or the Red Army. There were a lot of these organizations back then, and they were very tightly knit organizations. If somebody was involved in one of these groups, they were involved. But today's radical Islamic movement around the world that associates itself with terrorism is much more amorphous. As I factitiously said, these people do not have cards identifying themselves as members of these organizations. They are people who hate the West and the United States. They move in and out of the different countries of the world. They will take training in a certain place. They will affiliate a little while with a group and then move on to support some other group. The bottom line is that it is very difficult, sometimes impossible, to prove that they are affiliated with a specific group. In some cases, they are not. They are simply acting on their own. But they are still terrorists. They are still foreign terrorists. They still mean to do us harm on the international stage and should be covered by the Foreign Intelligence Surveillance Act. We close this loophole by providing that not only does it cover the person working for a foreign government, or who we can prove at that point is working for a foreign terrorist organization, it also includes the so-called lone wolf terrorist, or the individual we cannot yet prove is directly affiliated with one of these amorphous groups. That is really all the bill does. I will give a specific example. I mentioned Zacarias Moussaoui. Remember all of the criticism. He was a person who was taking flying lessons. It was under very suspicious circumstances. We understood this prior to September 11. There were people who wanted to get a Foreign Intelligence Surveillance Act warrant to search his computer. It went to the FBI, and somebody in the FBI concluded that, yes, all of this information looked good in the warrant except that they could not specifically tie him to a specific international group. Quite a bit of time was used following up leads that led to some group of Chechen rebels, but that ended up to be kind of a dry hole. Meanwhile, the attack of September 11 occurred. Immediately after that attack, we were able to get the warrant. His case is pending in Northern Virginia at this time. He was not able to hook up with the attackers of September 11, but clearly his is an example of a case to which this kind of provision should apply. I will quote something from some of the testimony that we had with regard to the need for this legislation. Spike Bowman, who is the Deputy General Counsel of the FBI, testified at a Senate Select Committee on Intelligence hearing on the predecessor bill to the one that is before us right now. I will quote at length from his testimony. He said: When FISA was enacted, terrorism was very different from what we see today. In the 1970s, terrorism more often targeted individuals, often carefully selected. This was the usual pattern of the Japanese Red Army, the Red Brigades and similar organizations listed by name in the legislative history of FISA. Today we see terrorism far more lethal and far more indiscriminate than could have been imagined in 1978. It takes only the events of the September 11, 2001, to fully comprehend the difference of a couple of decades. But there is another difference as well. Where we once saw terrorism formed solely around organized groups, today we often see individuals willing to commit indiscriminate acts of terror. It may be that these individuals are affiliated with groups that we do not see, but it may be that they are simply radicals who desire to bring about destruction. We are increasingly seeing terrorist suspects who appear to operate at a distance from these organizations. In perhaps an oversimplification, but illustrative nevertheless, what we see today are (1) agents of foreign powers in the traditional sense who are associated with some organization or discernible group, (2) individuals who appear to have connections with multiple terrorist organizations but who do not appear to owe any allegiance to any one of them, but rather owe allegiance to the International Jihad movement, and (3) individuals who appear to be personally oriented toward terrorism but with whom there is no known connection to a foreign power. This phenomenon which we have seen . . . growing for the past two or three years, appears to stem from a social movement that began some imprecise time, but certainly more than a decade ago. It is a global phenomenon which the FBI refers to as the International Jihad Movement. By way of background we believe we can see the contemporary development of this movement, and its focus on terrorism, rooted in the Soviet invasion of Afghanistan. During the decade-long Soviet/Afghan conflict, anywhere from 10,000 to 25,000 Muslim fighters representing some forty-three countries put aside substantial cultural differences to fight alongside each other in Afghanistan. The force drawing them together was the Islamic concept of ``umma'' or Muslim community. In this concept, nationalism is secondary to the Muslim community as a whole. As a result, Muslims from disparate cultures trained together, formed relationships, sometimes assembled in groups and otherwise would have been at odds with one another[,] and acquired common ideologies. . . . Following the withdrawal of the Soviet forces in Afghanistan, many of these fighters returned to their homelands, but they returned with new skills and dangerous ideas. They now had newly acquired terrorist training as guerilla warfare [had been] the only way they could combat the more advanced Soviet forces. Information from a variety of sources repeatedly carries the theme from Islamic radicals that expresses the opinion that we just don't get it. Terrorists world-wide speak of jihad and wonder why the western world is focused on groups rather than on concepts that make them a community. The lesson to be taken from how [Islamic terrorists share information] is that al-Qaida is far less a large organization than a facilitator, sometimes orchestrator of Islamic militants around the globe. These militants are linked by ideas and goals, not by organizational structure. The United States and its allies, to include law enforcement and intelligence components worldwide[,] have had an impact on the terrorists, but [the terrorists] are adapting to changing circumstances. Speaking solely from an operational perspective, investigation of these individuals who have no clear connection to organized terrorism, or tenuous ties to multiple organizations, is becoming increasingly difficult. The current FISA statute has served the Nation well, but the international Jihad movement demonstrates the need to consider whether a different formulation is needed to address the contemporary terrorist problem. Of course, the different way we are approaching it is by adding a third element to the FISA statute. If you are a non-United States person and otherwise we have probable cause to believe you are planning an act of or executing an act of terrorism, we have the right to seek a warrant in the FISA court to search you, surveil you, whatever the warrant might request. That is the essence of this legislation. As I said, when FISA was enacted in 1978, this international movement around an idea had not yet evolved and we were focused on organizations. Now we need to add to the statute, in addition to nations and specific organizations, non-United States persons--in other words, foreign persons--who we believe are carrying out some terrorist plan with international roots, directed at the United States, sufficient to bring it under the aegis of the FISA statute. It is the responsibility of Congress to adapt our laws to these changes. It is this challenge that Senator Schumer and I are attempting to address by this amendment. I introduced this bill with Senator Schumer in the 107th Congress on June 5, 2002, so it has been around almost a full year. The current bill is the identical bill introduced in the previous Congress. We held a Select Committee on Interrogation hearing July 2002, the testimony from which I just quoted, and we heard testimony from six witnesses. There was no Judiciary markup in the previous Congress, but in the 108th Congress, when we reintroduced the bill January 9, the Senate Judiciary Committee held a markup. This bill, by the way, was cosponsored by Chairman Hatch, Senators DeWine, Schumer, myself, Chambliss, Sessions, and there may be others of whom I am not aware. March 6, the Judiciary Committee marked up the bill at an executive session and adopted a substitute amendment, which is the bill we have before the Senate now, rejected a Feingold amendment by a vote of 11 to 4, and voted to report the bill unanimously by a vote of 19 to 0 to the Senate. That is where we are today. We hope to call anyone who has an interest in this to the floor to express their ideas. As I say, we are going to accept one amendment and we will be debating a second amendment, which I hope we defeat. There will be a break in our consideration here for some other business in the middle of the day. We will return in midafternoon to complete the work on the bill. It should be done by the late afternoon. Until Senator Schumer arrives, I make another point. There has been a worry on the part of some that this expands the Foreign Intelligence Surveillance Act to private American citizens. I make it crystal clear that is not true. By definition, we could not do that. This is a law that is only justified because it relates to international terrorism. So if you come here from a foreign country, you are a non-U.S. person, you come from a foreign country, intending to do harm to Americans, as part of this international movement, whether you are a member of some specific organization or not, the act will be allowed to be used to determine whether we should take further action against you. It is not pertaining to U.S. citizens; it is only to non-U.S. citizens and only in this particular context. Second, you cannot just do this willy-nilly, like every other warrant. Whether under FISA or not, we have to have probable cause. That requirement is not changed one iota. If anyone suggests there is anything improper, certainly it is not unconstitutional, but to the extent anyone suggests that we are ready to recite the reasons why, that is not true. I note the Department of Justice has sent a letter announcing its support for this legislation. Among those testifying in favor of it, the U.S. Attorney General, the Director of the Bureau of Investigation, former CIA Director, and any number of officials in our intelligence and law enforcement community have endorsed the bill. I direct Members' attention to a letter I will later put into the Record, dated July 31, 2002, which presented the Department of Justice's views on the bill and announced its support for the legislation. It provides a detailed analysis of this question about the fourth amendment and whether or not there would be any constitutional issues. The Department concluded that the bill would satisfy constitutional requirements specifically related to the fourth amendment. In particular, the Department emphasized that anyone monitored pursuant to the bill would be someone who had at the very least been involved in terrorist acts that transcends national boundaries in term of the means they are accomplished, the persons they appear intended to coerce or intimidate, or the locale in which the perpetrators operate or seek asylum. As a result, it would still be limited to collecting foreign intelligence for the international responsibilities of the United States and the duties of the Federal Government to the States in matters involving foreign terrorism, to wit, protecting the American citizens from people who come here to do us harm. Let me conclude these remarks by noting that I have enjoyed the cooperation, as usual, of my colleague who serves on the Judiciary Committee, the Senator from New York, Mr. Schumer, who has been a strong advocate of this kind of provision for a long time and whose assistance in this matter has been extraordinarily helpful. I yield the floor.

Mr. KYL

Mr. KYL. Mr. President, first, I ask unanimous consent to have printed in the Record a letter dated April 30, 2003, to Chairman Orrin Hatch from the Department of Justice relative to this legislation, and specifically an analysis of the amendment proposed by Senator Feinstein on pages 5 and 6.

Mr. KYL. I think there is a little time left on the debate time as well, but I am prepared to yield that back when we are done with this amendment, as would Senator Schumer. We could either note the absence of a quorum and wait a few minutes for somebody else or I could yield the floor to someone?

Mr. KYL. Mr. President, first of all, I thank Senator Feingold for the kind words he had for me and my colleague from Arizona, Senator McCain. I just spoke with Senator Feinstein. I don't think either of us has a whole lot more to say here. I think Senator Rockefeller may wish to speak and there may be others. I urge anyone who would like to speak to this amendment to come to the floor and speak because otherwise I think we are getting close to the time when we could vote. I inquire of the Chair, how much time remains on both sides on this amendment?

Mr. KYL

Mr. KYL. Mr. President, I rise in strong support of this resolution of ratification for the expansion of the North Atlantic Treaty Organization. The accession to NATO of these seven new democracies--Estonia, Latvia, Lithuania, Slovakia, Romania, Bulgaria and Slovenia--is an historic event that will have far-reaching and, in my view, very beneficial consequences. Just a dozen or so years ago, these countries were under the boot of Soviet domination and communist dictatorship. Against their will, they were arrayed against NATO as members of the now defunct Warsaw Pact. Today, they stand ready and willing to join forces with NATO, the organization that played such a major role in bringing freedom to their part of the world. We are striking a blow for freedom here today. Millions of people in eastern Europe live free today because of the commitment, patience and firmness of America and her allies during the cold war. And through their accession to NATO, those millions will now be able to live in greater security, as well as take part in the noble pursuit of defending the liberty of others. The expansion of NATO into eastern Europe will serve American interests in several ways. For starters, these seven nations, I believe, will help reinvigorate NATO's sense of purpose; which is, first and foremost, the defense of liberty. With memories of tyranny so fresh in their minds, the people of these nations no doubt have a deep appreciation for the freedom that is sometimes take for granted in the West. Thus, they are apt to have fewer reservations than some of our other allies about confronting the aggression of those who are hostile to our way of life. This appreciation for freedom--and for those who helped them during the cold war--was unquestionably a factor in the strong support that each of these seven nations gave us in Operation Iraqi Freedom. Most of the prospective members have very limited military capabilities, and we will certainly expect them to invest properly in their armed forces in the coming years. But many of these countries already possess excellent specialized capabilities, such as the Polish special forces who fought in Iraq or the Slovak WMD defense unit now serving in the Gulf. Over time, I am confident that each of these countries will find it own niche in NATO. Expansion of the NATO alliance to these countries will also offer us the opportunity to diversify and reorder our basing arrangements--the need for which, I believe, has been demonstrated by 9/11 and the runup to the Iraq War. In the future, it is clear that U.S. forces will need more flexibility--both geographic and political--than ever. It thus behooves us to review our basing structure in Europe with an eye toward relocating some--though certainly not all--of our forces. NATO expansion serves that end. Many of the prospective members-- Romania and Bulgaria in particular--are located closer to where U.S. forces are likely to see action in the future. Their governments are known to be actively interested in hosting U.S. forces. Polls indicate strong pro-American sentiment in these countries. Mr. President, 65 years ago, Eastern Europe began a horrific descent into darkness with the deal that was struck at Munich. Yalta then solidified what was to be another 45 years of communist tyranny for these nations. Those tragic mistakes are being rectified here today, and we should be proud. But make no mistake, the expansion of NATO is more than just a rearward-looking act of humanity. It is also a forward-looking act of statemanship that will serve U.S. interests well in the future.

Mr. KYL

Mr. KYL. I suggest the absence of a quorum.

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

Mr. KYL

Mr. KYL. Mr. President, I rise in morning business for a moment to speak about the nomination of Priscilla Owen of Texas to the Federal bench. This is really an extraordinary nomination. It is very troubling to me that it appears most of our colleagues on the other side of the aisle are willing to keep Justice Owen from getting a vote. In the past, even with very controversial votes on Justices to the Supreme Court--and I have, for example, Justice Clarence Thomas in mind, and there was significant opposition to the confirming of Justice Thomas, primarily by Members of the other side of the aisle--the leaders of the Democratic Party understood that tradition called for a vote--probably knowing they would lose the vote. They, nevertheless, refused to support any kind of filibuster and they voted against Justice Thomas's confirmation. But he was confirmed 52-48. I always respected the things they said at or about the time of that confirmation--that they would not ever support a filibuster, regardless of their particular feelings about the nominee. I thought that took courage, and I respected it, coming, as it did, from some of the key leaders of the Democratic side of the Senate. It confirmed to me that the tradition of the Senate relationship of comity we have with the President in dealing with his nominees, and the importance of our responsibilities with respect to confirming Justices of the Supreme Court and members of the Federal bench generally, is such that partisanship and tactical advantage could be laid to the side for the good of the country and these nominations could be voted on. Now, there have been votes--sometimes--where the nominee lost. Most of the time, when votes are allowed to happen, the nominees prevail. But the new situation we have in this body, starting out with the President's nomination of Miguel Estrada--and now sadly, it seems, with the nomination of Priscilla Owen--we are going to require that unless 60 Members of the Senate agree to allow a vote, we don't get a vote. A filibuster, in other words, becomes the benchmark, the standard for confirmation of judges. It has never been that way. There has only been one successful filibuster, and that was a very strange situation. There has never been a partisan filibuster in this body until now. It is especially remarkable because, in the case of Justice Owen, for example, one cannot claim, as has been claimed with regard to Miguel Estrada, that her record is unknown or unclear, or that there is more information that needs to be gleaned. She appeared not once but twice before the Judiciary Committee. The reason I wanted to take the floor briefly today is to say to my friends I don't think I have ever seen a nominee who handled herself or himself better than Justice Owen did at those hearings. She was forthcoming, brilliant in her exposition of the law, measured, and she clearly has the temperament to be a good judge. She has been serving as a justice of the State Supreme Court of Texas. She has the support of another former justice of that court, Judge Gonzales, who obviously is now acting as the President's counsel, and the support of Democrats and Republicans alike. The American Bar Association, as with Miguel Estrada, has recommended her for confirmation. She stayed at the hearing for as long as Members wanted her to stay. She answered all of the questions. So the same argument cannot be made that has been made about Miguel Estrada. In fact, one of my colleagues on the other side of the aisle made it clear, in discussing the nomination of Miguel Estrada, that the only thing standing in the way of a vote--they would not necessarily commit to voting for him but at least allowing a vote on him--was producing this information which they say they want from the Justice Department about his prior employment. But for that, that vote could occur, seeming to suggest that the same thing would be the case with any other nominee--that as long as the information was forthcoming and they knew about the individual, that therefore they could vote. In fact, the last line, after this colleague talked to others in the Democratic Party, states: Look, if we can just get this information, do you think we can vote? And the answer was: Affirmative, to a person, because, frankly, then we would know for whom we were voting. There was no commitment to vote for Miguel Estrada but at least they would allow the vote to go forward because they would then know ``for whom we are voting.'' Well, we do know who we are voting for in the case of Justice Owen. Her record is out there for everyone to see. There has never been a suggestion by anybody that she needs to produce more in the way of a record. It is there to be evaluated. I suspect the reason Members on the other side of the aisle will not allow her to come to a vote is because they fear she will be more conservative as a justice than they would like to see. Let's be honest about it. I voted for numerous circuit court nominees of President Clinton knowing they were far more liberal than I am. On my own circuit, the Ninth Circuit Court of Appeals, I voted for several who I knew were more liberal, and their voting record subsequently has borne that. They were confirmed. I voted for them. I felt President Clinton was the President; he was elected by all of the people. He had the right to nominate his own people, and if they were otherwise qualified, then I ought to vote for them. That has always been the tradition, that has always been the standard, by which we have judged these candidates for circuit court. So it is very troubling now to have a new standard imposed on us. I come this morning to note that we are soon going to go back to the nomination of Priscilla Owen. I implore my colleagues to think about what they are doing by creating the 60-vote standard. There is no way that can be the standard only for Republican Presidents and not Democratic Presidents. It is either going to be the standard or it is not. If it becomes the standard for all Presidents, then I believe it is only a very short period of time before the confirmation process is going to grind to a halt because there will always be political differences. By and large, that is what divides the Democrat and Republican Parties. We view life a little bit differently. We are all great Americans. We all support the troops and all want the judiciary to succeed, but we have some philosophical differences. That is fine, but they should not be the basis for not confirming judges or, more importantly, for requiring 60 votes to confirm because it is a very rare Senate in which one party has more than 60 votes in controlling the Senate. So it is basically going to grind the confirmation process to a halt. That is a breach of our comity to the judicial branch; it is a breach of our obligations to the American people, to ensure justice is done. We know that justice delayed is justice denied. We have already heard from the Supreme Court Chief Justice about the emergencies that exist because we cannot fill these vacancies. We have a crisis. We have to find a way to resolve this crisis. I suggest that the simplest way to do this, that is fair to everybody, is the way we have always done it: Express yourself, allow the vote to occur, vote your conscience and then move on. But do not hold up the votes simply because you have a philosophical disagreement with the President who nominates these candidates. I urge my colleagues to think carefully because in the case of Priscilla Owen, as the bar association found, as the Judiciary Committee concluded in its most recent action by passing her out on the Executive Calendar, she is a fine justice. She would make a fine member of the Federal bench. There is no legitimate reason to oppose her. I urge my colleagues to think about this as we focus on her qualifications, on the relationship between the Senate and the House, and on the obligation we have to the courts and to the American people. This is serious and we ought to be acting in a serious way. I urge my colleagues to support the nomination of Justice Priscilla Owen.

Mr. KYL

Mr. KYL. Madam President, I rise in support of the goal of this nonbinding resolution, which is to promote bringing Saddam Hussein and his war criminals to justice. In reading the language of the resolution, I note that it does not preclude the United States itself from detaining or from prosecuting Iraq war offenders of any nationality before a United States military tribunal or some other American-arranged forum. It also does not preclude a new Iraqi government from prosecuting these criminals in an Iraqi tribunal if it is deemed that this is feasible and likely to result in substantial justice. The resolution also does not in any way mandate constitution of an international tribunal, something which the United States should oppose, as it would preclude the death penalty. With this understanding, I support the resolution.

Mr. KYL

Mr. KYL. Mr. President, I rise today to introduce the Intermediate Sanctions Compensatory Revenue Adjustment Act of 2003, ISCRAA. This legislation will restore to the States billions of dollars in revenue due to them from a massive lawsuit recently conducted on their behalf the tobacco-Related Medicaid expenses litigation. ISCRAA amends an existing provision of the Federal tax code in order to enforce basic, universally accepted fiduciary standards governing the award of attorneys fees. By applying these standards to the attorneys who represented the states in the tobacco settlement, ISCRAA reasonably can be expected to restore to the states income with a present value of approximately $9 billion. I have included at the end of my statement a chart detailing how much each state can expect to recover. ISCRAA's tax formula is borrowed from the 1996 Tax Act's Intermediate Sanctions Tax, IST, which applies a two-step excise tax to any excessive or unreasonable compensation that the managers of a trust pay to themselves from the assets of the trust. The IST framework encourages the trustee to restore the excessive portion of any fee to the trust--when he does so, the IST's punitive taxes do not apply. ISCRAA extends the IST to another type of trust relationship: that between a lawyer and his client. ISCRAA applies the IST tax formula to any unreasonable or excessive income that a lawyer collects from litigation resulting in a judgment or settlement in excess of $100 million. To avoid IST taxes, an attorney must restore the excessive portion of the fee to the client. As my colleague Senator Cornyn will explain today, the ethical and legal abuses that resulted from the 1998 State tobacco settlement make the need for this legislation manifest. Senator CORNYN also will discuss the law of attorneys' fiduciary obligations, which establishes that a fee award is the property of the client--and that any unethical fee must be restored to the client, regardless of how the fee award is structured. I will discuss today how ISCRAA will affect massive litigations generally. In order to gauge the reasonableness of a lawyer's fee award, ISCRAA adopts and codifies a liberal version of the lodestar- multiplier system. As I will later explain in greater detail, ISCRAA allows fee multipliers of up to 500 percent of reasonable hourly rates. This limit is as generous as the most liberal limits adopted by state courts, and considerably more generous than the limits that federal courts have applied in $100 million cases. ISCRAA's fee formula guarantees that attorneys' fiduciary obligations will be respected, while providing plaintiff's lawyers with ample incentive to provide high-quality legal representation in these types of cases. Federal supervision of fee awards resulting from $100 million litigations is appropriate for several reasons. First, because of their sheer size, these types of lawsuits inevitably operate as a tax on the consuming public. Few defendants actually can afford to pay such judgments with cash on hand. Instead, the affected industries simply will raise the prices that they charge to their customers. This is exactly what has happened in the State Medicaid tobacco settlement--according to the leading proponents of that litigation. The first State attorney general to file suit against the tobacco companies has admitted that ``what always happens in these cases is the industry passes the costs to the consumer.'' Other commentators agree that this has occurred in the tobacco litigation. As one law-review article notes, ``the [tobacco] settlement * * * is a tax because it's a set of payments made by tobacco companies that depend on how many packs they sell; in short, it looks like a tax and quacks like a tax.'' Because of the way that these massive judgments typically are satisfied, it is particularly important to ensure that attorneys are paid in proportion to the services that they provided--rather than solely on the basis of the size of the recovery. Again, the State tobacco settlement highlights the nature of the problem. As two of the leading academic commentators have noted, it is ``very troubl[ing]'' that under that agreement, ``a group of private citizens [are] getting paid a percentage of a tax increase they helped pass.'' The sheer size of the tobacco settlement--and the fact that attorneys fees were based on this size, rather than on the attorneys' actual efforts--has given the fee awards an uncanny resemblance to the medieval practice of tax farming. In all but name, the government has licensed a group of private individuals to collect a tax from the consuming public. I would emphasize at this point that ISCRAA is not an attack on the State tobacco lawsuits. The bill does not pass judgment on the merits or the appropriateness of this type of litigation. ISCRAA simply is designed to ensure that when such lawsuits are brought on the public's behalf, the public receive its fair share of the proceeds. If a State chooses to seek compensatory revenue from industry for past harms, then the resulting tax on the public--minus the reasonable value of the legal services actually provided--must go to the State treasury. There are several reasons why $100 million is an appropriate threshold for applying ISCRAA's fee formula. First, the courts themselves have indicated that fee agreements based primarily on the size of the recovery tend to become unreasonable when judgements reach this size. As one court has stated, ``in much smaller cases, a fee award of 33 percent does not present the danger of providing the plaintiff's counsel with the windfall that would accompany a `megafund' settlement of $100 million or upwards. But it is quite different when the figures hit the really big time.'' Or as the Third Circuit notes, ``courts have generally decreased the percentage awarded [for attorneys fees] as the amount recovered increases, and $100 million seems to be the informal marker of a 'very large' settlement.'' The logic of avoiding judgment-based awards in these very large cases is straightforward. As one court explains, ``it is not 150 times more difficult to prepare, try, and settle a $150 million case than it is to try a $1 million case, but the application of a percentage comparable to that in a smaller case may yield an award 150 times greater.'' Thus, according to another court, ``there is considerable merit'' to disallowing standard percentage awards as the ``size of the [recovery] fund increases. In many instances the increase [in the recovery] is merely a factor of the size of the class and has no direct relationship to the efforts of counsel.'' It also bears mention that because of its $100 million threshold, ISCRAA applies to a fairly limited universe of cases. As courts have remarked, ``there are few so-called `megafund' cases with settlements over $100 million.'' In 2001, the U.S. Court of Appeals for the Third Circuit attempted to catalogue all common-fund cases in federal court that resulted in recoveries greater than $100 million. Though such litigations have been more frequent in recent years, the Third Circuit identified only 22 such cases since 1985. See in re Cendant Corp. PRIDES Litig., 243 F.3d 722, 737 (3d Cir. 2001). ISCRAA is somewhat broader than the criteria that Cendant Corp. employed to collect cases. ISCRAA is not limited to common-fund cases-- it also applies to judgments won on behalf of tax-exempt entities or even single individuals. ISCRAA also applies to cases brought in State court, and it aggregates identical claims that are brought against common defendants in separate actions, in order to prevent evasion of its limits through the subdivision of actions. Nevertheless, ISCRAA's scope remains fairly narrow. An academic specialist who is familiar with developments in this field has reviewed the bill and concluded that because of its ``relatively high threshold,'' ISCRAA probably would apply only to about 15-20 litigations per year. I will include a copy of this professor's letter to me in the Congressional Record. Finally, a $100 million threshold also is appropriate because it limits ISCRAA's reach to litigations that are a natural subject of congress's authority to regulate interstate commerce. It is well- established that ``Congress' commerce authority includes the power to regulate . . . those [economic] activities that substantially affect interstate commerce.'' United States v. Morrison, 529 U.S. 598, 609 (2000). See also United States v. Lopez, 514 U.S. 549 (1995). Both the executive and the legislative branches previously have identified $100 million as guideline for determining whether a matter has a significant impact on interState commerce. See, e.g. Executive Order 12866; Congressional Review Act, 5 U.S.C. Sec. 804(2); Unfunded Mandates Act, 2 U.S.C. Sec. 1532(a). Because it is limited to litigations of this size, ISCRAA is consistent with congress's power and obligation to protect the flow of commerce between states. Another point that I would like to emphasize today is that ISCRAA is not an anti-plaintiffs' lawyer bill. It is not stingy toward trial attorneys. ISCRAA is carefully designed to protect fiduciary interests while providing plaintiffs' lawyers with ample incentives to provide high-quality legal representation in large litigations. ISCRAA's fee formula is as generous as the limits set by the most liberal State courts that engage in meaningful review of attorneys fees, and is considerably more generous than the Federal courts' practices in $100 million cases. Moreover, the multiplier criteria that ISCRAA employs universally are recognized as legitimate prerequisites for a contingency fee--even by trial lawyers' professional associations. Federal courts primarily rely on two systems for calculating attorneys fees in cases, such as class actions, in which they are required to set ``reasonable fees:'' the percentage method and the lodestar-multiplier method. The percentage method, as its name implies, calculates fees as a percentage of the total recovery. The lodestar system, by contrast, requires a court to first calculate a fee based on the number of hours that the lawyer worked multiplied by prevailing hourly rates, the ``lodestar''. The court then multiplies this lodestar fee again in order to reward the attorney for the risk of nonpayment of fees that he assumed and for any exceptional services that he provided. Over the last thirty years, courts have moved back and forth between these two systems. Only a few courts make lodestar-multipliers the exclusive means of awarding attorneys fees. But as one academic commentator has noted, ``lodestar, or hours-based methods, have been adopted in every [federal judicial] circuit.'' And more importantly, in large-recovery cases, there has been very little difference between lodestar and percentage systems. This is because even when courts apply a percentage to calculate fees, and as judgements become very large, courts typically also calculate a reasonable lodestar in order to determine what constitutes a reasonable percentage. Thus, again, as the Third Circuit notes, ``courts have generally decreased the percentage awarded as the amount recovered increases, and $100 million seems to be the informal marker of a `very large' settlement.'' Courts have been wary of awarding fees based on percentages alone. As one State supreme court explains: ``to begin the assessment by arbitrarily picking a percentage amount without any reliance on a cognizable structure invites decisions that are nonobjective and inconsistent. What constitutes a reasonable percentage may differ from one judge to another depending on each judge's predilections, background, and geographical location in the state.'' Thus ``courts that employ the percentage approach appear to be motivated in part by a lodestar dynamic. Because courts are reluctant to give fee awards totally incommensurate with the efforts of the attorneys, percentage awards generally decrease as the amount of the recovery increases.'' One result of the cross-use of the lodestar and percentage systems is that even when courts use the percentage system, those awards overwhelmingly tend to reflect a reasonable lodestar multiplier. Therefore, even percentage-based cases tend to provide evidence of the range of multipliers that the courts consider to be reasonable. In 2001, the Third Circuit ``set forth a chart of fee awards given in Federal courts since 1985 in class actions in which the settlement fund exceeded $100 million and in which the percentage of recovery method was used.'' Cendant Corp. The court identified 17 such cases. In almost every case, the Third Circuit could calculate the multiplier that was used, and ``the lodestar multiplier in those cases never exceeded 2.99.'' And in the direct lodestar-multiplier cases that court identified, the multiplier ranged from 1.2 to 3.25. Other courts, surveying smaller cases than the $100 million recoveries examined in Cendant Corp., have identified larger multipliers. One Federal district court has ``observe[d] that in virtually every case where the court notes a lodestar but awards fees based upon a percentage, the lodestar multiplier converted from this percentage is in the range of 1 to 4.'' Another Federal district court has found that ``the range of lodestar multipliers in large and complicated class actions runs from a low of 2.26 to a high of 4.5.'' By contrast, some courts have declared that they would allow only lower multipliers. One Federal court has stated that ``only in the most exceptional circumstances would this court award a multiplier of 3 or greater. . . . this court believes that lodestars enhanced by multipliers less than 3 should adequately compensate even the most talented counsel.'' And the Seventh Circuit has suggested that ``it may be that a doubling of the lodestar would provide a sensible ceiling.'' On the other hand, the Florida Supreme Court--which is generally regarded as one of the more plaintiff-friendly courts in the United States--has announced that: ``we set the maximum multiplier available in this common-fund category of cases at 5. . . . [A] multiplier which increases fees to five times the accepted hourly rate is sufficient to alleviate the contingency risk factor involved and attract high level counsel to common fund cases while producing a fee that remains within the bounds of reasonableness. We emphasize that 5 is a maximum multiplier.'' ISCRAA adopts this more liberal standard. It allows fees as high as 500 percent of reasonable hourly rates. ISCRAA awards multipliers based on two criteria: it allows up to 300 percent to be added onto the amount of reasonable hourly fees if a case that involved a substantial risk of nonrecovery of fees, and allows an additional 100 percent add- on if the attorney provided exceptional services that improved the plaintiff's recovery. The criteria that ISCRAA employs universally are recognized as necessary prerequisites to the legitimacy of a contingency fee. ``Courts in general have insisted that a contingent fee be truly contingent. The typically elevated fee reflecting the risk to the lawyer of receiving no fee will be permitted only if the representation indeed involves a significant degree of risk.'' Charles W. Wolfram, Modern Legal Ethics Sec. 9.4, at 532 (1986). The risk requirement has been recognized ever since contingency fees first were allowed in the United States. The American Bar Association even noted at that time that ``a contract for a contingent fee, where sanctioned by law, should be reasonable under all the circumstances of the case, including the risk and uncertainty of the compensation.'' ABA Canons of Professional Ethics, Canon 13 (1908). Indeed, even the professional associations of plaintiffs' attorneys have, at times, acknowledged that contingent fees should be based on an actual contingency. In a guide to its members, the Association of Trial Lawyers of America has ``recommend[ed]'' that attorneys ``exercise sound judgment in using a percentage in the contingent fee contract that is commensurate with the risk, cost and effort required.'' ATLA, Keys to the Courthouse: Quick Facts on the Contingency Fee System 13 (1994). The criteria that ISCRAA employs are universally accepted--and the limits that it sets should be universally acceptable. ISCRAA is not intended to alter the considered standards of any jurisdiction. Rather, it is intended to enforce those standards--and to correct the occasional extreme outlier. Because ISCRAA incorporates a fee formula that is substantially more liberal than the usual practices of the federal courts in $100 million cases, we can be confident that high- quality legal representation will remain available to plaintiffs in these large litigations. See, e.g. in re Sumitomo Copper Litig., 74 F. Supp. 2d 393, S.D.N.Y. 1999, RICO and Commodities Exchange Act case resulting in $116 million recovery; attorneys reviewed millions of pages of documents located throughout the world, many requiring translation from Japanese; Federal district court awards multiplier of 250 percent for total fee of $32 million. Another issue that I will address today is the argument--occasionally raised in opposition to proposals to limit attorneys fees--that such restrictions violate attorneys' rights to freedom of contract. The first principle to keep in mind when questions of attorneys fees are considered is that ``a fiduciary relationship exists as a matter of law between attorney and client.'' (Illinois Supreme Court.) As one academic commentator has noted: ``[I]t is uncontroverted today that a lawyer is a fiduciary for, and therefore has a duty to deal fairly with, the client. . . . Lawyers are fiduciaries because retention of an attorney to exercise 'professional judgment' on the client's behalf necessarily involves reposing trust and confidence in the attorney. Exercising professional judgment requires that the lawyer advance the client's interests as the client would define them if the client were well-informed.'' The lawyer's status as fiduciary places limits on his dealings with his client--including with regard to his fee. ``An attorney's freedom to contract with a client is subject to the constraints of ethical considerations.'' New Jersey Supreme Court. ``In setting fees, lawyers are fiduciaries who owe their clients greater duties than are owed under the general law of contracts.'' Massachusetts Appeals Court. ``As a result of lawyers' special role in the legal system, contracts between lawyer and client receive special scrutiny. . . . While freedom of contract is the guiding principle underlying contract law, contractual freedom is muted in the lawyer-client and lawyer-lawyer contexts.'' Joseph M. Perillo, law professor. The unique status of attorney fee contracts has led courts to reject analogies between such agreements and other business or service contracts. Perhaps the fullest exposition is provided by the Arizona Supreme Court: ``We realize that business contracts may be enforced between those in equal bargaining capacities, even though they turn out to be unfair, inequitable or harsh. However, a fee agreement between lawyer and client is not an ordinary business contract. The profession has both an obligation of public service and duties to clients which transcend ordinary business relationships and prohibit the lawyer from taking advantage of the client. Thus, in fixing and collecting fees the profession must remember that it is a branch of the administration of justice and not a mere money getting trade.' ABA Canons of Professional Ethics, Canon 12.'' The same principle has been identified by the Florida Supreme Court: There is but little analogy between the elements that control the determination of a lawyer's fee and those which determine the compensation of skilled craftsmen in other fields. Lawyers are officers of the court. The court is an instrument of society for the administration of justice. Justice should be administered economically, efficiently, and expeditiously. The attorney's fee is, therefore, a very important factor in the administration of justice, and if it is not determined with proper relation to that fact it results in a species of social malpractice that undermines the confidence of the public in the bench and bar. It does more than that. It brings the court into disrepute and destroys its power to perform adequately the function of its creation.'' In order to protect the lawyer's public role and to enforce his fiduciary obligations, the courts read a reasonableness requirement into every attorney fee contract. ``[T]he requirement that a fee be reasonable in amount overrides the terms of the contract, so that an `unreasonable' fee cannot be recovered, even if agreed to by the client.'' G. Hazard, Jr. & W. Hodes, The Law of Lawyering 1. 5:205 Fee Litigation and Arbitration 120 (1998 Supp.). As one court has stated, ``[A]n attorney is only entitled to fees which are fair and just and which adequately compensate him for his services. This is true no matter what fee is specified in the contract, because an attorney, as a fiduciary, cannot bind his client to pay a greater compensation for his services than the attorney would have the right to demand if no contract had been made. Therefore, as a matter of public policy, reasonableness is an implied term in every contract for attorney's fees.'' Finally, when assessing whether a fee is reasonable, courts ask whether the fee is proportional to the services that were actually provided. ``Fees must be reasonably proportional to the services rendered and the situation presented.'' (Arizona Supreme Court.) ``If an attorney's fee is grossly disproportionate to the services rendered and is charged to a client who lacks full information about all of the relevant circumstances, the fee is `clearly excessive' . . . even though the client consented to such fee.'' West Virginia Supreme Court. Because attorneys are fiduciaries, they simply do not have complete freedom of contract in negotiating their fees. An attorney's dealings with his client always must reflect that the client comes to him in a position of trust--and therefore, the attorney's fee always must be reasonable. ISCRAA will help ensure that this important obligation is respected. Another subject that I would like to address today is ISCRAA's effective date. ISCRAA applies to attorney fee payments received after June 1, 2002. This effective date is appropriate under the circumstances of the State tobacco settlement for several reasons: first, Congress routinely enacts major tax legislation with effective dates that look back much further than does ISCRAA. The Supreme Court has ``repeatedly upheld [such moderately] retroactive tax legislation against a due process challenge.'' United States v. Carlton, 512 U.S. 26, 30-31, 1994; see id. at 33, upholding tax whose ``actual retroactive effect . . . extended for a period only slightly greater than one year''. Second, ISCRAA is not even truly retroactive. ISCRAA does not change the substantive law governing attorneys fee awards. Rather, it simply enforces established, pre-existing fiduciary standards that already bind every attorney in every state. The Model Rules of Professional Conduct, at Rule 1.5(a), contain a clear, direct command that ``a lawyer's fee shall be reasonable.'' Similarly, the Model Code of Professional Responsibility, at DR 2-106, directs that an attorney ``shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee.'' The Model Code further explains that an attorneys fee is ``clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee.'' Finally, as academic commentators point out, in addition to the model rules, ``all State rules of professional conduct prohibit attorneys from charging excessive fees.'' As I described earlier, to enforce fiduciary standards, ISCRAA codifies and applies a very generous version of the fee multiplier system, allowing attorneys fees as high as 500 percent of reasonable hourly rates. This is considerably more generous than what Federal courts typically allow in large-judgment cases. No attorney can be heard to complain that he is subjected to a law that is more generous than his existing fiduciary obligations. Further, none of the tobacco-settlement attorneys can reasonably maintain that they have a vested right to see their fiduciary duties to the states go unenforced. Nevertheless, in order to be fair to all parties, ISCRAA's excise taxes are applied only to fees that were paid after June 1, 2002. By this date, all of the tobacco lawyers twice had received notice from George W. Bush that he intended to enact legislation to enforce their fiduciary obligations. In February 2000, then-candidate Bush promised that he would ``extend[] the `excess benefits' provision of the tax code to private lawyers who contract with states and municipalities,'' with ``the reasonableness of the fees * * * [to] be determined by the standard judicial `lodestar' method.'' And as early as February 2001, the current Administration announced that it anticipated providing ``additional public health resources for the States from the President's proposal to extend fiduciary responsibilities to the representatives of States in tobacco lawsuits.'' See A Blueprint for New Beginnings: A Responsible Budget for America's Priorities 80, Office of Management and Budget, February 28, 2001. Under ISCRAA, all of the attorneys who participated in the State tobacco settlement still will be very liberally compensated. Because ISCRAA does not apply to the first three-and-a-half years of fee payments under the settlement, it exempts the first two-and-a-half billion dollars that these lawyers received. Every one of the tobacco lawyers will have more than enough money left to pay for the yachts, luxury cars, and vacation homes that were purchased with the tobacco proceeds. ISCRAA might simply be described as the one-yacht-per-lawyer rule. But most importantly, because ISCRAA applies to the last year's worth of tobacco fee payments, and to all future payments, it will return a substantial amount of funds to the States--money that already should belong to the States under any reasonable interpretation of fiduciary standards. It is critical that these funds be restored in this time of widespread fiscal crisis. Today a large number of the States face massive budget deficits that threaten their ability to provide health care to the indigent, to fully fund public education, and to guarantee adequate and effective law enforcement. When such needs risk going unmet, fee abuses that cost the States billions of dollars simply can no longer be ignored. The States must receive their fair share of the tobacco settlement proceeds--funds that are badly needed to support basic public services. Under the terms of the November 1998 Master Settlement Agreement, MSA, between the States and tobacco companies, $500 million in cigarette taxes is set aside every year to pay the attorneys who chose to have their fees awarded in arbitration. Because extraordinarily high fees were awarded by the arbitrators--estimated to total $15 billion-- the $500-million-a-year income stream, which is not adjusted for inflation, may have to be paid in perpetuity. In addition to this annuity, the MSA also sets aside an additional $1.25 billion in cigarette taxes to compensate those lawyers who choose to forego arbitration and negotiate their fees directly with the tobacco companies. The present value of the $500-million-a-year fee stream--discounting all future payments for the time value of money--has been conservatively estimated at just over $8 billion. Current and future payments from the $1.25 billion fee fund are less certain, since the grants made from that fund and their disbursement schedule have been kept obscure from the public. Because ISCRAA's effective date is June 1, 2002, ISCRAA will probably recoup for the States an additional $1 billion above the present value of future $500 million-a-year payments. ISCRAA does not affect the first three-and-a-half years of fees paid under the MSA. Because these payments almost certainly are adequate to pay all reasonable fees incurred in the litigation, ISCRAA would restore to the States virtually all fees paid after its effective date. Thus the net present value of the sums that ISCRAA would provide to the States can conservatively be estimated at $9 billion. By restoring these excess fee payments to the states' MSA escrow account and returning them to the States on a per capita basis, ISCRAA guarantees every State a very substantial recovery. Based on the estimates that I have described, even our Nation's smallest State, Wyoming, would recoup at least $15 million in tobacco fee payments, and other small States, such as North Dakota, would receive approximately $20 million. On the other hand, our nation's largest State, California, can expect to recoup at least $1 billion. Other large States would also see generous returns: Florida, $511 million; Illinois, $397 million; Michigan, $318 million; New York, $607 million; Ohio, $363 million; and Texas, $667 million. Here is how much each State can expect to recover: Alabama....................................................$142,220,272 Alaska.......................................................20,046,569 Arizona.....................................................164,079,935 Arkansas.....................................................85,496,543 California................................................1,083,230,642 Colorado....................................................137,556,275 Connecticut.................................................108,911,511 Delaware.....................................................25,059,883 District of Columbia.........................................18,294,706 Florida.....................................................511,123,686 Georgia.....................................................261,806,474 Hawaii.......................................................38,745,502 Idaho........................................................41,381,203 Illinois....................................................397,174,614 Indiana.....................................................194,456,664 Iowa.........................................................93,585,167 Kansas.......................................................85,976,825 Kentucky....................................................129,257,603 Louisiana...................................................142,919,876 Maine........................................................40,772,615 Maryland....................................................169,384,021 Massachusetts...............................................203,046,997 Michigan....................................................317,835,940 Minnesota...................................................157,327,166 Mississippi..................................................90,973,451 Missouri....................................................178,937,382 Montana......................................................28,852,605 Nebraska.....................................................54,726,966 Nevada.......................................................63,905,164 New Hampshire................................................39,520,996 New Jersey..................................................269,094,724 New Mexico...................................................58,173,915 New York....................................................606,875,689 North Carolina..............................................257,420,675 North Dakota.................................................20,537,847 Ohio........................................................363,078,559 Oklahoma....................................................110,353,478 Oregon......................................................109,417,889 Pennsylvania................................................392,753,669 Rhode Island.................................................33,525,716 South Carolina..............................................128,305,961 South Dakota.................................................24,140,253 Tennessee...................................................181,945,847 Texas.......................................................666,850,647 Utah.........................................................71,417,756 Vermont......................................................19,470,563 Virginia....................................................226,374,115 Washington..................................................188,496,659 West Virginia................................................57,831,660 Wisconsin...................................................171,532,756 Wyoming......................................................15,791,372 I ask unanimous consent that the text of the bill and the following four articles be printed in the Record.

Mr. KYL

Mr. KYL. Mr. President, I rise today to introduce the Intermediate Sanctions Compensatory Revenue Adjustment Act of 2003, ISCRAA. This legislation will restore to the States billions of dollars in revenue due to them from a massive lawsuit recently conducted on their behalf the tobacco-Related Medicaid expenses litigation. ISCRAA amends an existing provision of the Federal tax code in order to enforce basic, universally accepted fiduciary standards governing the award of attorneys fees. By applying these standards to the attorneys who represented the states in the tobacco settlement, ISCRAA reasonably can be expected to restore to the states income with a present value of approximately $9 billion. I have included at the end of my statement a chart detailing how much each state can expect to recover. ISCRAA's tax formula is borrowed from the 1996 Tax Act's Intermediate Sanctions Tax, IST, which applies a two-step excise tax to any excessive or unreasonable compensation that the managers of a trust pay to themselves from the assets of the trust. The IST framework encourages the trustee to restore the excessive portion of any fee to the trust--when he does so, the IST's punitive taxes do not apply. ISCRAA extends the IST to another type of trust relationship: that between a lawyer and his client. ISCRAA applies the IST tax formula to any unreasonable or excessive income that a lawyer collects from litigation resulting in a judgment or settlement in excess of $100 million. To avoid IST taxes, an attorney must restore the excessive portion of the fee to the client. As my colleague Senator Cornyn will explain today, the ethical and legal abuses that resulted from the 1998 State tobacco settlement make the need for this legislation manifest. Senator CORNYN also will discuss the law of attorneys' fiduciary obligations, which establishes that a fee award is the property of the client--and that any unethical fee must be restored to the client, regardless of how the fee award is structured. I will discuss today how ISCRAA will affect massive litigations generally. In order to gauge the reasonableness of a lawyer's fee award, ISCRAA adopts and codifies a liberal version of the lodestar- multiplier system. As I will later explain in greater detail, ISCRAA allows fee multipliers of up to 500 percent of reasonable hourly rates. This limit is as generous as the most liberal limits adopted by state courts, and considerably more generous than the limits that federal courts have applied in $100 million cases. ISCRAA's fee formula guarantees that attorneys' fiduciary obligations will be respected, while providing plaintiff's lawyers with ample incentive to provide high-quality legal representation in these types of cases. Federal supervision of fee awards resulting from $100 million litigations is appropriate for several reasons. First, because of their sheer size, these types of lawsuits inevitably operate as a tax on the consuming public. Few defendants actually can afford to pay such judgments with cash on hand. Instead, the affected industries simply will raise the prices that they charge to their customers. This is exactly what has happened in the State Medicaid tobacco settlement--according to the leading proponents of that litigation. The first State attorney general to file suit against the tobacco companies has admitted that ``what always happens in these cases is the industry passes the costs to the consumer.'' Other commentators agree that this has occurred in the tobacco litigation. As one law-review article notes, ``the [tobacco] settlement * * * is a tax because it's a set of payments made by tobacco companies that depend on how many packs they sell; in short, it looks like a tax and quacks like a tax.'' Because of the way that these massive judgments typically are satisfied, it is particularly important to ensure that attorneys are paid in proportion to the services that they provided--rather than solely on the basis of the size of the recovery. Again, the State tobacco settlement highlights the nature of the problem. As two of the leading academic commentators have noted, it is ``very troubl[ing]'' that under that agreement, ``a group of private citizens [are] getting paid a percentage of a tax increase they helped pass.'' The sheer size of the tobacco settlement--and the fact that attorneys fees were based on this size, rather than on the attorneys' actual efforts--has given the fee awards an uncanny resemblance to the medieval practice of tax farming. In all but name, the government has licensed a group of private individuals to collect a tax from the consuming public. I would emphasize at this point that ISCRAA is not an attack on the State tobacco lawsuits. The bill does not pass judgment on the merits or the appropriateness of this type of litigation. ISCRAA simply is designed to ensure that when such lawsuits are brought on the public's behalf, the public receive its fair share of the proceeds. If a State chooses to seek compensatory revenue from industry for past harms, then the resulting tax on the public--minus the reasonable value of the legal services actually provided--must go to the State treasury. There are several reasons why $100 million is an appropriate threshold for applying ISCRAA's fee formula. First, the courts themselves have indicated that fee agreements based primarily on the size of the recovery tend to become unreasonable when judgements reach this size. As one court has stated, ``in much smaller cases, a fee award of 33 percent does not present the danger of providing the plaintiff's counsel with the windfall that would accompany a `megafund' settlement of $100 million or upwards. But it is quite different when the figures hit the really big time.'' Or as the Third Circuit notes, ``courts have generally decreased the percentage awarded [for attorneys fees] as the amount recovered increases, and $100 million seems to be the informal marker of a 'very large' settlement.'' The logic of avoiding judgment-based awards in these very large cases is straightforward. As one court explains, ``it is not 150 times more difficult to prepare, try, and settle a $150 million case than it is to try a $1 million case, but the application of a percentage comparable to that in a smaller case may yield an award 150 times greater.'' Thus, according to another court, ``there is considerable merit'' to disallowing standard percentage awards as the ``size of the [recovery] fund increases. In many instances the increase [in the recovery] is merely a factor of the size of the class and has no direct relationship to the efforts of counsel.'' It also bears mention that because of its $100 million threshold, ISCRAA applies to a fairly limited universe of cases. As courts have remarked, ``there are few so-called `megafund' cases with settlements over $100 million.'' In 2001, the U.S. Court of Appeals for the Third Circuit attempted to catalogue all common-fund cases in federal court that resulted in recoveries greater than $100 million. Though such litigations have been more frequent in recent years, the Third Circuit identified only 22 such cases since 1985. See in re Cendant Corp. PRIDES Litig., 243 F.3d 722, 737 (3d Cir. 2001). ISCRAA is somewhat broader than the criteria that Cendant Corp. employed to collect cases. ISCRAA is not limited to common-fund cases-- it also applies to judgments won on behalf of tax-exempt entities or even single individuals. ISCRAA also applies to cases brought in State court, and it aggregates identical claims that are brought against common defendants in separate actions, in order to prevent evasion of its limits through the subdivision of actions. Nevertheless, ISCRAA's scope remains fairly narrow. An academic specialist who is familiar with developments in this field has reviewed the bill and concluded that because of its ``relatively high threshold,'' ISCRAA probably would apply only to about 15-20 litigations per year. I will include a copy of this professor's letter to me in the Congressional Record. Finally, a $100 million threshold also is appropriate because it limits ISCRAA's reach to litigations that are a natural subject of congress's authority to regulate interstate commerce. It is well- established that ``Congress' commerce authority includes the power to regulate . . . those [economic] activities that substantially affect interstate commerce.'' United States v. Morrison, 529 U.S. 598, 609 (2000). See also United States v. Lopez, 514 U.S. 549 (1995). Both the executive and the legislative branches previously have identified $100 million as guideline for determining whether a matter has a significant impact on interState commerce. See, e.g. Executive Order 12866; Congressional Review Act, 5 U.S.C. Sec. 804(2); Unfunded Mandates Act, 2 U.S.C. Sec. 1532(a). Because it is limited to litigations of this size, ISCRAA is consistent with congress's power and obligation to protect the flow of commerce between states. Another point that I would like to emphasize today is that ISCRAA is not an anti-plaintiffs' lawyer bill. It is not stingy toward trial attorneys. ISCRAA is carefully designed to protect fiduciary interests while providing plaintiffs' lawyers with ample incentives to provide high-quality legal representation in large litigations. ISCRAA's fee formula is as generous as the limits set by the most liberal State courts that engage in meaningful review of attorneys fees, and is considerably more generous than the Federal courts' practices in $100 million cases. Moreover, the multiplier criteria that ISCRAA employs universally are recognized as legitimate prerequisites for a contingency fee--even by trial lawyers' professional associations. Federal courts primarily rely on two systems for calculating attorneys fees in cases, such as class actions, in which they are required to set ``reasonable fees:'' the percentage method and the lodestar-multiplier method. The percentage method, as its name implies, calculates fees as a percentage of the total recovery. The lodestar system, by contrast, requires a court to first calculate a fee based on the number of hours that the lawyer worked multiplied by prevailing hourly rates, the ``lodestar''. The court then multiplies this lodestar fee again in order to reward the attorney for the risk of nonpayment of fees that he assumed and for any exceptional services that he provided. Over the last thirty years, courts have moved back and forth between these two systems. Only a few courts make lodestar-multipliers the exclusive means of awarding attorneys fees. But as one academic commentator has noted, ``lodestar, or hours-based methods, have been adopted in every [federal judicial] circuit.'' And more importantly, in large-recovery cases, there has been very little difference between lodestar and percentage systems. This is because even when courts apply a percentage to calculate fees, and as judgements become very large, courts typically also calculate a reasonable lodestar in order to determine what constitutes a reasonable percentage. Thus, again, as the Third Circuit notes, ``courts have generally decreased the percentage awarded as the amount recovered increases, and $100 million seems to be the informal marker of a `very large' settlement.'' Courts have been wary of awarding fees based on percentages alone. As one State supreme court explains: ``to begin the assessment by arbitrarily picking a percentage amount without any reliance on a cognizable structure invites decisions that are nonobjective and inconsistent. What constitutes a reasonable percentage may differ from one judge to another depending on each judge's predilections, background, and geographical location in the state.'' Thus ``courts that employ the percentage approach appear to be motivated in part by a lodestar dynamic. Because courts are reluctant to give fee awards totally incommensurate with the efforts of the attorneys, percentage awards generally decrease as the amount of the recovery increases.'' One result of the cross-use of the lodestar and percentage systems is that even when courts use the percentage system, those awards overwhelmingly tend to reflect a reasonable lodestar multiplier. Therefore, even percentage-based cases tend to provide evidence of the range of multipliers that the courts consider to be reasonable. In 2001, the Third Circuit ``set forth a chart of fee awards given in Federal courts since 1985 in class actions in which the settlement fund exceeded $100 million and in which the percentage of recovery method was used.'' Cendant Corp. The court identified 17 such cases. In almost every case, the Third Circuit could calculate the multiplier that was used, and ``the lodestar multiplier in those cases never exceeded 2.99.'' And in the direct lodestar-multiplier cases that court identified, the multiplier ranged from 1.2 to 3.25. Other courts, surveying smaller cases than the $100 million recoveries examined in Cendant Corp., have identified larger multipliers. One Federal district court has ``observe[d] that in virtually every case where the court notes a lodestar but awards fees based upon a percentage, the lodestar multiplier converted from this percentage is in the range of 1 to 4.'' Another Federal district court has found that ``the range of lodestar multipliers in large and complicated class actions runs from a low of 2.26 to a high of 4.5.'' By contrast, some courts have declared that they would allow only lower multipliers. One Federal court has stated that ``only in the most exceptional circumstances would this court award a multiplier of 3 or greater. . . . this court believes that lodestars enhanced by multipliers less than 3 should adequately compensate even the most talented counsel.'' And the Seventh Circuit has suggested that ``it may be that a doubling of the lodestar would provide a sensible ceiling.'' On the other hand, the Florida Supreme Court--which is generally regarded as one of the more plaintiff-friendly courts in the United States--has announced that: ``we set the maximum multiplier available in this common-fund category of cases at 5. . . . [A] multiplier which increases fees to five times the accepted hourly rate is sufficient to alleviate the contingency risk factor involved and attract high level counsel to common fund cases while producing a fee that remains within the bounds of reasonableness. We emphasize that 5 is a maximum multiplier.'' ISCRAA adopts this more liberal standard. It allows fees as high as 500 percent of reasonable hourly rates. ISCRAA awards multipliers based on two criteria: it allows up to 300 percent to be added onto the amount of reasonable hourly fees if a case that involved a substantial risk of nonrecovery of fees, and allows an additional 100 percent add- on if the attorney provided exceptional services that improved the plaintiff's recovery. The criteria that ISCRAA employs universally are recognized as necessary prerequisites to the legitimacy of a contingency fee. ``Courts in general have insisted that a contingent fee be truly contingent. The typically elevated fee reflecting the risk to the lawyer of receiving no fee will be permitted only if the representation indeed involves a significant degree of risk.'' Charles W. Wolfram, Modern Legal Ethics Sec. 9.4, at 532 (1986). The risk requirement has been recognized ever since contingency fees first were allowed in the United States. The American Bar Association even noted at that time that ``a contract for a contingent fee, where sanctioned by law, should be reasonable under all the circumstances of the case, including the risk and uncertainty of the compensation.'' ABA Canons of Professional Ethics, Canon 13 (1908). Indeed, even the professional associations of plaintiffs' attorneys have, at times, acknowledged that contingent fees should be based on an actual contingency. In a guide to its members, the Association of Trial Lawyers of America has ``recommend[ed]'' that attorneys ``exercise sound judgment in using a percentage in the contingent fee contract that is commensurate with the risk, cost and effort required.'' ATLA, Keys to the Courthouse: Quick Facts on the Contingency Fee System 13 (1994). The criteria that ISCRAA employs are universally accepted--and the limits that it sets should be universally acceptable. ISCRAA is not intended to alter the considered standards of any jurisdiction. Rather, it is intended to enforce those standards--and to correct the occasional extreme outlier. Because ISCRAA incorporates a fee formula that is substantially more liberal than the usual practices of the federal courts in $100 million cases, we can be confident that high- quality legal representation will remain available to plaintiffs in these large litigations. See, e.g. in re Sumitomo Copper Litig., 74 F. Supp. 2d 393, S.D.N.Y. 1999, RICO and Commodities Exchange Act case resulting in $116 million recovery; attorneys reviewed millions of pages of documents located throughout the world, many requiring translation from Japanese; Federal district court awards multiplier of 250 percent for total fee of $32 million. Another issue that I will address today is the argument--occasionally raised in opposition to proposals to limit attorneys fees--that such restrictions violate attorneys' rights to freedom of contract. The first principle to keep in mind when questions of attorneys fees are considered is that ``a fiduciary relationship exists as a matter of law between attorney and client.'' (Illinois Supreme Court.) As one academic commentator has noted: ``[I]t is uncontroverted today that a lawyer is a fiduciary for, and therefore has a duty to deal fairly with, the client. . . . Lawyers are fiduciaries because retention of an attorney to exercise 'professional judgment' on the client's behalf necessarily involves reposing trust and confidence in the attorney. Exercising professional judgment requires that the lawyer advance the client's interests as the client would define them if the client were well-informed.'' The lawyer's status as fiduciary places limits on his dealings with his client--including with regard to his fee. ``An attorney's freedom to contract with a client is subject to the constraints of ethical considerations.'' New Jersey Supreme Court. ``In setting fees, lawyers are fiduciaries who owe their clients greater duties than are owed under the general law of contracts.'' Massachusetts Appeals Court. ``As a result of lawyers' special role in the legal system, contracts between lawyer and client receive special scrutiny. . . . While freedom of contract is the guiding principle underlying contract law, contractual freedom is muted in the lawyer-client and lawyer-lawyer contexts.'' Joseph M. Perillo, law professor. The unique status of attorney fee contracts has led courts to reject analogies between such agreements and other business or service contracts. Perhaps the fullest exposition is provided by the Arizona Supreme Court: ``We realize that business contracts may be enforced between those in equal bargaining capacities, even though they turn out to be unfair, inequitable or harsh. However, a fee agreement between lawyer and client is not an ordinary business contract. The profession has both an obligation of public service and duties to clients which transcend ordinary business relationships and prohibit the lawyer from taking advantage of the client. Thus, in fixing and collecting fees the profession must remember that it is a branch of the administration of justice and not a mere money getting trade.' ABA Canons of Professional Ethics, Canon 12.'' The same principle has been identified by the Florida Supreme Court: There is but little analogy between the elements that control the determination of a lawyer's fee and those which determine the compensation of skilled craftsmen in other fields. Lawyers are officers of the court. The court is an instrument of society for the administration of justice. Justice should be administered economically, efficiently, and expeditiously. The attorney's fee is, therefore, a very important factor in the administration of justice, and if it is not determined with proper relation to that fact it results in a species of social malpractice that undermines the confidence of the public in the bench and bar. It does more than that. It brings the court into disrepute and destroys its power to perform adequately the function of its creation.'' In order to protect the lawyer's public role and to enforce his fiduciary obligations, the courts read a reasonableness requirement into every attorney fee contract. ``[T]he requirement that a fee be reasonable in amount overrides the terms of the contract, so that an `unreasonable' fee cannot be recovered, even if agreed to by the client.'' G. Hazard, Jr. & W. Hodes, The Law of Lawyering 1. 5:205 Fee Litigation and Arbitration 120 (1998 Supp.). As one court has stated, ``[A]n attorney is only entitled to fees which are fair and just and which adequately compensate him for his services. This is true no matter what fee is specified in the contract, because an attorney, as a fiduciary, cannot bind his client to pay a greater compensation for his services than the attorney would have the right to demand if no contract had been made. Therefore, as a matter of public policy, reasonableness is an implied term in every contract for attorney's fees.'' Finally, when assessing whether a fee is reasonable, courts ask whether the fee is proportional to the services that were actually provided. ``Fees must be reasonably proportional to the services rendered and the situation presented.'' (Arizona Supreme Court.) ``If an attorney's fee is grossly disproportionate to the services rendered and is charged to a client who lacks full information about all of the relevant circumstances, the fee is `clearly excessive' . . . even though the client consented to such fee.'' West Virginia Supreme Court. Because attorneys are fiduciaries, they simply do not have complete freedom of contract in negotiating their fees. An attorney's dealings with his client always must reflect that the client comes to him in a position of trust--and therefore, the attorney's fee always must be reasonable. ISCRAA will help ensure that this important obligation is respected. Another subject that I would like to address today is ISCRAA's effective date. ISCRAA applies to attorney fee payments received after June 1, 2002. This effective date is appropriate under the circumstances of the State tobacco settlement for several reasons: first, Congress routinely enacts major tax legislation with effective dates that look back much further than does ISCRAA. The Supreme Court has ``repeatedly upheld [such moderately] retroactive tax legislation against a due process challenge.'' United States v. Carlton, 512 U.S. 26, 30-31, 1994; see id. at 33, upholding tax whose ``actual retroactive effect . . . extended for a period only slightly greater than one year''. Second, ISCRAA is not even truly retroactive. ISCRAA does not change the substantive law governing attorneys fee awards. Rather, it simply enforces established, pre-existing fiduciary standards that already bind every attorney in every state. The Model Rules of Professional Conduct, at Rule 1.5(a), contain a clear, direct command that ``a lawyer's fee shall be reasonable.'' Similarly, the Model Code of Professional Responsibility, at DR 2-106, directs that an attorney ``shall not enter into an agreement for, charge, or collect an illegal or clearly excessive fee.'' The Model Code further explains that an attorneys fee is ``clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee.'' Finally, as academic commentators point out, in addition to the model rules, ``all State rules of professional conduct prohibit attorneys from charging excessive fees.'' As I described earlier, to enforce fiduciary standards, ISCRAA codifies and applies a very generous version of the fee multiplier system, allowing attorneys fees as high as 500 percent of reasonable hourly rates. This is considerably more generous than what Federal courts typically allow in large-judgment cases. No attorney can be heard to complain that he is subjected to a law that is more generous than his existing fiduciary obligations. Further, none of the tobacco-settlement attorneys can reasonably maintain that they have a vested right to see their fiduciary duties to the states go unenforced. Nevertheless, in order to be fair to all parties, ISCRAA's excise taxes are applied only to fees that were paid after June 1, 2002. By this date, all of the tobacco lawyers twice had received notice from George W. Bush that he intended to enact legislation to enforce their fiduciary obligations. In February 2000, then-candidate Bush promised that he would ``extend[] the `excess benefits' provision of the tax code to private lawyers who contract with states and municipalities,'' with ``the reasonableness of the fees * * * [to] be determined by the standard judicial `lodestar' method.'' And as early as February 2001, the current Administration announced that it anticipated providing ``additional public health resources for the States from the President's proposal to extend fiduciary responsibilities to the representatives of States in tobacco lawsuits.'' See A Blueprint for New Beginnings: A Responsible Budget for America's Priorities 80, Office of Management and Budget, February 28, 2001. Under ISCRAA, all of the attorneys who participated in the State tobacco settlement still will be very liberally compensated. Because ISCRAA does not apply to the first three-and-a-half years of fee payments under the settlement, it exempts the first two-and-a-half billion dollars that these lawyers received. Every one of the tobacco lawyers will have more than enough money left to pay for the yachts, luxury cars, and vacation homes that were purchased with the tobacco proceeds. ISCRAA might simply be described as the one-yacht-per-lawyer rule. But most importantly, because ISCRAA applies to the last year's worth of tobacco fee payments, and to all future payments, it will return a substantial amount of funds to the States--money that already should belong to the States under any reasonable interpretation of fiduciary standards. It is critical that these funds be restored in this time of widespread fiscal crisis. Today a large number of the States face massive budget deficits that threaten their ability to provide health care to the indigent, to fully fund public education, and to guarantee adequate and effective law enforcement. When such needs risk going unmet, fee abuses that cost the States billions of dollars simply can no longer be ignored. The States must receive their fair share of the tobacco settlement proceeds--funds that are badly needed to support basic public services. Under the terms of the November 1998 Master Settlement Agreement, MSA, between the States and tobacco companies, $500 million in cigarette taxes is set aside every year to pay the attorneys who chose to have their fees awarded in arbitration. Because extraordinarily high fees were awarded by the arbitrators--estimated to total $15 billion-- the $500-million-a-year income stream, which is not adjusted for inflation, may have to be paid in perpetuity. In addition to this annuity, the MSA also sets aside an additional $1.25 billion in cigarette taxes to compensate those lawyers who choose to forego arbitration and negotiate their fees directly with the tobacco companies. The present value of the $500-million-a-year fee stream--discounting all future payments for the time value of money--has been conservatively estimated at just over $8 billion. Current and future payments from the $1.25 billion fee fund are less certain, since the grants made from that fund and their disbursement schedule have been kept obscure from the public. Because ISCRAA's effective date is June 1, 2002, ISCRAA will probably recoup for the States an additional $1 billion above the present value of future $500 million-a-year payments. ISCRAA does not affect the first three-and-a-half years of fees paid under the MSA. Because these payments almost certainly are adequate to pay all reasonable fees incurred in the litigation, ISCRAA would restore to the States virtually all fees paid after its effective date. Thus the net present value of the sums that ISCRAA would provide to the States can conservatively be estimated at $9 billion. By restoring these excess fee payments to the states' MSA escrow account and returning them to the States on a per capita basis, ISCRAA guarantees every State a very substantial recovery. Based on the estimates that I have described, even our Nation's smallest State, Wyoming, would recoup at least $15 million in tobacco fee payments, and other small States, such as North Dakota, would receive approximately $20 million. On the other hand, our nation's largest State, California, can expect to recoup at least $1 billion. Other large States would also see generous returns: Florida, $511 million; Illinois, $397 million; Michigan, $318 million; New York, $607 million; Ohio, $363 million; and Texas, $667 million. Here is how much each State can expect to recover: Alabama....................................................$142,220,272 Alaska.......................................................20,046,569 Arizona.....................................................164,079,935 Arkansas.....................................................85,496,543 California................................................1,083,230,642 Colorado....................................................137,556,275 Connecticut.................................................108,911,511 Delaware.....................................................25,059,883 District of Columbia.........................................18,294,706 Florida.....................................................511,123,686 Georgia.....................................................261,806,474 Hawaii.......................................................38,745,502 Idaho........................................................41,381,203 Illinois....................................................397,174,614 Indiana.....................................................194,456,664 Iowa.........................................................93,585,167 Kansas.......................................................85,976,825 Kentucky....................................................129,257,603 Louisiana...................................................142,919,876 Maine........................................................40,772,615 Maryland....................................................169,384,021 Massachusetts...............................................203,046,997 Michigan....................................................317,835,940 Minnesota...................................................157,327,166 Mississippi..................................................90,973,451 Missouri....................................................178,937,382 Montana......................................................28,852,605 Nebraska.....................................................54,726,966 Nevada.......................................................63,905,164 New Hampshire................................................39,520,996 New Jersey..................................................269,094,724 New Mexico...................................................58,173,915 New York....................................................606,875,689 North Carolina..............................................257,420,675 North Dakota.................................................20,537,847 Ohio........................................................363,078,559 Oklahoma....................................................110,353,478 Oregon......................................................109,417,889 Pennsylvania................................................392,753,669 Rhode Island.................................................33,525,716 South Carolina..............................................128,305,961 South Dakota.................................................24,140,253 Tennessee...................................................181,945,847 Texas.......................................................666,850,647 Utah.........................................................71,417,756 Vermont......................................................19,470,563 Virginia....................................................226,374,115 Washington..................................................188,496,659 West Virginia................................................57,831,660 Wisconsin...................................................171,532,756 Wyoming......................................................15,791,372 I ask unanimous consent that the text of the bill and the following four articles be printed in the Record.

Mr. KYL

Mr. KYL. Mr. President, today, I am pleased to join with Senator McCain to introduce the Northern Arizona National Forest Land Exchange Act of 2003. This bill, which facilitates a large and very complex land exchange in Arizona, is the product of months of discussions between the Forest Service, community groups, local officials, and other stakeholders. It will allow communities to accommodate growth and improve the management of our forests; it will also yield many environmental benefits to the public. This bill will protect some of Arizona's most beautiful ponderosa pine forests from future development by placing approximately 35,000 acres of private land into public use. It consolidates a 110-square mile area in the Prescott National Forest near the existing Juniper Mesa Wilderness under Forest Service ownership, to preserve the area in its natural state and prevent its subdivision. This land has old growth ponderosa pine that is at least 250 years old and juniper that is 500 years old or older. Consolidation will preserve the area for watershed management, wildlife habitat, and outdoor recreation. Without consolidation, these tracts would be open to future development. I am pleased that this bill will preserve them for future generations. This bill significantly improves management of the Prescott National Forest. The existing checkerboard ownership pattern in the Prescott makes management and access difficult. The exchange improves management of the forest by consolidating this land, and allowing the Forest Service to effectively apply forest-restoration treatments designed to improve forest health and reduce hazardous fuels. In turn, better management will help decrease the fire risk in Arizona's forests. The importance of improved management and efficient restoration treatments cannot be overstated given last year's devastating Rodeo-Chediski fire. In addition to protecting Arizona's natural resources, this bill allows several Northern Arizona communities to accommodate future growth and economic development, and to meet other municipal needs. The exchange will allow the Cities of Williams and Flagstaff to expand their airports and water-treatment facilities, and develop town parks and recreation areas. The town of Camp Verde will have the opportunity to acquire lands for view shed protection. Several youth organizations throughout northern Arizona will be able to acquire land for their camps. Even as it addresses environmental and community needs, this bill saves significant taxpayer dollars. It obviates the administrative route for land exchange--doing an exchange of this size administratively would require considerable financial and personnel resources within the Forest Service. The agency estimates that the legislative approach will cost half as much as the administrative alternative--resulting in potential savings to the taxpayers in excess of $500,000. This land exchange is supported and endorsed by many municipalities, religious institutions, environmental groups, and other nongovernmental organizations in Arizona. Experts from the Arizona Game and Fish Department have reviewed the lands to be exchanged and strongly support the proposal. I have received hundreds of letters and petitions from residents expressing support for it. This exchange is extremely important to the residents of Arizona. This land exchange is a unique opportunity to protect Arizona's natural resources while accommodating the tremendous growth that my State is experiencing. This bill is good for the state of Arizona and I plan to work with my colleagues to ensure that we pass this important legislation this year.

Mr. KYL

Mr. KYL. Mr. President, today, I am pleased to join with Senator McCain to introduce the Northern Arizona National Forest Land Exchange Act of 2003. This bill, which facilitates a large and very complex land exchange in Arizona, is the product of months of discussions between the Forest Service, community groups, local officials, and other stakeholders. It will allow communities to accommodate growth and improve the management of our forests; it will also yield many environmental benefits to the public. This bill will protect some of Arizona's most beautiful ponderosa pine forests from future development by placing approximately 35,000 acres of private land into public use. It consolidates a 110-square mile area in the Prescott National Forest near the existing Juniper Mesa Wilderness under Forest Service ownership, to preserve the area in its natural state and prevent its subdivision. This land has old growth ponderosa pine that is at least 250 years old and juniper that is 500 years old or older. Consolidation will preserve the area for watershed management, wildlife habitat, and outdoor recreation. Without consolidation, these tracts would be open to future development. I am pleased that this bill will preserve them for future generations. This bill significantly improves management of the Prescott National Forest. The existing checkerboard ownership pattern in the Prescott makes management and access difficult. The exchange improves management of the forest by consolidating this land, and allowing the Forest Service to effectively apply forest-restoration treatments designed to improve forest health and reduce hazardous fuels. In turn, better management will help decrease the fire risk in Arizona's forests. The importance of improved management and efficient restoration treatments cannot be overstated given last year's devastating Rodeo-Chediski fire. In addition to protecting Arizona's natural resources, this bill allows several Northern Arizona communities to accommodate future growth and economic development, and to meet other municipal needs. The exchange will allow the Cities of Williams and Flagstaff to expand their airports and water-treatment facilities, and develop town parks and recreation areas. The town of Camp Verde will have the opportunity to acquire lands for view shed protection. Several youth organizations throughout northern Arizona will be able to acquire land for their camps. Even as it addresses environmental and community needs, this bill saves significant taxpayer dollars. It obviates the administrative route for land exchange--doing an exchange of this size administratively would require considerable financial and personnel resources within the Forest Service. The agency estimates that the legislative approach will cost half as much as the administrative alternative--resulting in potential savings to the taxpayers in excess of $500,000. This land exchange is supported and endorsed by many municipalities, religious institutions, environmental groups, and other nongovernmental organizations in Arizona. Experts from the Arizona Game and Fish Department have reviewed the lands to be exchanged and strongly support the proposal. I have received hundreds of letters and petitions from residents expressing support for it. This exchange is extremely important to the residents of Arizona. This land exchange is a unique opportunity to protect Arizona's natural resources while accommodating the tremendous growth that my State is experiencing. This bill is good for the state of Arizona and I plan to work with my colleagues to ensure that we pass this important legislation this year.

Mr. KYL

Mr. KYL. Mr. President, I was about to say there is no more honest Member of this body than the Senator from Iowa, who spoke a moment ago. When he lays out the case for this particular facility in Ames, IA, I do not think any of us can quibble with that. That is not the point. The point of this amendment is literally to help the chairman of the Appropriations Committee resist the very persuasive cases that every one of us can make that some great project that needs to be completed or started needs to be part of this very special supplemental appropriations bill. We are hoping to make his job a little easier in the future so he can say: No, these bills are going to be clean. This is a bill to fund the war. It is not to complete a research facility and do other activities that may be good ideas but have no place in this bill to fund the war. Let them go the regular process. I can make the case there is something that relates to our ability as first responders to deal with an emergency from a terrorist threat in the State of Arizona. We are trying to get some money to prevent our hospital emergency rooms from closing down because we are having to treat illegal immigrants with health care under a Federal mandate, a Federal law, which we are happy to comply with, but which costs our hospitals hundreds of millions of dollars every year. We would like reimbursement for that so those emergency rooms will not close down, as they had to, but can stay open. We will not ask for that in this bill. Instead, we think the best approach is to go through the regular process. That is why I hope my colleagues will support the amendment.

Mr. KYL. Certainly.

Mr. KYL. Mr. President, I support the McCain amendment.

Mr. KYL

Mr. KYL. Mr. President, I support the Senator's amendment. One could make an argument for this particular case, as the Senator from Mississippi has just done. That argument should be made in a place and a time that doesn't, however, attempt to take advantage of this funding resolution for the war. The President sent up a request for funding for the war specifically, and Congress is responding to that in this legislation. By and large, this legislation is directed specifically to that. What is perplexing to the other Senator from Arizona and I is why we have this handful-- just a handful, six or seven--of items that have absolutely nothing to do with the war, such as an agricultural research station at Iowa State University, or mental health, autistic help, and others that have nothing whatsoever to do with this war effort. There may be a good case to be made for every one of these. And there is an appropriations process for that case to be made. So why are they being put on this bill at this time? It is not fair to all of those other people who can make equally good cases for other things. There are a lot of things that need to be done in an emergency way or with timing as a factor. There are other provisions in the bill that don't necessarily relate to the war, but don't cost any money, such as a study for this, or a change in the language on something. We don't have objection to that. Our objection is taking advantage of this process for the expenditure of money on items that have nothing to do with the war. One of the reasons for it is because it only relates to a handful of projects, primarily for people who happen to be on the Appropriations Committee. That is not fair to the vast number of Members of this body who have equally good requests but don't happen to be in the room when the bill is put together. That is why, as an ordinary proposition, these bills are presented to us on the floor clean. For those who are not familiar with the Senate process, that means without extraneous provisions, little pieces of pork that specific Members add on. The reason for that is because we can all trust the process from the Appropriations Committee to put out a clean bill that supports the President's request to run the war. I commend the chairman of the Appropriations Committee and the chairman of the subcommittee. They have done a great job. That is almost entirely what was done in this case. But for these few provisions, which we will move to strike tomorrow because they don't belong on the bill, if they can sustain themselves in debate and there really is a good case for them, they will prevail through the ordinary process. If they cannot, they should be permitted to fall. That is the reason we will urge support for the amendment when offered tomorrow and why I support the Senator's amendment this evening.

Mr. KYL. Mr. President, how much time is left?

Mr. KYL

Mr. KYL. I thank the Senator for taking the time to help me clarify this important issue. payment limitations

Mr. KYL. I would ask the Finance Committee, in its consideration of legislation dealing with welfare reform, Medicaid, and issues regarding uncompensated care, to work with me to provide for consideration of legislation to provide for this reimbursement funding.