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HOUSE PRODUCT LIABILITY BILL IS MEASURE REAGAN ADMINISTRATION CAN "WORK WITH," COMMERCE DEPARTMENT SECTY. BALDRIGE TESTIFIES AT MAY 5 HILL HEARING

Executive Summary

The product liability bill (HR 1115) sponsored by Rep. Richardson (D-N.M.) is legislation that the Reagan Administration can "work with," if not fully endorse, Commerce Department Secretary Baldrige testified at a May 5 hearing on product liability law reform before the House Commerce Subcommittee. Although Baldrige said he could endorse only an Administration proposal -- whose provisions, such as caps on pain and suffering awards, are considered unacceptable by a majority of Congress -- HR 1115 "comes closer to it than anything I've seen." The secretary noted that the Richardson bill provides a return to fault-based liability and modifies the doctrine of joint and several liability. "I don't know why we couldn't work with it and come up with something," he said. Baldrige added that "the time is really now" for product liability reform. "This is the fourth Congress that I know of that has been addressing product liability legislation, and we're still talking about it," he said. "It is the time for some action because we do need reform," particularly to provide relief for small companies. The subcommittee hearing did not focus on Richardson's bill; it addressed general issues concerning reform of product liability law. Subcommittee Chairman Florio (D-N.J.) reportedly has promised Richardson that he will schedule a second hearing before the end of May to consider HR 1115. Rep. Waxman (D-Calif.) said a complete and fair approach to product liability reform must explore compensation systems and alternative dispute resolution mechanisms and must consider regulation of the insurance industry. "Let's be creative as we explore solutions. I would like to examine the wisdom of alternative dispute resolution systems and compensation systems," Waxman said. "Let's also determine whether the system, both insurance and liability, works efficiently and expeditiously." Furthermore, "legislation that does not include regulation of the insurance industry would be incomplete." Waxman distinguished the liability insurance crisis from the product liability crisis and urged that the distinction be kept in mind when considering legislation to reform product liability law. "The fact that we see an insurance crisis does not mean that we face a product liability crisis," Waxman said. "Proving causation in complicated product liability cases can be extremely difficult, but establishing causation in those cases is a breeze compared to finding a link between product liability reform and insurance rates." Such a connection must be demonstrated, he added, "before we undertake extensive changes in the law." The California Democrat also advised against pursuing passage of legislation that does not address the concerns of consumer organizations. "Fair legislation means balanced legislation," Waxman said. "I could not support an approach that bars consumers from pursuing claims under state strict liability theories, yet leaves manufacturers free to continue lobbying states to impose caps on pain and suffering." Rep. Richardson responded that his bill is balanced and has bipartisan support and that his record is "equal" to Waxman's in terms of consumer rating. Consumer Federation of America Legislative Director Gene Kimmelman maintained that compliance with government standards should not be made a defense in product liability cases -- as it would be under HR 1115 -- because such standards represent a minimum. "When you go through the full regulatory process, our concern is that in most instances these are minimum safety standards. These are designed to be minimally adequate for the entire public and do not address individual safety circumstances and do not address everything that manufacturers and distributors ought to consider when they put a product on the market and when they distribute it," Kimmelman argued. Regulatory agency standards "really just set the bottom-line minimum that products must meet as a basic standard to be acceptable to the American public in general. In litigation you've got a specific case, specific examples. You may have warnings that are lacking; you may have particular promotional material for the product that makes the consumer believe that it can do even more than what any regulatory agency was considering. So it's a vastly different subject." American Bar Association member John Subak pointed out that ABA's House of Delegates has recommended detailed changes to improve the tort system. However, the proposals "should be implemented by the courts and by legislation at the state level," Subak said. The association opposes federal liability law reform. ABA recommends that pain and suffering awards "should be more uniform" but should not have caps imposed on them, Subak testified. In addition, punitive damages "should be limited" in scope and "should not be commonplace," he said. Furthermore, defendants should not be liable for repeated punitive damages for the same wrongful act. "The purpose of punitive damages is to punish, not to confiscate," he said. Joint and several liability should "apply only to economic losses in certain cases" -- as stipulated in HR 1115, Subak continued. "Defendants should not be held for someone else's share of any noneconomic loss when the defendant's responsibility is substantially disproportionate" to liability for the plaintiff's entire harm. He also maintained that legal fees "are too high in the aggregate" and that courts should be permitted to examine and adjust them if necessary. ABA's proposals are opposed by the Association of the Trial Lawyers of America, whose president Robert Habush testified against federal legislation to reform the tort system. Virginia State Supreme Court Justice Harry Carrico contended that federal product liability legislation would cause a particular problem in cases where a tort action includes a claim against a product, such as a complaint alleging malpractice by a physician and his use of a defective medical device. A new product liability law would "coexist with an unchanged system for all other claims in tort," Carrico said. A court would have to apply the federal law to the claim against the medical device and state rules to the malpractice claim. And the state and federal rules "will be diametrically opposed" in some states, he said. "We will not only have state courts interpreting and applying a mix of state and federal law in the same case, but we will have the lower federal courts, under diversity jurisdiction, interpreting and applying the same mix," Carrico maintained. "A legal thicket is inevitable and the burden of untangling it, if it can be untangled at all, will lie only with the Supreme Court of the U.S."
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