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ing that they can adopt uniformity, it is in the history of the adoption of the uniform commercial code.
As I read this particular bill, and certainly some of the substitutes, the shining example of article II of the uniform commercial code, which deals with safety, with warranties, with implied warranty, with express warranty, with the statute of limitations pertaining to warranties, would be eliminated to some extent, either by the substitutes or by the bill itself in some aspects, which really is saying that States who did adopt a uniform approach, who were successful, whom we praise and whom you have praised, those efforts somehow or other were wrong.
I think there is a great deal of tort reform needed, but I think it ought to be done at the State level. And if I could cite one shining example of how it can be done, I would point to the adoption of the UCC. That you point it out, too, clearly points out that the States have done it, they have made uniform efforts and that is the path to follow.
If the amount of money that has been expended in lobbying this bill had been expended toward a UCC approach to uniform products liability, I think it would already be passed.
Senator McCONNELL. If the Senator from Alabama would yield
Senator KASTEN. As far as we can determine in our committee, there is a key difference between the uniform commercial code and the opportunity or the likelihood of the States adopting a uniform product liability code, and that is that there is a huge amount of money that trial lawyers are making as a result of the present system in tort law. The contingency fees and the other huge amounts of money that just was not there in contract law, therefore
Senator HEFLIN. Do you mean to tell me that the commercial lawyers of the country, the incomes of the large corporate firms do not exceed the total income of the trial lawyers?
Senator KASTEN. Well
Senator HEFLIN. I would have to see some strong statistics to believe otherwise.
Senator KASTEN. I do not have any statistics
Senator HEFLIN. I would say that probably the Washington lobbyists who are also lawyers have total income around here of $400 or $500 an hour. Their incomes probably exceeds that of the trial lawyers of the D.C. area.
Senator KASTEN. As far as we can determine, in 1979, when the Carter administration had a Uniform Product Liability Act that they sent out to the various States, they developed it here, not unlike the uniform commercial code, they sent it out to the various States hoping that it would be adopted State by State by State.
At that point, an unprecedented lobbying effort came in opposition to the Uniform Product Liability Act State by State by State, primarily by trial lawyers through a very, very heavy organized opposition. In some States they testified- Pennsylvania is a good example—they testified “we don't want a Pennsylvania law, what we need is a Federal law, so if you Pennsylvania legislators think you are going to solve the problem here in Pennsylvania, you are not, we're against the Pennsylvania law,” they testified in Pennsylvania, "we're for a Federal law,” said the trial lawyers testifying in Pennsylvania on the adoption of the uniform product liability code in Pennsylvania for Pennsylvania.
Now, I would have preferred, frankly, that we could have done it State by State by State, as we did with the uniform commercial code.
Now, I looked recently—you might have seen the article in the New York Times the other day of the special interest groups that contribute to campaigns, and trial lawyers were right up there, I think No. 1 or No. 3 or No. 4 they had the realtors, two or three unions, and then the trial lawyers. The fact is that an awful lot of State legislators are former trial lawyers and an awful lot of legislators here are trial lawyers, and they have a very effective, tough, hard-working lobby and they lobbied against product liability State by State by State, and they won. Roughly half the States did nothing, the other half of the States adopted something, but not one
ate adopted, not one state adopted the exact uniform law that the Carter administration was hoping would be adopted nationwide.
So we have the continuing patchwork of law which works in the favor of those who make their money on the transaction costs in this area, and they are doing well and they are lobbying like crazy, and they are our opposition.
Senator HEFLIN. Well, I believe also I could add up about 15 on the other side and put the total amount of money that has been spent in regards to that, but that is not my concern. My basic concern is the ultimate, which this will mean the complete and ultimate death of federalism and which is my major concern.
Thank you, sir.
Senator BROYHILL. The Senator from Kentucky has another comment?
Senator McCONNELL. I will pass. Thank you.
Senator BROYHILL. Thank you. I would like to make one clarification. As I understand what the Senator from Wisconsin said, his amendment would only override State law with respect to the area of liability for defects where a manufacturer could not have known about or the liability for harm due to the unauthorized alteration or misuse of a product. Is that correct?
Senator KASTEN. That is correct, and that is the Kasten-Lugar amendment.
Senator BROYHILL. Thank you very much for your testimony. And thank you for your leadership in this area.
Senator KASTEN. Thank you very much.
Senator BROYHILL. At this time the Chair would ask the panel of witnesses to come forward: Mr. Robert Habush, of the American Trial Lawyers Association, Mr. John Scott, representing Dickinson, Wright, Moon, Van Dusen and Freeman, and Mr. Kendall Few, of Few and Glenn.
We are delighted to welcome you gentlemen to the committee this morning. We are glad to have your testimony. As with past practice, we will be glad to include your testimony in the record, let you summarize and then perhaps respond to some questions that the members of the committee have.
At this time I would like to recognize Mr. Robert Habush, of the American Trial Lawyers Association. PANEL CONSISTING OF ROBERT J. HABUSH, PRESIDENT, ASSO.
CIATION OF TRIAL LAWYERS OF AMERICA; JOHN E.S. SCOTT, DICKINSON, WRIGHT, MOON, VAN DUSEN & FREEMAN; AND KENDALL FEW, FEW & GLENN
Mr. HABUSH. Thank you, Mr. Chairman. It is an honor to be here. I am Bob Habush. I am the president of the Association of Trial Lawyers of America. I represent 70,000 men and women in the United States and in Canada.
I think the Chair may recognize some differences of thought on this subject from the previous witness from Wisconsin, since I am from Milwaukee, in Senator Kasten's State.
I have filed a paper with the committee and ask that the committee, if they have time, to refer to it.
It has been an interesting year for me so far. Lawyer-bashing has replaced Trivial Pursuit as the Nation's favorite pastime, and I think it comes as no shock to the committee members that the Association of Trial Lawyers of America appear against S. 2760.
I think, although my self-interest is evident and obvious, we should also keep in mind that we can understand how businesses and corporations and other entities would like to not be sued and would like to curtail their exposure to lawsuits. But I think it is a mistake, Mr. Chairman, to cast this dispute as one of trial lawyers versus the business community.
I think it is important for the committee and the Senate to keep in mind that there is a coalition of opposition to product liability bills that have been proposed, made up of the consumer organizations of America, and a group representing 45 million consumersand you will hear from the consumer representatives later-and also organized labor. Unfortunately, the victim groups have no other lobby other than yourselves and us and the consumer groups and are unable to participate in the kind of phone-a-thon that occurred this week.
Let me tell you, since you are used to hearing what trial lawyers do not like and what trials lawyers are opposed to, what this trial lawyer is in favor of. I am opposed to frivolous lawsuits and frivolous defenses and I am in favor of strong sanctions against lawyers who continue this practice.
I am opposed to excessive plaintiff's fees and defense fees, and I am in favor of condemnation of attorneys who engage in this practice.
I am in favor of lowering transaction costs in litigation. I am in favor of alternative dispute resolution methods which can get payments to the consumer and to individuals if that method is voluntary and contains no restrictions.
And I must tell you, Mr. Chairman, that we lawyers share some of the blame with the media for the perception in America that this is a runaway, litigious society, with juries running amok, for my members and myself have been quick in recent years to see that the successes that we have had were publicized when in fact But I think it is important to ask yourself the question, has everybody in America suddenly become a bad risk? Because of the pressure that you are facing, consider the unreality of what has been going on.
When products liability legislation first had its start in the midseventies, there was a price problem and availability problem, but in the late seventies and the early eighties, when product liability legislation was proposed, the hallmark of the legislation was uniformity. There was no question or any suggestions that it was too hard to get or high priced. That was because insurance companies were making money, they were lowering rates, and the product was available.
It has been only since the granddaddy insurance crisis of 1986 occurred that we have had the suggestion that it is products liability cases have caused the insurance crisis and that any legislation on this subject is going to cure it.
Let me suggest to you, Mr. Chairman, in all respect, that this is not true. Prof. Joseph Page, of Georgetown School of Law, testified in March of 1985 before the Commerce Committee:
There is no reason to believe that the tort system contributed at all to the decrease of product liability insurance premiums at the end of the last decade or to the increases which may currently be taking place. No correlation in the slightest exists between expansions or contractions of tort doctrine during those periods and the level of premiums. The same may be said with respect to the size of jury awards and settlements.
I do not think that anyone who has been following the studies and the accounts of this insurance crisis should have any question left in their mind that the insurance crisis was cause by the insurance companies.
The Consumer Reports, which is a magazine put out by a middleof-the-road consumer organization, has 3 million circulation, in August of 1986 said it best: "The Manufactured Crisis: Liability insurance companies have created a crisis and dumped it on you."
Mr. Chairman, I submit that this is not a plaintiffs' trial lawyer magazine and the article pretty clearly establishes where the fault lies.
In an editorial, Saturday, August 30, 1986, the Chicago SunTimes' headline is, "What Liability Crisis?" and concludes and says, “The facts underscore the major point: Don't undertake major reforms that entail the loss of important individual rights until it is demonstrated that changes are absolutely necessary. They weren't."
The National Association of State Attorneys General studied this problem and concluded that it was the insurance industry that caused the unavailability and increase of insurance costs.
The Consumer Federation of America studied this question and determined that jury verdicts have not increased any faster than the inflation rate, including products liability verdicts.
And Mr. Herman, who is the chief executive of the Jury Verdict Research, the source for that insidious $1.8 million average of products liability which has been discredited and disputed repeatedly but is consistently quoted by Assistant Attorney General Willard, says:
The problem is not that jurors are out of control or, with exceptions, make ridiculous awards, but the problem is the effect that newspaper reports of very high verdicts, which may or may not be justified by the facts, have upon the public, the lawyers, and the insurance carriers.
Mr. Chairman, the Rand Study which just came out concluded that the entire civil justice system in this country costs between $28 and $35 billion a year. Mr. Chairman, we spend $40 billion a year on tobacco and $60 billion a year on alcohol in this country.
Let me suggest, Mr. Chairman, that the bill proposed does not answer the problem. The cap is a one-way street. It penalizes the most severely injured. It tells the injured plaintiffs that if you want to go ahead and do not accept $100,000 plus your net economic loss, you can try the case for $150,000 more. If the manufacturer of a defective product wants to be arbitrary, they get slapped on the wrist with a $100,000 penalty for lawyers fees which has a substantial loophole, that if it is determined to be a complicated case, that penalty does not even evolve.
Worse than that, the most severely injured and the most severely hurt are penalized by this particular cap. The joint and several provision will in my opinion of 25 years of practice reduce settlements. And although I respect Senator Danforth's desire to increase settlements, the elimination of joint and several liability will have the exact opposite effect.
It is important to remember that anyone who is included in a judgment, if sued separately, would have been found liable. So even a person who is found 20 percent negligent has to be a substantial factor in producing the damages and the injuries.
The provision of collateral source, Mr. Chairman, transfers the cost of defective products to third-party carriers and accident carriers and health carriers and workmen's compensation carriers. The belief that under the “collateral source rule” that people get double recovery is crazy. Subrogation clauses and workmen's compensation repayment all over the country prevent people from getting double recovery.
The suggestion that punitive damages cannot be awarded if the FDA and the FAA pass muster on a product also is a bad provision. I only remind the Chairman and the committee that the FAA approved the Beechcraft Bonanza that had an annoying characteristic of having its tail fall off while in flight. This was a plane that had been determined airworthy by the FAA and which has since been determined to have a negligent design.
In the early sixties, a drug company put out a product called Quadrigen, which was a childhood vaccine shot approved by the FDA and which was withdrawn some years later, after damaging thousands of youngsters in this country. And I speak of that with personal knowledge since a close relative of mine was one of those victims.
Mr. Chairman, the withdrawal of asbestos from the market and dioxin from the market, the withdrawal of Dalkon Shields and Rely Tampons, the withdrawal of and the change of Pintotype gas tanks, the change in the Drano cans and the Liquid Plumber cans, and the removal from the market of children's cotton pajamas which burned up little children in several seconds, was the result of litigation. And I respectfully suggest to this committee and to