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I think that is something that our courts deal with regularly, anyway, and could deal with, if they had to, in this situation.

Senator McCONNELL. I disagree. I think as a practical matter, what you are going to promote here is even greater injustice, be cause what is going to happen is, that the jury is looking around for some way to make an injured plaintiff happy, are going to pick out the defendant without a limit and "sock it to him," and I think that is one of the strongest arguments I can think of—if the goal here is to provide equity and fairness across the board for the Nation's personal injury system. It seems to me that there is a very, very strong argument to be made for drawing some parameters beyond which courts and juries, even in State courts, may go in these kinds of cases. If what we are looking for is predictability, equity, and fairness throughout the system. And I think, Mr. Wil. lard, that is the flaw, and the problem with the product liability only approach to tort reform in America.

Mr. Chairman, I have no further questions at the moment.
Senator Hatch. Thank you, Senator.
We will turn to Senator Heflin.

OPENING STATEMENT OF SENATOR HOWELL T. HEFLIN Senator HEFLIN. Mr. Willard, I was a member of the Commerce Committee for, I believe, 6 years and I followed this legislation. In the Commerce Committee it must have been rewritten at least seven or eight times. There were all kinds of different approaches. At one time they even had the judge declaring punitive damages and the cause for which the punitive damages could be used.

I think it has a history of shoddiness in scholarship, in the draftsmanship, and in the concepts. As I look at the product, I see major constitutional problems with what came out of the Commerce Committee, and hopefully, those problems will be addressed, as well as the inconsistencies that exist in the legislation itself.

Frankly, the Judiciary Committee ought to be given some authority to rewrite this legislation since even the Department of Justice is now dissatisfied with the language involved in it.

But my major concern, my concern when I was on the Commerce Committee, and my concern still, today, is the issue of federalism.

I think I made a statement over there that every Federal cure turns out to be a Federal plague, and that the pendulum swings backward and forward.

I may be one of the few that still believes in States' rights that exist. But I was greatly elated on January 30, 1986, when I read the newspaper reports of the speech of the Attorney General of the United States, Hon. Edwin Meese, when he spoke to the Conservative Political Action Conference. At that time, he went into the issue of federalism. I have that speech before me and I just want to quote two or three items from it.

He is advocating that as a part of conservatism, there must be federalism, that it is bedrock. He says, “What we seek is not some old-fashioned notion of States' rights. Rather, we must seek to generate a belief in States' responsibilities and confidence in the States' ability to govern.'

He goes into it, he traces it, and he says, for example:

The toughest political problems deserve to have full and open public debate, whether it is the issue of abortion, pornography, aid to parochial schools. There is no constitutional, explicit reason, why the people within the several States may not deliberate over them and reach a consensual judgment.

And then he advocates, toward the end, he comes forward with, I think, a very succinct, timely, and important statement.

He says:

Frankly, my view is that we ought to restore power and authority whether the States are capable of handling it, or not. The reason for restoring federalism is not because the States have somehow now proven themselves under the watchful parental eye of Congress and the Supreme Court. Federalism must be restored because it is a basic constitutional principle. Under our Constitution we have a political obligation to allow the States to govern themselves, hopefully to govern themselves well, but to govern themselves in any event.

And he then said that: This leads to four basic propositions we need to keep in mind as we go forward in the years ahead. First, to paraphrase Mark Twain, the reports of the death of federalism have been greatly exaggerated. Second, if we are to protect our most important constitutional values, then federalism must be preserved. Third, with a little innovation and a little creativity, federalism can be revitalized. And fourth-as he is speaking to the Conservative Political Conference: "With your enthusiasms and efforts it is inevitable that Federalism will be revived, and ultimately will be protected and preserved."

Here today, the Department of Justice is critical of this legislation, they state their reasons, but their reasons invade federalism even more than the Commerce Committee bill.

Has the Attorney General personally reviewed this legislation and put his stamp of approval on this?

Mr. WILLARD. Yes, Senator. I have discussed it with him on a number of occasions.

Senator HEFLIN. Then the Attorney General of the United States speaks with a forked tongue, I suppose. I cannot understand how a historical and traditional matter such as the tort system of the United States has been vested in the past, exclusively within the jurisdiction of the several States, and yet you advocate “nailing additional nails in the coffin of federalism.'

Can you give me any explanation for the inconsistency between those words of the Attorney General and his approval of your position that you are advocating today?

Mr. WILLARD. I will try to do so very briefly, Senator. I could go on at some length and would be happy to provide as much detail as you would like.

In our view, the Constitution, and the values of federalism are not simply simpleminded States rights, but instead involve an allocation of responsibilities in the constitutional scheme, some to the National Government, some to the State governments.

One responsibility allocated to the National Government, specifically to Congress, is to promote interstate commerce. Our analysis of product liability law led us to believe that tort liability imposed by State courts was creating an excessive burden on interstate commerce.

A manufacturer in one State who makes a product cannot control where it is sold. Ultimately, products are sold throughout the country, and yet these people can be held liable under the standards of the States where the product is sold, or used, or caused an injury. This can, and does, have an effect of chilling commerce by forcing products off the market because of excessive liability. This is not something that a State, individually, can address. For example, a manufacturer in the State of Florida, cannot be protected from product liability by legislation passed by Florida, if the manufacturer's products are sold in other States.

For that reason, we believe that there is a justification for a limited kind of Federal legislation that would limit the amount of tort liability States can place on products in interstate commerce.

Now I realize the interstate commerce clause has been used to cover a multitude of sins, including making it illegal to grow wheat on your own farm for your own consumption. But in this case we think that the legislation we proposed is within what the commerce clause was originally intended to permit.

Senator HEFLIN. Well, I must say that your answer is no different from the answer that "knee-jerk liberals” have given for every Federal cure that has ever been advocated, or placed before this Congress; and I think if we could get a record, and if similar questions were asked, that the answers given would almost be parroting what you have said today—or perhaps you were parroting what was said to them at that time.

It goes back to the old concept of interstate commerce, and I think that somebody has even held that if anybody uses a restroom in a building in New York City, where the refuse floats into the waters, that somehow it affected what happened in California. So, the concept of the interpretation of interstate commerce is in need, but it is intriguing to me, that here we have a speech to a great conservative group-and I must say that at the time, I thought it was a courageous speech because it was given to those that were advocating the Federal cures for everything that he mentioned.

He did not get into the toilet thing, but I thought it was a courageous speech. However, I must say that I think that the Attorney General has his arm, and his hammer, and he is nailing additional nails in the coffin of federalism and States rights. That is all I have.

Senator McCONNELL (presiding]. Senator Simon.

OPENING STATEMENT OF SENATOR PAUL SIMON Senator Simon. Thank you, Mr. Chairman.

First, just a general observation. I happen to think that some type of Federal product liability law is desirable. However, I think any progress in this area is going to have to be incremental.

I think this bill is doomed to defeat, and we are just going to hear a lot of speeches about it. Though I don't foresee any action on this legislation, I believe we should have the will to move toward substantive change.

Second, you talk about your working group. What is this working group? Who are they?

Mr. WiLLARD. The Tort Policy Working Group was set up as an interdepartmental group under the Domestic Policy Council. It included representatives of about 10 Federal departments, or agencies, that participated in producing the report, which has been issued and publicly released in February of this year.

Senator Simon. And who did you feel you had an obligation to serve in that working group?

Mr. WILLARD. The working group was purely an internal deliberative group within the executive branch. It did not involve participants from outside. It was a policy formulation and recommendation group for the administration, and our report ultimately went to the Cabinet and the President.

Senator Simon. But you did not answer my question.
Mr. WILLARD. Well, you asked who was-

Senator SIMON. My question was, Whom did you feel obligated to serve? Were you just serving the administration, or were you-

Mr. WILLARD. That is correct, Senator. The President.

Senator SIMON. I was interested in your response to a question from Senator McConnell on data. One of the things that has struck me, as I have looked at this whole liability question, is the great difficulty in getting adequate data.

You say you had too much data. How carefully were you looking?

Mr. WILLARD. Well, what I tried to suggest is that there is a large amount of data out there about this problem, and I think the problem is not so much collecting new data-

Senator SIMON. Yes. I would agree that there is a large amount of data out there in 50 States, some of which collect it adequately, many of which do not collect it adequately.

Interestingly, Senator Javits, just about a decade ago, was working on this very question and said, “It's just tough to get adequate information.

For example, are you aware that some insurance companies, when they list their securities, list them at purchase price, and some list them at market price, giving vastly different kinds of information about what their status is?

Are you aware of that problem? Mr. WILLARD. I am aware of that issue, and the question of whether or not unrealized capital gains should be considered. One reason for the differences is that there are different regulatory standards for gathering data supplied by the different States. This is one reason why we think that the authorities that do the regulation are in the best position to gather the data, because they can develop what are the appropriate standards for gathering the data.

Senator SIMON. The United States is the only western industrialized country which does not have a national system of insurance regulation. I should say here that I am not an advocate of Federal regulation of our insurance industry. Don't you think we should consider gathering information on a national level so we know what we have? Why just leave it up to 50 States to gather, or not gather the data, and set their own standards?

Mr. WILLARD. Well, I think that there are bodies that do compile nationwide data on the performance of the insurance industry.

Senator SIMON. I am talking about insurance companies.

Mr. WILLARD. There are companies that compile and aggregate the data. The kinds of questions that I have seen raised about data really go more to interpretation than they do to the absence of raw information.

The question about whether you should recognize unrealized capital gains-

Senator SIMON. But the data that you are talking about is gathered by the insurance industry, is that correct?

Mr. WILLARD. The nationwide aggregation is. There are some independent companies that do it also, I think F.M. Best, and others.

Senator Simon. But do you think that the Federal Government maybe should be pulling together information, so we can know where we are in this whole area?

Mr. WILLARD. Well, as I said before, Senator, it is really hard to be against gathering information. I do not want to overstate my opposition. I do not think that it would be a terrible thing to gather the information. It is just that I do not think it would be terribly helpful, because the disputes that have occurred about this problem have dealt more with how you interpret the data, rather than what the raw data show.

Senator SIMON. OK. Then let me shift to one other thought, and then I will yield to my colleague from Delaware, who has slightly more seniority on this committee than I do.

When you get to discussing McCarran-Ferguson, you say while the working group did not review and takes no position on the continuing validity of the industry's antitrust immunity, it is readily obvious that the suggestion that allegedly excessive competition can be cured by even more competition is absurd.

What you are saying in this statement is that you did not review the information, you are taking no position, and then, in the same sentence, you take a position.

Now let me read from a speech given at the American Bar Association convention in New York by the Chairman of the FTC, Dan Oliver, on August 12, about 3 weeks ago. He says,

Trade restraints are not the only way the State thwarts competition. Congress, for example, has enacted various statutory exemptions to the general antitrust laws for certain special interests. We hear a great deal these days about an insurance crisis. Well, I wonder how much of the crisis would be solved by market forces, if entry into the insurance market were made easier. The McCarran-Ferguson Act largely exempts the business of insurance from the antitrust law. That exemption, together with State regulation that precludes entry into the insurance industry, make it less likely that the insurance crisis will go away. Perhaps the time has come for repeal of the McCarran-Ferguson Act.

This is the Chairman of the FTC.
Any observations about his comments before the ABA?

Mr. WILLARD. As a general matter, I do not think that the Department looks favorably on special industry exemptions from antitrust laws.

We have not been asked to comment on a specific piece of legislation dealing with the McCarran-Ferguson Act. If we are asked to do so we can comment in more detail because some of these issues are kind of complex.

As a general matter, though, we think there should be competition in the insurance industry.

The point I was trying to make in that footnote, which, I realize is somewhat bureaucratic in its wording, is that we think there already is a great deal of competition in the insurance industry, notwithstanding the exemption.

There are thousands of companies in the insurance business. The Antitrust Division has looked at the insurance industry and found it to be a very unconcentrated industry. I am not sure therefore,

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