Billy Tauzin

Mr. TAUZIN

Mr. TAUZIN. Mr. Speaker, I thank the gentleman for yielding. Mr. Speaker, I have great sympathy for those who believe this bill is moving too fast this session, but I remind my colleagues that I offered this bill two Congresses ago. I crafted this bill two Congresses ago with the hopes we could have hearings two Congresses ago. We got no hearings. I refiled it last year, 182 Members of the Congress last year cosponsored it; 67 Democrats. And we could get no hearings until the very last week or two of the session when it was too late for us to take any action on the bill. There were 4 years for this Congress to move on this bill if we had wanted to take that time. But for 4 years, we could never even get this bill moving, except finally a series of hearings right at the end of the session. We have had hearings again this year. We have had markups, subcommittee and the full committee. We will have a full and active debate the next day and a half, with 8 hours for folks to offer amendments under this modified open rule. And I am excited that we will finally get a chance to fix something that desperately needs fixing. The old rule that ``If it ain't broke, do not fix it'' not only applies here, it applies in buckets. When 93 percent of these cases settle, most of them at 10 cents on a dollar, we have a system that is ultimately broke. We have a system made for the attorneys. When 8 cents on the dollar is all that is recouped for the stockholders, when most of the suits are brought to shake down companies, to shake them down any time their stock prices drop a couple points, when these suits are produced on Xerox machines, when the same plaintiff repeatedly appears in the suit time after time, one of them 35 times, you begin to see a picture of professional plaintiffs. I ask the attorney who brought that suit for the same plaintiff 35 times if perhaps he did not have a professional plaintiff, or if maybe this was the most unlucky person in America. It is time for us to put an end to that kind of a legal system. When a legal system preys upon our economy instead of trying to render justice, something is wrong. The bill we will present to you today had the support of eight Democrats on the Committee on Commerce, almost half of our membership. It will have the support of many Democrats and Republicans on the floor today and tomorrow. It will truly be a bipartisan effort to put an end to a terrible legal system and to replace it with one that works, one that corrects fraud, one that urges plaintiffs to bring good cases and take them to a conclusion, to prove fraud exists, and to make the guilty parties pay, and to end this business of frivolous shakedown lawsuits that is threatening to cripple many small businesses just trying to get going and discourage them to disclose more information to us, not keep it all secret because they are afraid of another lawsuit right around the corner. Mr. Speaker, this is a day we have long waited for. This day and the next day ought to produce a good legal system instead of the rotten one we have. I look forward to it under this rule.

Mr. TAUZIN

Mr. TAUZIN. Mr. Chairman, a good legal system is not one that is measured by the number of lawsuits that are filed. It is not one measured by the length of those lawsuits, about how many judgments are rendered. Quite the contrary. A good legal system is one that deters bad behavior and, therefore, leads to fewer lawsuits. It is one in fact that encourages settlements of merited cases rather than the massive settlement of all cases regardless of merits. On that test, this legal system we are trying to reform today is a rotten one. The gentleman from Massachusetts has told you that there were only a few cases filed. Let me give Members the facts. In 1993, there were 723 of these cases pending, more than any other year except 1974. In fact, in the last 4 years, from 1990 to 1993, there have been 1,180 of these cases filed and that is almost equal to the number filed in the 10 previous years. Many more lawsuits. While Federal lawsuits are generally declining by 30 percent, these lawsuits are up by 10 percent. Second, these lawsuits are not sailboats sailing on the ocean of litigation. These are massive carriers, massive lawsuits. The 723 cases pending today estimated request $28.9 billion in damages. These are huge lawsuits that clog up the system and that send a message out to everybody across America that the lawsuits are waiting for you the first time your stock prices drop. The ripple effect of these lawsuits is massive. To businesses sued and those anything about your company because anything you say will be held against you in a lawsuit filed by lawyers who xerox the claims, appoint their own clients and get a lawsuit going worth billions of dollars in which most of the parties end up settling at 10 cents on the dollar.'' Let me ask Members something: When 93 percent of these cases never reach a jury, when most of them are settled for 10 cents on the dollar, do you not get the impression I get, that this is a system where merit does not matter, everybody settles all the time? Why? Because these are massive lawsuits and merit does not count. The liability is so huge, the shotgun effect of the lawsuit against all parties is so dramatic, the damages claimed is so huge that the temptation is to get out of it as fast as you can, 10 cents on the dollar, take care of the lawyer, do not worry about the stockholders, is the way this system works. This is a bad legal system. And when we are told, as we are told, that only 6 cents on the dollar ends up being recovered for stockholders under this system, you and I ought to be deeply concerned about it. It means that real fraud is not being prosecuted. It means that meritless cases are filed and stockholders get nothing, but a few big law firms in America are doing quite well. When you have that kind of a system where merit does not matter, where lawsuits are filed on a Xerox machine, where one lawyer in California says, ``I have the best law practice in America, I have no clients,'' he just names whoever he wants to represent the class and files a lawsuit. When you have professional plaintiffs appearing time after time on these lawsuits and bounties, legal bounties paid in order to get these lawsuits going, when you have got that kind of a system, is not time to reform it? For 4 years now, I have been asking this Congress to do that and I am delighted today we will have that chance. As we debate amendments over the next 8 hours, let me tell Members that we have tried to accommodate concerns. We have tried to bring this bill this year as close as we can to the Dodd-Domenici bill of last year and to the Tauzin bill of last year that got 182 cosponsors, 67 Democrats to cosponsor it. We will see when this debate is over an awful lot of Members on both sides of this aisle voting for this measure. We will improve it in the process in the next 8 hours. It will be a better bill, closer to the bill that we offered last year and the year before. I am proud to tell Members the coalition that I have been working with has endorsed this bill and the effort to improve it is still on this floor. We will join with many other Democrats in a bipartisan effort to improve this section of the law. When we are through, we are going to have a statute that discourages fraud because it counts on real merited cases to be filed, and it counts on them to be brought to fruition and the guilty parties punished. It will be a system that discourages frivolous, shakedown strike lawsuits that benefit no one in this country except the few law firms who make a havoc of our legal system and a ton of money over it.

Mr. TAUZIN. Mr. Chairman, I move to strike the requisite number of words. Mr. Chairman, the whole purpose of this debate, the whole purpose of this multi-year effort to bring this issue to the floor and eventually hopefully to pass this bill, is to change the incentives in this system, in this legal system, to change them in a very positive way, to create an incentive system that says, if you find knowing fraud, prosecute it. You will have, under knowing fraud, under the examples illustrated by several of my colleagues on this side, you will have the full recourse of 10(b)(5) litigation remedies at your disposal. You will have full joint and several liability available to you. You sue all the parties. They are all 100 percent responsible. It is up to them to figure out who is going to contribute to each other in a knowing fraud case. It says where there is not knowing fraud--and by the way, the original statute we are amending never talked about anything but knowing fraud. Courts have invented another standard of violations of the statutes. Courts have invented something that they said was called recklessness, something close to knowing. It was so close to knowing they said that you almost had to be believed to have known that you were committing a fraud or you were so reckless, you were so in fact in violation of common standards of what we perceive to be good behavior that you literally will be presumed to have known. In those cases where it is a reckless behavior, not a knowing behavior, this statute creates a new liability structure. It says, in those cases that you identify the persons who were reckless. You identify their percentage liability or the court does eventually in the judgment, and each is proportionately liable for their share of the recklessness, as opposed to the joint and several liability that attaches to knowing fraud, the guys that intend to harm you and, in fact, do harm you. It is the purpose of this statute to create these two liabilities for one simple reason: Without a change in the law, as this bill suggests, plaintiffs will, plaintiffs' lawyers will continue to file these shakedown lawsuits, scattershot everybody connected with the company, everybody associated with it, officers, board members, accountants, lawyers, everybody connected with a company, and then sit back and do discovery and continue the litigation until somebody says, wait a minute, we have had enough, here is 10 cents on the dollar. We are out of here. That has been the practice. If you want to discourage that, you need to make this important change in the way these kinds of lawsuits are brought. Remember we are talking about civil lawsuits. This bill does nothing, nothing to change the authority nor the responsibility of the SEC to authority already guaranteed in law and preserved in this statute. What this amendment does, and it is supported by the SEC, is to say that plaintiff lawyers who do not like these reforms, who want to continue bringing these massive lawsuits to shake people down, will not be able to use the civil processes of RICO to do that. They are going to use this reform statute. Without this amendment, this reform is meaningless. Lawyers can simply continue to do, as some have suggested they will do, and that is use the treble damage approach of the RICO statute to avoid the reforms of this legislation and, therefore, continue to wreak havoc upon a legal system that is creating some awful problems for us in the marketplace. We have heard through witnesses before our committee in the last Congress and this Congress what some of those awful problems are, problems in which small companies, particularly growth companies, who are doing their best with a new invention to get it going and to produce it and sell it to the marketplace find that their stock may jump up one day, jump down the next. And all of a sudden they are in a massive lawsuit, they and everybody connected with them Problems that we have found in companies across the board where they have said, we would like to tell you more about our company, if you want to invest in it, but we are afraid to tell you anything because whatever we say somebody is going to say we misled you in a lawsuit next week. And we are going to find ourselves involved in another massive litigation with a lot of court costs and legal fees. If we do not cure those problems soon, this legal mess created under 10(b)(5) will continue to erode the productivity of small growth companies who are desperately trying to employ Americans and to produce more products not only for our marketplace but for the marketplaces of the world. It is that simple. Lawyers who actually use this system today and who want to fight these reforms would love to have somewhere else to go, some other system, and using the civil RICO is the way they might go. This amendment needs to be passed.

Mr. TAUZIN

Mr. TAUZIN. Mr. Chairman, will the gentleman yield?

Mr. TAUZIN. Mr. Chairman, I thank the gentleman for yielding. Mr. Chairman, what happens under the bill is that the property owner who believes he is affected by one of these statutes, endangered species, 404 wetlands or swampbusters, literally goes to the agency and makes a request, am I affected by those statutes. If so, what part of my property is affected. A good example is the one I gave the other day from my farmer in Plaquemines Parish. Included in his letter to me was a map. The corps actually drew a map, showed him the affected area of his property affected by the wetlands determination. So the agency determines what part of your property is affected by wetlands or endangered species. That area is defined, is certain, and that is why this new revision to the amendment makes sense.

Mr. TAUZIN. Mr. Chairman, I thank the gentleman for yielding. I am so glad my friend, the gentleman from Maryland, brought up Florida Rock again. The reason I quote it so often is that it is now Florida Rock III. These plaintiffs have made their third trip to the court of appeals. The case started in 1978. They finally got a judgment in March 1994 that says they are entitled to compensation. The case has been remanded again to the Court of Claims. They are on their fourth trip around. That is why this bill is so desperately needed.

Mr. TAUZIN. Mr. Chairman, will the gentleman yield just briefly?

Mr. TAUZIN. I thank the gentleman for yielding. Mr. Chairman, we need to make one more point before we end this debate. The gentleman from Massachusetts [Mr. Frank] said or intimated that the real intent is to gut the Endangered Species Act, the Wetlands Act. Let me read from the article by Sue Waldron in the Wall Street Journal: The dispute over endangered species isn't over whether or not society should protect them. It's between a policy that refuses to set priorities and insists on preservation no matter what the costs to the human species or, alternatively, a more balanced approach. We are hard put to see how the species act can itself survive politically operating as an environmentalist land grab of other peoples property. The seriousness of the claims for these various species might be better tested if the government had to compensate landowners for their losses. That is all we are asking: balance, respect. We want a good Endangered Species Act, a good Wetlands Act, but we also want balance in landowner rights.

Mr. TAUZIN. I want to thank the gentleman from Oregon [Mr. Cooley] for an excellent statement. That is exactly what we are talking about. Nobody in this room, I hope, believes that the Government has the right to come and take 10, 20, percent, any amount of your property. If you really believe that--the gentleman makes the point--how many people are willing to donate 20 percent of their homes to the Federal Government? But when the Government comes and takes it, clearly that requires the Government to pay compensation. That is what this fight is all about. I want to make another point. The debate we are on right now, whether to accept the amendment offered by the gentleman from California [Mr. Mineta], will not only change it from 10 to 20 but will now involve all of the property of the owner, not just the affected regulated portion, The court, in Florida Rock, said that is wrong. It said the fifth amendment prohibits uncompensated taking of private property without reference to the owner's remaining property. We defeated this amendment, and then we offered an amendment to change it from 10 to 20.

Mr. TAUZIN. Mr. Chairman, if the gentleman will further yield, if I can make it crystal clear, it is not the intention in that exception to say that you cannot be compensated for wetland protection regulations on your own property. It is not the intent of that exception to say that you will not be able to be compensated because the regulation is designed to protect wetlands on somebody else's property. The idea is to prevent harm or damage to the property itself of the neighbor, not to carry out further wetlands protection. Therefore, that exemption would not exonerate the government from liability for the wetlands protection regulations as 404 or swamp-busters that diminish the value of someone's property.

Mr. TAUZIN. If the gentleman will yield, I suggest it would truly be an oxymoron for anyone to argue that the bill provides compensation for private property takings when the reason for that private property taking is wetland protection under 404 and under sod-busters, and then to argue that you do not get compensated because the wetlands regulation on your property is designed to protect somebody else's wetlands regulation, it would certainly be an oxymoron. The purpose of that exception is not indeed to allow such an oxymoron to occur, The purpose of that exemption is to provide a specific exemption for those regulations which are not designed for wetland protection but designed for other purposes, specifically purposes to prevent one from creating a harm or a nuisance on your neighbor. That is further amplified when as you know under the Tauzin amendment, we specifically said that nuisance laws and zoning laws which similarly regulate the property for valid reasons other than wetland protection create an exemption from the act.

Mr. TAUZIN. If the gentleman will yield, I will be more than happy.

Mr. TAUZIN. Mr. Chairman, I move to strike the requisite number of words. Mr. Chairman, the amendment before us is as flawed as the amendment that was previously offered that would have changed the 10 percent of any affected portion criteria to 30 percent of the whole of the property. It is flawed primarily because it refers to the whole of the property. The whole of the property is a variable sum. I can change the whole of my property tomorrow by simply selling off a portion. I can divide it. I can do a number of things to game this system when the percentage is applied to the whole of my property. We heard an eloquent statement from the gentleman from Missouri [Mr. Volkmer] about how farmers would be treated under this kind of an arrangement when the percent diminution was applied to the whole of their property. What farmers would have to do in order to qualify for compensation, under this plan, under this amendment, they would be forced to sell off parts of their farm to divide it up in ways to qualify under this amendment. No one should be forced to game a system in order to receive fair compensation, but that is what this amendment was done as it is constructed. I am informed by managers of this bill and this is a very important announcement that I hope Members are paying close attention to in their offices, that if we defeat this amendment providing for 20 percent of the entirety of one's property as a criteria, we will immediately offer an amendment that will provide the criteria 20 percent of the affected portion. This will get for those Members who think 10 percent is too small a criteria a change in the bill, that modifies it to 20 percent. But it will also make the bill workable. It will apply that 20 percent to the regulated portion of a person's property, not to the entirety of his property causing him and others to try to game the system. In effect, let me say it again. If we are successful in defeating this amendment, which is inartfully drawn, as inartfully drawn as the 30 percent amendment was previously drawn, and apply instead the following amendment, we will reach the 20 percent criteria that some of the authors of this amendment want to achieve but we will do it correctly. We will apply it to the affected portion of the property regulated under the act. I want to make a quick point. In an editorial written by Sue Waldren, we find these words, and by the way this was January 2, 1994: The third amendment to the Bill of Rights states that no soldiers can be quartered in any home without the consent of the owner. Somehow, though, it apparently never occurred to the Founding Fathers that we might someday need an amendment against the arbitrary quartering of endangered species on private land. Good thing the Founders did not see this day when property owners all over America were to be told to idle their land and effectively turn it into a wildlife refuge without compensation from the government, But that is what the endangered species law does now to farmers all over America. In California most of my colleagues remember, let me remind them of the story that appeared April 19, 1994, where a southern farmer was arrested and charged with the possibility of a year in prison and $200,000 fine for doing what, for plowing his field because five dead rats were found on his field after he finished plowing it. About the same time, another farmer in Fresno, CA was brought to court for doing nothing more than plowing his field and in order to avoid going to jail, reached agreement with the Fish and Wildlife Service to pay a $5,000 fine, to give them 60 acres of his 160-acre farm, to give it to them, ordered by the court, and to sell the remaining 100 acres. Why? Because he had plowed his field and there on his property was apparently some sort of a bluenosed lizard that the Fish and Wildlife Service deemed threatened or endangered. That kind of story needs to end. This amendment needs to be defeated. Then we can adopt an amendment for 20 percent of the affected portion and we will so offer that amendment.

Mr. TAUZIN. Mr. Chairman, will the gentleman yield?

Mr. TAUZIN. Mr. Chairman, will the gentleman yield?

Mr. TAUZIN. Mr. Chairman, I should remind the gentleman that offer was made to the gentleman yesterday when this amendment was made. We immediately offered to do that. It was turned down.

Mr. TAUZIN. Mr. Chairman, will the gentleman yield?

Mr. TAUZIN. Mr. Chairman, I think we need to again make it crystal clear to the Members who are in their offices listening to this debate, when we defeat this amendment, which changes two provisions of the bill, it changes it from 10 to 20, but also from the affected portion to all of the property, we will offer an amendment that simply changes it from 10 to 20.

Mr. TAUZIN. Mr. Chairman, will the gentleman yield?

Mr. TAUZIN. Mr. Chairman, let me first commend the gentleman on an excellent addition to the bill. Secondly, I want to also commend him for the fact that he was the original author for the original 10- to 20-percent change we just adopted. I thank him for contributing this change to the bill.

Mr. TAUZIN

Mr. TAUZIN. Mr. Chairman, I will just take a minute and thank the gentleman for yielding. Let me concur in the last remarks. I do not want to use words like gutting and all of that, but this is extremely damaging. It takes from the bill the method of payment. Let me say to my friend who offered the amendment, this is a first class right under the Constitution. Any citizen under this bill that wants to exercise that right can do so at 1 percent, 2 percent, 10 percent, 20 percent. This bill simply creates a new remedy for citizens at home under the criteria set by this bill to get justice at home. For it to work the agency has to want to cooperate, and if you do not make the agency responsible for damage it does, and do not make the agency responsible for payment, you will never get cooperation. Just day before yesterday Mr. Babbitt just announced the first of its kind safe harbor provision for the red cockaded woodpecker offering to cooperate with a landowner instead of taking their land. This is what we need.

Mr. TAUZIN. Mr. Chairman, I thank the gentleman for yielding to make the point that it is the very language the gentleman's amendment would delete from the bill that provides the answer. It says that notwithstanding any other provision of law, payment must come from that agency. Therefore, the citizen can compel mandamus against that agency for payment.

Mr. TAUZIN. Mr. Chairman, will the gentleman yield?

Mr. TAUZIN. Mr. Chairman, will the gentleman yield?

Mr. TAUZIN

Mr. TAUZIN. Mr. Chairman, will the gentleman yield?