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PRODUCT LIABILITY BILL: SENATE CMTE. "TENTATIVELY" APPROVES COMPROMISE MEASURE WITH JOINT & SEVERAL LIABILITY AMENDMENT BASED ON CALIFORNIA REFERENDUM

Executive Summary

The Senate Commerce Cmte. gave "tentative" approval to a compromise product liability bill at a June 12 markup. Crafted by Chairman Danforth (R-Mo.), Consumer Subcmte. Chairman Kasten (R-Wis.), and Sen. Gorton (R-Wash.), the legislation passed by a 16-1 vote. After passing what the cmte. called the "core" provisions of the compromise package -- which will constitute an amendment in the nature of a substitute for Danforth's S 1999 -- it turned to other provisions that did not have as broad support among cmte. members. Such provisions will be individually considered as amendments in further markup. The next session is scheduled for June 19. Immediately following cmte. acceptance of the "core" proposal, Sen. Pressler (R-S.D.) introduced an amendment to modify the doctrine of joint and several liability. Based on the referen dum recently adopted as Proposition 51 in California, Pressler's amendment passed by 10-6 margin, with Sen. Riegle (D-Mich.) voting present. Under the amendment, liability for noneconomic damages, such as pain and suffering and punitive damages, "shall be several only and shall not be joint." Several liability denotes that "each defendant shall be liable only for the amount of noneconomic damages allocated to that defendant in direct proportion to that defendant's percentage of responsibility" for the harm, as determined by "the trier of fact," the provision states. For example, if a defendant is found to be 10% responsible for the injury, it can be liable for 100% of the noneconomic damages under current law but only 10% of those damages under the Pressler amendment. However, the amendment retains joint liability for economic damages; consequently, such a defendant could be liable for 100% of the plaintiff's loss of income, medical care, burial services, etc. Gorton, indicating that he had an alternative amendment, voted against Pressler's proposal. He characterized the amendment as an attempt to find a middle ground between current law's interest in "total recovery" for the injured party and interest in equity with regard to "the responsibility of the defendant." However, the joint and several liability standard in Pressler's amendment differs from the California law in that the cmte. bill applies only to litigation that "involves a claim alleging harm caused by a defective product" whereas the California rule applies to all tort cases, Gorton said. California changed "its joint and several rule as to all tort cases. We are not; we are changing joint and several rules as to a certain category of tort cases in 50 states," the senator pointed out. Consequently, most states will have two joint and several liability standards. A dual standard for joint and several liability "will add to the complexity "of product liability litigation, Gorton maintained. A plaintiff in a case with an "insolvent defendant" would have an "overwhelming" incentive to present a product liability case as a design defect case, he said. Gorton offered an example of a person injured while driving over a twisting roadway in a defective automobile made by a mfr. that is now bankrupt due to similar lawsuits. In such a case, Gorton argued, the bill would encourage the plaintiff to file a design defect claim against the municipality responsible for the road rather than against the car mfr. The bill includes uniform standards for awarding punitive damages. Punitive damages may be awarded to a plaintiff who establishes "by clear and convincing evidence" that the injury was caused by the defendant's "conscious, flagrant indifference to the safety of those persons who might be harmed by a product," the bill states. "A failure to exercise reasonable care in choosing among alternative designs, formulations, instructions, or warnings" does "not of itself" demonstrate such an indifference. Sen. Gore (D-Tenn.) made a motion to drop the second sentence of the provision. Gore argued that the first sentence provided a sufficiently limited standard for punitive damages but that the second sentence provided an overly restricted standard. The motion failed by a 12-5 vote. Cmte. aide David Zorensky contended that both sentences are needed "to distinguish between negligence . . . and punitive damages." Zorensky, who helped draft the compromise document, said: "You have to make a greater showing with respect to punitive damages" because they are awarded when the defendant's conduct "goes beyond mere negligence to . . . a conscious indifference to the safety of others." He defined clear and convincing evidence" as "more than that required under the 'preponderance of the evidence' [standard for civil claims] but less than that required for [the criminal standard of] 'proof beyond a reasonable doubt.'" The Pharmaceutical Mfrs. Assn. is seeking an amendment that would make compliance with federal standards -- such as FDA premarket approval, labeled instructions and warnings, and other regulations -- a defense against punitive damages. The amendment would not apply in cases where FDA approval was based on fraudulent or misrepresented data or lack of full reporting. Although the core agreement does not include such a govt. standards defense provision, the amendment is fourth on a list of "possible amendments on remaining issues," attached to a summary of the bill. A requirement for record retention is included in the agreement and provides for minimum fines of $1,000 for willful destruction or concealment of relevant materials. In addition, the bill's summary states, a party who so disposes of relevant materials will be "ordered to pay the other party's costs, including attorney's fees, incurred in proving the violation, and there shall be a rebuttable presumption that the facts to which the record related are adverse to the position of the party who committed the violation. If a party nonwillfully destroys relevant materials, the court may, in the interest of justice, establish a rebuttable presumption that the facts to which the record related are adverse to the position of the party who destroyed the materials." With regard to expedited settlement procedures, the bill establishes penalties for either party's rejection of a settlement offer. According to the summary, if a plaintiff or defendant "rejects such a settlement offer, and the final judgment is equal to or less favorable to that party than the offer, the party who rejects such an offer would be liable for the other party's attorney's fees and costs." If the defendant rejected such an offer, "these costs would be added to the judgment," the summary explains. If the plaintiff rejects such an offer, "these costs would be subtracted from the judgment, but in no case would the plaintiff be required to forfeit more than the amount of the judgment that exceeds his or her net economic loss; the reduction in judgment must come from that portion which is allocable to noneconomic loss and economic loss for which the plaintiff has received or will receive collateral benefits. Thus, if the plaintiff is awarded nothing, there is no penalty." Danforth indicated he may try to amend this provision because its penalties do not provide sufficient incentive for settlement. Time could be running out in this Congress for product liability legislation. Further amendments are expected to come from Kasten, who had previously introduced a bill drafted by the Administration. Reportedly, Kasten will offer amendments from that bill individually; consequently, a substantial amount of work remains in the Commerce Cmte. After a cmte. bill is formally introduced, it will be referred to the Judiciary and Labor & Human Resources Cmtes. before it can be reported to the Senate floor. Although Rep. Waxman has expressed interest in product liability legislation, he might not schedule subcmte. hearings until after a bill passes the Senate.
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