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are dramatic increases both in the number of cases filed and in the magnitude of awards to plaintiffs.

Could you comment on that.

Mr. ROPER. Well, I have two comments. First of all, I certainly would not want to generalize to the entire country based upon what happens in Cook County, IL.

We try to gather as much information as we get from every State court that collects and reports the data.

Second, I am not sure if the Institute for Civil Justice of the Rand Corp. will be testifying here during tomorrow's hearings, but I know I have heard information directly from Rand, that they are about to release a study this fall that is going to support the general finding of the National Center for State Courts, that there does not appear to be a litigation explosion.

Mr. HERMAN. Thank you very much. With the one statement, that some of the members of this committee may be submitting additional written questions, this committee stands in recess.

We will reconvene tomorrow morning at 9 o'clock to proceed with these hearings. Thank you.

[Whereupon, at 1:06 p.m., the committee was adjourned, subject to the call of the Chair.]

PRODUCT LIABILITY REFORM ACTS. 2760

WEDNESDAY, SEPTEMBER 10, 1986

U.S. SENATE,
COMMITTEE ON THE JUDICIARY,

Washington, DC. The committee met, pursuant to notice, at 9:07 a.m., in room SD226, Dirksen Senate Office Building, Hon. Strom Thurmond (chairman) presiding

Present: Senators Broyhill, McConnell, Heflin, Grassley, Simon, and Specter.

Staff present: Mike Regan, counsel; Lawrence R. Herman, chief counsel (Subcommittee on Courts); and Christopher Dunn, minority counsel.

OPENING STATEMENT OF SENATOR JAMES T. BROYHILL Senator BROYHILL (presiding]. The committee will come to order.

The committee is holding a hearing on S. 2760. We are delighted to hear from the distinguished Senator from Missouri, Senator Danforth, who is the chairman of the Commerce, Science, and Transportation Committee and whose committee has reported S. 2760 and has original jurisdiction over this legislation. We are delighted to have you come and testify this morning. We will be delighted to have your testimony inserted in the record and you may summarize. [The prepared statement of Senator Thurmond follows:)

PREPARED STATEMENT OF CHAIRMAN STROM THURMOND The Senate Judiciary Committee today considers S. 2760, the Product Liability Reform Act, a bill drafted by the Senate Commerce Committee which provides for a uniform Federal product liability law. This legislation represents months of efforts by the Commerce Committee to write a consensus bill which could be considered by the full Senate. Despite the good faith efforts of members of both the Commerce and Judiciary Committees, we were unable to obtain a sequential referral of S. 2760. Regardless, the members of the Judiciary Committee believe it is appropriate that the committee carefully review legislation which affects standards of liability and civil procedure in tort actions. Therefore, the committee is holding these two days of hearings, with an impressive witness list, to examine S. 2760 in detail.

Tort reform legislation-the need for it and, if there is a need, the exact shape it should take-has been a hotly debated topic of late. In the last decade, we have witnessed an erosion of the traditional concepts of fault-based liability, which have been gradually replaced by no-fault and strict liability theories. These developments have significantly increased the number of lawsuits that are clogging our court system and have contributed to the dramatic increase in the number and size of monetary awards.

While the underlying causes of these developments may be debatable, no one disputes the dramatic impact that expanded tort liability has on our lives. Liability, or the fear of liability, affects the price and types of products we buy, the manner in which we conduct business, the price and availability of insurance, the permissible uses of our land, the health care we receive, and even the way we care for our children.

This committee has examined liability questions in earlier Congresses including the personal liability dilemma facing certain Government employees and the indemnification and the reduction of liability of Government contractors. More recently, this committee has examined the lack of availability of insurance for municipalities and the underlying liability schemes of the Superfund Program advanced by the administration. The issues are complex and broad and deserve special attention.

We have some excellent witnesses over the two days of hearings who will help this committee focus squarely on the key issues raised in the Product Liability Reform Act. I look forward to receiving and reviewing your testimony.

STATEMENT OF HON. JOHN DANFORTH, A U.S. SENATOR FROM

THE STATE OF MISSOURI Senator DANFORTH. Thank you, Mr. Chairman. I am pleased to be here. I am delighted that the Judiciary Committee is addressing the question of product liability. The Commerce Committee has addressed this now for a number of years. We have attempted to mark up at least a couple of bills. We finally reported out S. 2760 a couple of months ago. I have been asked a number of times this morning since I came into the room what the prospect for action is. I know that Senator Dole would like to bring this up on the floor. There is at least some chance that we will not be able to get the bill enacted this year. And should it go over until next year, Mr. Chairman, I would hope that you would be a member of the Commerce Committee at that time and then you would help participate in the activity.

Mr. Chairman, my understanding of the hearing yesterday in the Judiciary Committee is that one or two members of the Judiciary Committee expressed some puzzlement as to why the Congress should get into this business of product liability reform. They felt that maybe this should be a matter that is left to the States. Even in S. 2760, many questions of tort reform are left to the States.

I think the answer to the question as to why we should refrain from doing nothing, why we should be addressing the question at all is that if you ask anybody who has gone through this system, and if you ask people in business what are the problems you see, they will bend your ear forever.

A couple of months ago there was a meeting here in Washington of the small business people, a White House Conference on Small Business. The No. 1 concern that they expressed was about product liability. They are demanding that something be done, that Con

There is evidence that the costs of litigation, including attorneys fees, now run between $15 and $19 billion a year. If that is the case, then the amount that we are paying to the civil justice system, the amount that we are paying for lawyers in product liability cases is exceeding what plaintiffs get.

Now, some people say, well, if we want to get into this area, if there is going to be any kind of restraint on recovery, why, that is not compassionate, it is not compassionate; if somebody has undergone a serious injury to in any way place any restriction on what the recovery can be.

Mr. Chairman, I would suggest that the present system is not very compassionate. I don't think it is very compassionate if somebody who is seriously injured can wait 5 years before getting any

gress act.

relief at all. I do not think that it is very compassionate for every incentive in the system to be for delay. I do not think that it is very compassionate for the costs of litigation and for the costs of this unworkable system to be greater than the compensation provided to those injured by defective products, and for the costs which we have now to be passed on to the consumer in higher prices.

I do not think it is compassionate. I think it is a scandal and I think where this kind of scandal exists in our country, Congress should be attentive to it, and if it is possible Congress should get to work on it and should reform it.

Mr. Chairman, the bill that was reported by the Commerce Committee is a comprehensive piece of legislation. It is also a very controversial piece of legislation that was finally reported out of the committee by a vote of 9 to 7.

We could have had a bigger vote. We could have had a bigger margin to report that bill out of committee, but I did not want to report out a blank. I did not want to report out a bill that just pr tends to address the question of product liability. It seemed to me that if we are going to take action it should be more than just putting out press releases and claiming that we have taken action. It should be something that is effective.

It has seemed to us in the Commerce Committee, at least to a majority of us on the Commerce Committee, that any meaningful system of product liability reform must include some mechanism or some system of incentives to settle cases expeditiously short of fullscale litigation.

The scandal is that the cases drag on forever. The scandal is that the more serious the injury, the longer the case is liable to drag out and the more the plaintiff is going to be inclined to settle for almost anything because the plaintiff's expenses are high and he must meet those expenses. So the whole theory of the bill that we reported out, at least the central theory of the bill that we reported out, is to develop a system of incentives so that both plaintiffs and defendants feel that it is worth their while to settle litigation, to settle claims short of full-scale litigation, short of going through the whole court system.

And that is the reason we develop a system of caps in the Commerce Committee bill. What we said is that if the defendant refuses a settlement offer more favorable than the judgment the defendant should pay the attorney fees for the plaintiff. If the defendant makes an offer of settlement and the offer is for the full economic damages of the plaintiffs, plus a limited amount for pain and suffering, then there should be some cap on the exposure of the defendant to these wild verdicts that could otherwise go against the defendant.

I do not know of any other incentive system that makes sense other than an economic incentive system. I do not know of any way to encourage plaintiffs and defendants to settle short of full-blown litigation, unless there is some economic motive for them to do that. That was the whole thrust of this legislation.

We debated various alternatives to a cap system. We had various alternatives drafted. Most of them proved highly complicated. People could not understand them. They were controversial, and finally we turned to caps. I recall at one time, I made a luncheon speech on the subject of product liability, and at the end of the speech, at the elevator, one of the people present said if you do not have caps you do not have anything in the bill. So we put caps in this bill and I want to make it clear, Mr. Chairman, that the point of putting caps in the bill was not to be hard-hearted or mean-spirited, but, rather, to get these cases disposed of, get these cases settled.

I have always believed that there should be a community of interest between consumers and between manufacturers for meaningful product liability reform. I know that the trial lawyers have an interest in the existing system. Of course they do. You know, if they are getting 50 percent of the total amount that is paid out just for keeping the matter alive and keeping the ball in play forever, of course they have a vested interest in the status quo.

But it seems to me for the rest of the country, for consumers, for manufacturers, for people who have been injured, there should be a common interest for making sure that reasonable recovery for actual losses is paid expeditiously, and that is the point of the bill that the Commerce Committee reported.

Just one other point, Mr. Chairman: I have repeatedly throughout the last year and a half said that nothing is etched in stone as far as I am concerned. I am very flexible in entertaining other pro posals, particularly to provide incentives for settlement. I have communicated with various people, including Senator Inouye and Senator Stevens on this matter. I have asked anybody who was interested to come forth with any suggestion for incentives for settle ment that they might have.

There is nothing inflexible as far as I am concerned about the Commerce Committee's position on this matter. However, having said that, I have never seen a meaningful, workable incentive system for settlement that did not contain caps. So if anybody on this committee has a better idea, great, I am delighted to hear it.

Thank you very much for allowing me to testify.

Senator BROYHILL. Thank you very much for your testimony and, as one who has worked very hard over the years to formulate legis lation to remedy the problems that you have outlined, I want to commend you for the good work that you have done. The bill is not perfect, but, at least, it is a considerable giant step forward from where we have been. We have been debating this issue too long. and it is time to start the legislative wheels rolling. At this time I will recognize the Senator from Kentucky.

OPENING STATEMENT OF SENATOR MITCH MCCONNELL Senator McCONNELL. Thank you, Mr. Chairman.

Senator Danforth, I want to add my commendation to that of Senator Broyhill for all of your work on this issue over the years. I might share with you a disturbing observation made by our colleagues, Senator Biden and Senator Metzenbaum, at the hearing yesterday that this kind of legislation was going nowhere this year, and they said that with great certainty, so I suspect that whatever bill is brought to the floor is going to encounter considerable diffi

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