verdits: a jury in South Carolina may find the Michigan manufacturer faultless and the absent California component part manufacturer fully responsible, while a subsequent California jury may find the previously-absolved Michigan manufacturer entirely responsible and the California component part manufacturer faultless. As a result, although both juries would have found favorably for the plaintiff, the plaintiff would recover nothing. Is that fair? Does that make sense?

The practical effect of caps on damages. The Kasten bill would limit so-called "non-economic damages" to $100,000.46 The effect of this provision would be to virtually eliminate settlements. Under existing law, the plaintiff knows he may recover nothing. The defendant knows the jury may return a full verdict. Both have incentive to settle. With a cap, the defendant has no incentive. No insurance company will offer $100,000 if that is their maximum exposure. Instead, they will offer a maximum of $50,000 and almost all cases will go to trial with the resulting substantial increase in "transaction costs" and considerable delays in the disposition of

cases.

4. The fallacy justifying abolition of well-considered common law principles. Masquerading under the disguise of "reform" 47 the liability insurance industry would have this Committee and the Congress of the United States abolish or severely limit the following existing common law doctrines:

(a) The collateral source rule.48

(b) Joint and several liability.

(c) Liability for negligent design and manufacture of products.

(d) Liability for negligent failure to warn.

(e) Liability for breach of implied of warranty of fitness for a particular purpose. (f) Liability for manufacture and sale of defective and unreasonably dangerous products.

Yet the sacrifice of these six common law principles solely for the benefit of the liability insurance industry is not the main purpose of the products liability reform movement. Their main purpose is to strike at the very cornerstone of our Constitutional freedoms, the right to trial by jury.

An Epitaph to the Right of Trial by Jury. Born in Britain in or before the 5th Century A.D., raised in the hearts and minds of our Saxon ancestors prior to Norman conquest, christened at Runnymede, England, June 15, 1215, and consecrated in the 7th Amendment of our sacred Constitution. A survivor of civil war, economic depression, two world wars and 200 years of American freedom and progress. Died June 3, 1986, in the Senate Commerce Committee, Senate Russell Building, Room 257, Washington, D.C. Rest in Peace. (Hopefully, this will not occur.) Before this Committee executes the right of trial by jury, perhaps it will pause a moment to consider its noble history from the pages of Blackstone's Commentaries: 49

66

[T]rial by jury. . . has been used time out of mind in this nation [England], and seems to have been coeval with the first civil government. Some authors. trace the origin of juries. . . [to] the Britons 50 themselves, the first inhabitants of our island; but certain it is, that they were in use among the earliest Saxon 51 colo

46 Kasten Bill, § 7(a). Congressional Record-Senate S-5107 (April 30, 1986).

47 See Footnote 1, page 1 above.

48 The equitable_doctrine known as the Collateral Source Rule recently celebrated its bicentennial birthday. From Mason v. Sansburg, 3 Douglas 61 (Eng. 1782) and Yeates v. White, 132 Eng.Rep. 793 (Eng. 1838), it was adopted in the United States in Propeller Monticello v. Mollison, 58 U.S. 152 (1854) and Althorfe v. Wolfe, 22 N.Y. 355 (1860). It is now almost universally followed in the United States. See Restatement of Torts, 2d, § 920A, Comment b., by the American Law Institute, which provides as follows:

"Benefits from collateral sources. . It is the position of the law that a benefit that is directed to the injured party should not be shifted so as to become a windfall for the tortfeasor. If the plaintiff was himself responsible for the benefit, as by maintaining his own insurance or by making advantageous employment arrangements, the law allows him to keep it for himself. One way of stating this conclusion is to say that it is the tortfeasor's responsibility to compensate for all harm that he causes. See, also, Annotation: "Collateral Source Rule: Hospital

or Medical Insurance", 77 ALR3d 415 (1977).

49 Blackstone's Commentaries on the Laws of England (Oxford, England 1765-1769). 50 Celtic tribes, known as "Britons," crossed the English Channel and settled in Britain between 700 and 200 B.C. See Enclopedia Britannica, Macropedia, Vol. 3, pages 193-197, and Micropedia, Vol. II, page 285.

51 Following the Roman conquest of Britain between 43 and 80 A.D., Germanic tribes known as Saxons settled in southern and eastern Britain between 430 and 600 A.D. See Enclopedia Britannica, Macropedia, Vol. 3, pages 198-199 Saxon kings united Britain in 927 A.D. See Note 52 below.

65-879 0 - 87 - 6

nies. [W]e may find traces of juries in the laws of . . . Germany, France, and Italy; who had all of them a tribunal composed of twelve good men and true. being the equals or peers of the parties litigant. . . . In England we find actual mention of them so early as the laws of King Ethelred, 52 and that not as a new invention. . . . [W]e are apt to impute the invention of [juries] . . . to the superior genius of Alfred the Great.53 . . . Its establishment . . . in this island . . . was always so highly esteemed and valued by the people, that no conquest, no change of government, could ever prevail to abolish it. In [the] Magna Charta it is [called].. the principal bulwark of our liberties . . . and it was ever esteemed, in all countries, a privilege of the highest and most beneficial nature. 54

Trial by jury has ever been, and I trust ever will be, looked upon as the glory of the English law . . . . It is the most transcendent privilege which any subject can enjoy . . . [It has] secured the just liberties of this nation for a long succession of ages. And [those who claim] . . . that because Rome, Sparta, and Carthage have lost their liberties, therefore those of England in time must perish, should have recollected that Rome, Sparta, and Carthage, were strangers to . . . trial by jury."

155

"So that the liberties of England cannot but subsist, so long as [trial by jury] remains sacred and inviolate, not only from all open attacks but also from all secret machinations, which may sap and undermine it, by introducing new and arbitrary modes of trial, by justices . commissioner and courts of conscience. And however convenient these may appear at first, (as doubless all arbitrary powers, well executed, are the most convenient) yet let it be again remembered, that delays, and little inconveniences in the forms of justice, are the price that all free nations must pay for their liberty in more substantial matters; that these inroads upon the sacred bulwark of the nation are fundamentally opposite to the spirit of our Constitution; and that, through begun in trifles, the precedent may gradually increase and spread, to he utter disuse of juries in questions of the most momentous concern." 56 Hear, also, what others have said of the ancient right of trial by jury:

(a) Sir John Fortescue (1385-1479). Chief Justice of the King's Bench, author: "In Praise of the Laws of England", (c. 1470):

. By the laws of England, the truth of the matter cannot appear to a judge, but [only] upon the oath of twelve men of the neighborhood, a method which is to be esteemed as the most rational and effectual [method] for discovering the truth." 57 (b) Sir Edward Code (1552-1634). Chief Justice of the Court of Common Pleas and author of "Coke's Institutes of the Laws of England" (1628):

The institution and right of this trial by twelve men I excels other . . this trial of the fact . . . is very ancient: for here . . . the law was before the conquest...

Nor is it any small merit in this arrangement . . . to have the benefit of a trial, in which the judge and jury are a check upon each other; and that this benefit may always be enjoyed. . . . Thus considered, the distinction between the office of judge and jury seems to claim our utmost respect. May this wise distribution of power between the two long continue to flourish, unspoiled. . .

"158

(c) Pollock & Maitland, "The History of English Law" (2nd Ed., 1899):

[Of trial by jury:] "We may say that it suited Englishmen well; it became a cherished institution and was connected in their minds with all those liberties that they held dear. . . ."59

52 Sixth in a line of Saxon kings of a united Britain beginning with King Athelstan (927-939 A.D.), "Ethelred the Unready" reigned from 978 to 1016 A.D. See Enclopedia Britannica, Macropedia, Vol. 3, pages 203-204.

53 Alfred the Great, Saxon king of Wessex in southwest Britain from 871 through 899 A.D., is credited with saving England from conquest by the Danes, with the revival of learning in Britain, and with the compilation of the Dome-book or Liber Judicials which contained, according to Blackstone, "the principal maxims of the common law." Blackstone's Commentaries, Vol. I, pages 64-65; Black's Law Dictionary, page 434 (5th Ed., 1979).

54 Blackstone's Commentaries, Vol. III, pages 349-350.

55 Blackstone's commentaries, Vol. III, page 379.

56 Blackstone's Commentaries, Vol. IV, pages 343-344.

57 Fortescue, "In Praise of the Laws of England", Chapter XX, page 64 (c. 1470).

58 Coke's Institutes of the Laws of England, Vol. I, § 234, page 155b (1628). Cases collected in 21 recent annotations in which judges have exercised their inherent discretionary powers to reverse or reduce jury verdicts in products and other personal injury cases are discussed on pages 27-34 below.

59 Pollock & Maitland, "The History of English Law," Vol. II, page 629 (2nd Ed., 1899).

(d) Thomas Jefferson, author of our Declaration of Independence and third President of the United States:

"Equal and exact justice to all men, freedom of religion; freedom of the press,

and trial by juries impartially selected. These principles form the bright constellation which has gone before us, and guided our steps through an age of revolution and reformation. The wisdom of our sages and the blood of our heroes has been devoted to their attainment. They should be the creed of our political faith . . .; and should we wander from them in moments of error or alarm, let us hasten to retrace our steps and to regain the road which alone leads to peace, liberty, and safety." 60 Pause a moment, if you will, before sacrificing the cornerstone of our freedom to the insatiable greed of the liability insurance industry.

5. The fallacy of fairness in the products liability reform movement. That both products liability reform proposals are heavily weighted in favor of industry 61 and against the injured victim is clearly demonstrated by the following illustrations: (a) Kasten bill.

[1] The bill applies only to products liability actions for personal injury or death and not to actions by one commercial enterprise against another. 62

[2] The bill abolishes or severely limits longstanding common law principles beneficial to the injured victim, including the collateral source rule, joint and several liability and liability of negligent design and manufacture, negligent failure to warn, implied warranty and strict liability. However, the bill retains all “applicable defense[s] or limitation[s] of state law." 63 So much for uniformity.

[3] The bill provides that no more than $100,000 of non-economic damages maybe recovered in any products action regardless of the circumstances. 64

[4] The bill permits defendants who make payments of awards for future damages "periodically based on when the damages are found likely to occur" 65 even though applicable state law requires the jury to reduce future damages to their present cash value.66

[5] The Kasten bill abolishes the collateral source rule with respect to any payment or benefit by a health insurance program "funded in whole or in part by an employer." "67 Health insurance premiums are, in essence, payments by a prospective victim toward potential future health care costs. In other words, the health insurance payment is not a payment from a collateral source, it is payment by the injured victim himself in a series of increments over a period of years. Under the bill, even if the victim pays 90 percent of a health insurance premium, the defendant gets full credit for the payment. Is that fair? Obviously not.

[6] The Kasten bill refers to the "unacceptable high transaction costs of the products liability system" 68 and states 69 that "almost twice as much money goes to attorneys' fees and litigation expenses as to compensate victims." 70 As the standard contingent fee contract is approximately one-third,71 it is reasonable to assume that the remaining "attorneys' fees and litigation expenses" goes to the defense lawyers. 72 Yet the only restrictions in the bill are on the victim's attorneys' fees. The bill provides for the victim's attorneys' fees to decrease as the recovery increases.73 In other words, the better the results the victim's attorney achieves, the more he is penalized. In a typical case of a severely injured victim, the victim's attorneys' fees

60 Thomas Jefferson, First Inauguaral Address, Bartlett's Familiary Quotations, page 472 (14th Ed., 1968). The 7th Amendment to the United States Constitution, ratified December 15, 1791, provides for the right of trial by jury in civil cases: "In suits at common law . . . the right of trial of by jury shall be preserved. Most state constitutions have similar provisions.

61 Primarily, the liability insurance industry.

62 See Kasten bill, § 3(5), Congressional Record-Senate S-5106 (April 30, 1986).

63 See Kasten bill, §5(1) and 5(2). See, aso § 9(b) which preserves all state law reducing damage awards. Congressional Record, supra, Note 62, S-5106-07.

64 Kasten bill, § 7(a). Congressional Record, supra, Note 62, S-5107.

65 Kasten bill, § 8(a) Congressional Record, supra, Note 62, S-5107.

66 See, Am. Jur. 2d, Damages, § § 26-29.

67 Kasten bill, § 9(b)(2) Congressional Record, supra, Note 62, S-5107.

68 Kasten bill, § 2(a)(7), Congressional Record, supra, Note 62, S-5106. The word "transaction" would appear to cover both sides of the issue: i.e., the victim's attorneys' fees and the product manufacturer's attorneys' fees.

69 Without citation of source or authority.

70 See Footnote 68.

71 In my own experience, contingent fee contracts range from one-third to 40 percent. 72 In my experience, the plaintiff usually has one lawyer and the defendant two or more. 73 Section 10(a) of the Kasten bill provides for maximum contingent fees of 25 percent for the first $100,000 recovery, 20 percent for the second $100,000 recovery, 15 percent for the third $100,000, and 10 percent above $300,000. See Congressional Record, supra, Note 62, S-5107.

would be cut in half.74 Why not apply the same logic to the insurance company's lawyers: cut their allowable fees an average of 50 percent depending upon the outcome, the better the result, the more their fees would be cut? Typical insurance lawyers are paid an average of approximately $100 per hour. Therefore, if they win the case outright, they would get only $25 per hour, but if they lose big, the could get as high as $75 per hour. The answer to this equally absurd proposition is that the best defense lawyers would not handle products cases. This is the same insidious purpose of the Kasten bill: to fix it so the best plaintiff's lawyers will not handle products cases and to take away all incentive toward maximizing recovery for the catastrophically injured victim of defective and unreasonably dangerous products.

(b) Danforth bill.

[1] As with the Kasten bill, the Danforth bill covers personal injury, only, and not "commercial loss."75

[2] The so-called "expedited settlement claim"76 requires the claimant "under penalties of perjury"77 to submit to the product manufacturer 78 "a detailed description of the product", "full information" regarding the occurrence and injury, copies of all medical bills and medical reports, a statement of ther claimant's employment history and earnings, copies of all witness statements 79 and the amount of all compensation received by the claimant. In addition, the claimant must "cooperate fully and expeditiously with the manufacturer" in its investigation, 80 promptly update all medical information, furnish copies of records of "any relevant medical treatment or examination of the claimant," 81 "submit 82 to a physical or medical examination, or both, by a health care provider specified and compensated 83 by the manufacturer," provide copies of all expert opinions 84 and "provide the manufacturer with a reasonable opportunity to inspect, photograph or test"85 the product. What does the claimant get in return for baring his body and soul to the inquiring eyes of the product manufacturer and his liability insurance company? Nothing, absolutely nothing. No copies of quality control records, customer compliants, records of previous product injury, witness statements, or expert opinions. Nothing. Is that fair? You be the judge.

[3] Sanctions are imposed on a claimant's attorney who fails to act in good faith in the filing of an action, but no similar sanctions are imposed on a defense attorney who fails to act in good faiths asserting a defense. 86

DISCRETIONARY POWER OF THE TRIAL JUDGE TO REDUCE THE AMOUNT OF JURY AWARDS

In the "hocus-pocus" statistics of the liability insurance industry, the punitive damages award in the famous California Pinto fire case is always listed as a $125 million. For some reason, they neglect to tell us that the trial judge reduced the award to $32 million. 87 Under the longstanding common law procedure that Lord

74 In a case of catastrophic injury involving a recovery by the plaintiff of $450,000, attorneys' fees under a one-third contingent fee contract would approximate $150,000. Under the Kasten bill, they would be reduced to $75,000. See Footnote 73 above. In response to questions by Senator Ford, Assistant Attorney General Willard testified that he was not generally in favor of wage and price controls, but that he was in this case. See Transcript, page In truth, he appears to favor it in this case only as it applies to the victim's attorneys' fees, but not as it applies to the product manufacturer's attorneys' fees.

75 Danforth bill, § 103(a), Congressional Record-Senate S-5875 (May 13, 1986).

76 See § 203, Congressional Record, supra, Note 75, S-5876. In my judgment, these provisions are colossally cumbersome, absolutely unworkable and will expedite nothing. 77 Danforth bill, § 203(b)(6), Congressional Record, supra, Note 75 S-5876.

78 And to "promptly update during the course of the product manufacturer's investigation." 79 "Where practical", whatever that means. See § 203(b)(7).

80 For those of us who know the method of operation of insurance companies, this means that the plaintiff must bare both body and soul to the inquiring eyes of an army of insurance company investigators.

81 To an inquiring insurance adjustor, this means all medical records from the cradle to the grave.

82 An appropriate word indeed.

83 Health care providers compensated by manufacturers and liability insurance companies tend to realize upon which side their bread is buttered.

84 Only the claimant, but not the manufacturer is required to submit copies of expert opinions.

85 Product manufacturers always require that the testing be done of their own facility. 86 Section 308(b), Congressional Record, supra, Note 75, S-5879.

87 See Grimshaw v. Ford Motor Co., 119 Cal.App.3d 757, 174 Cal.Rptr. 348 (1981), a case in which the court concluded that Ford Motor Company had engaged in "a cost-benefit analysis balancing human lives against corporate profits" and had shown a "callous indifference to

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Coke refers to as a "wise distribution of power" in which "the judge and jury are a check upon each other",88 the trial judge has both the power and the duty to set aside or reduce 89 the amount of any verdict which the trial judge considers to be excessive.90 For those who are interested in learning the whole truth of the matter,91 there are no less than 21 recent Annotations 92 on the subject:

1. "Excessiveness or inadequacy of punitive damages awarded in personal injury or death cases", 35 ALR4th 441 (1985), which includes a collection of 39 appellate court decisions from 22 states and the District of Columbia in which various jury awards for punitive damages were reversed or reduced as being excessive.93 It is interesting to note that 38 of these 39 "huge and irrational" 94 punitive damages awards were for less than $50,000.95 It is also interesting to note that three of these cases were from Senator Kasten's home state of Wisconsin 96 and five were from Senator Danforth's home state of Missouri.97

2. "Excessiveness or adequacy of damages awarded for injury to trunk or torso, or internal injuries", 16 ALR4th 238 (1982).98

3. As to damage awards for particular diseases and conditions, 16 ALR4th 736 (1982).99

4. As to damage awards for injuries to sensory or speech organs, 16 ALR4th 1127 (1982).10

100

public safety." The court concluded that the evidence in that case "had a tendency in reason to prove that Ford's failure to correct the Pinto's fuel design system defects, despite knowledge of their existence, was deliberate and calculated." 174 Cal.Rptr. 368.

88 See quote from Lord Coke on page 21 at Footnote 58 above.

89 On motion for a new trial, the trial judge has the discretion to grant a conditional new trial or a new trial nisi unless the plaintiff agrees to remit [reduce] a portion of the verdict. The practical effect of this procedure is to grant the trial judge with discretionary power to reduce the verdict.

90 See 66 C.J.S., New Trial, § 76, page 241, which states: "As a general rule, the fact that the jury. have given excessive damages is ground for a new trial, and the trial court has both the power and the duty, where a new trial is sought on this ground, to determine whether the damages awarded to plaintiff are excessive so as to warrant a new trial." That would include all of the "huge and irrational courtroom damage verdicts we hear about almost daily" according to Senator Kasten. See Congressional Record-Senate S-5107 (April 30, 1986). One reason that we don't hear so much about discretionary reduction of verdicts by the trial judge is because that is not the stuff of which newspapers are sold. Another reason is that is does not suit the purposes of the liability insurance companies' propaganda campaign. They sometimes tell the truth, but seldom, if ever, the whole truth.

91 By definition, that would exclude the Administration's "working group" on "tort reform" and the liability insurance industry's propaganda team whose flagrantly distorted half-truth horror stories and concocted "hocus-pocus" statistics form the basis of the products liability reform hoax. On examination by Senator Hollings, Assistant Attorney General Willard, who "headed-up" the "working group", admitted that his statistics came from Jury Verdict Research, whose figures were "gathered from people who write in" and from "newspaper clippings". See Transcript of May 20, 1986, hearing, page He also claimed his figures were based on the Rand study, but their figures do not support his "hocus-pocus" statistics, either. See Footnote 28 on page 13 of my prepared Testimony for the May 20, 1986, hearing.

92 A collection of cases from various courts-of-record throughout the United States.

93 Section 8[a], 35 ALR4th 464-468.

94 A quote from Senator Kasten, Congressional Record, supra, Note 62, S-5107.

95 30 of 39 cases (77%) were for less than $25,000; 25 (64%) were less than $10,000; 17 (43%) were less than $5,000; and 5 (13%) were less than $1,000.

96 Myer v. Fronimades, 2 Wis.2d 89, 86 N.W.2d 25 (1957), punitive damages of $2,160 held excessive; Jones v. Fisher, 42 Wis.2d 209, 166 N.W.2d 175 (1965), $5,000 punitive damages award reduced to $1,000; and Meke v. Nickol, 56 Wis.2d 654, 203 N.W.2d 129 (1973), $47,000 punitive damages award reversed and remanded for new trial.

97 Punitive damages awards considered excessive by Missouri appellate courts included awards ranging between $500 and $10,000.

98 This annotation reviews 73 verdicts from 13 states which were reduced or reversed by the court as excessive. Only 1 of these 73 cases [Stambaugh v. International Harvester Co., 106 Ill.App.3d 1, 435 N.E.2d 729 (1982)] involved a jury verdict in excess of $1 million. In Stambaugh, a $7.5 million verdict was reduced to $650,000. 72 (98%) of the 73 verdicts were for less than $500,000; 53 (73%) were for less than $100,000; 44 (60%) were for less than $50,000; and 35 (48%) were for less than $25,000.

99 This annotation discusses 26 verdicts from 11 states which were reversed or reduced by the court as excessive. Only 5 (19%) were in excess of $100,000. Of the more than 275 appealed cases summarized in this annotation, only 3 involved jury verdicts in excess of $1 million and none of these 3 were in products cases (all three involved motor vehicle accidents).

100 This annotation summarizes reported cases from 16 states where verdicts were reduced or reversed by the court as excessive. Typical cases include the following: $7.5 million verdict reduced to $650,000, Stambaugh v. International Harvester Co., 106 Ill.App.3d 1, 435 N.E.2d 729 (1982); $2 million verdict reduced to $750,000, Sewar v. Gagliardi Brothers, 418 N.Y.S.2d 704

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