A proposed new federal products liability bill negotiated by the White House, Senator Jay Rockefeller (D-WV), and Senator Slade Gorton (R-WA) would dictate for the first time in U.S. history broad federal products liability standards to the courts in all 50 states. These standards would weaken the rights of innocent consumers and workers who are wrongfully injured by defective and dangerous products. The proposal would create a framework, easily amended by future Congresses, that could result in even worse damage to the civil justice system and the people it is designed to protect.
Although this latest proposal is touted by its supporters as a reasonable compromise, nothing could be further from the truth. Like every other federal products liability bill introduced in Congress over the past two decades, this proposal will limit access to the courtroom for millions of Americans killed or injured by unsafe products, including guns, children's toys, machine tools, automobiles and asbestos. If enacted, corporations that recklessly manufacture and distribute these and other products will no longer have as significant a financial incentive to make and sell safer products and, as a result, the important deterrent potential of the civil justice system will be substantially weakened. Further, the corporate proponents of eliminating consumers' rights have made it clear that they support this legislation primarily because they believe, once Congress has broadly preempted state products liability standards, it will be easy to build upon the federal framework this proposal would erect.
The Rockefeller-Gorton proposal offers nothing for injured consumers and workers and their families. Its provisions would weaken the rights of innocent people who are wrongfully harmed by defective and dangerous products. Each section has specific industry proponents who are lobbying for the special protections the bill would provide to them. Major concerns with the Rockefeller-Gorton proposal include the following areas:
Business Exemption (Sec. 102(a)(2)(A)). The complete unfairness of this legislation to consumers is laid bare by the bill's special exemption for lawsuits filed by businesses for any commercial loss suffered as a result of defective products. In other words, the cap on punitive damages and other limitations on recovery would apply to injured consumers but not to businesses whose only harm is economic.
A primary argument given by those who argue for preemptive federal products liability legislation for its enactment is to curb "excessive" products liability litigation and punitive damage awards. But business-to-business lawsuits pose a much greater litigation "burden" on corporations advocating this legislation than do product liability suits. Eleven percent of new civil case filings in general jurisdiction state courts are contract cases alone, typically between businesses. This is over 10 times as many lawsuits as are filed by injured consumers in products liability and medical malpractice actions, combined. Almost half of all federal court cases are businesses suing each other, according to the Wall Street Journal. And 47% of all punitive damage awards are in business-to-business suits, whereas only 4.4% of such awards are assessed in products liability cases. Yet the proposed Rockefeller-Gorton legislation, while restricting consumers' access to the civil justice system, would leave corporations with unfettered use of the courts, including full rights to obtain compensation and punitive damages for their commercial losses from defective products under state, not federal, law.
One-Way Preemption. Proponents of this bill say that it would standardize laws across 50 states. However, in several key areas, the bill would not standardize the law but would only preempt state laws that are more pro-consumer than the federal bill. For example, the cap on punitive damages for smaller businesses (sec. 110(b)) overrides state laws where larger punitive damages are allowed; it leaves in place state laws that do not allow punitive damages or that cap punitive damages at an amount lower than the federal legislation would require.
This one-way preemption makes clear that the intent of this legislation is not uniformity. Rather, the proposal is carefully crafted to provide the most protection for the industries lobbying for it, and the least for those who are injured. This one-way approach contradicts President Clinton's message upon vetoing similar legislation in 1996. At that time, the President said that one-way preemption "peculiarly disadvantages consumers . . . I cannot accept, absent compelling reasons, such a one-way street of federalism." The compelling justification -- indeed, any justification -- for one-way preemption has yet to be provided.
Cap on Punitive Damages (Sec. 110(b)). Punitive damage caps completely undermine the central and historic purpose of punitive damages: imposition of an amount of damages sufficient to deter and punish reckless and egregious misconduct. The Rockefeller-Gorton bill would establish a punitive damages cap of $250,000 or two times compensatory damages, whichever is less, for corporations with fewer than 25 full-time employees and annual revenues of $5 million or less. Yet, the fact a business is small does not mean that its products can not cause a great deal of harm. Many businesses with fewer than 25 employees produce products that threaten the public's health and safety. For example, a 1995 New York Times article revealed that some airlines use fake replacement parts bought from "scrap yard dealers" -- companies that could be covered by this cap. Fake Replacement Parts Often Used on Airliners: One Fatal Crash is Said to Have Resulted, New York Times (May 5, 1995). The Consumer Federation of America conducted a review of recent Consumer Product Safety Commission (CPSC) press releases and found that several companies with fewer than 25 employees had been fined or cited for failing to conform with federal mandatory safety standards or failed to recall a product alleged to contain defects. Many of these products were toys, fireworks or baby products -- underscoring the impact this provision will have on the health and safety of children.
One such example involves the company Toy Wonders, a company with only 10 employees and annual sales of less than $500,000, which, according to the CPSC, illegally imported 36,693 toys containing small parts despite knowledge that the toys presented a choking and aspiration hazard to young children. The CPSC assessed a fine of $75,000 against the company. However, under the small business exemption, in a civil case a parent of a child injured or killed by a Toy Wonders product could seek, at most, $250,000, no matter how outrageous their conduct.
According to the Violence Policy Center, small companies that could be covered by this punitive damages cap also include typical manufacturers of Saturday Night Special guns or "junk guns"-- cheap, concealable, low-quality handguns, many of which do not meet the minimum federal design and safety standards required of imported handguns. These safety standards do not apply to domestically manufactured handguns. As a result, the tort system provides the only regulation of domestic "junk gun" manufacturers. The Rockefeller-Gorton bill would strip away much of this oversight and deterrence where the gun manufacturer is a smaller company.
One easily foreseeable consequence of the punitive damage cap for small businesses is that manufacturers will set up small companies to do their risky manufacturing in order to qualify for the small business cap. This type of scheme is child's play for corporate lawyers to arrange. In addition, under the latest changes to the bill, the time for determining whether a company qualifies as a small business is at the time of suit, not at the time the defective or dangerous product was actually made. This allows for even more manipulation of the law, as companies can downsize or sell off revenue generating assets after their products have caused harm as a way to avoid full punitive damage awards -- much like Union Carbide attempted to do after the Bhopal chemical disaster.
New Punitive Damages Causation Requirement Protecting Large & Small Companies (Sec. 110(a)). The bill also establishes a new federal standard for awarding punitive damages in all products liability cases covered by the bill -- not "just" cases involving small companies. The deal places a significant new evidentiary burden on plaintiffs seeking punitive damages; depending on how it is interpreted by the courts, this new standard could be a backdoor way of limiting -- or in some cases, eliminating -- punitive damage awards against corporations large and small. This massive preemption of state punitive damages law is unwarranted and unprecedented -- and could have substantial ramifications that may (or may not) be unintended.
The legislation would wipe out all existing state punitive damages standards in products cases and mandate that punitive damages may only be awarded if the plaintiff shows by clear and convincing evidence that the harm was the result of the defendant's conscious, flagrant indifference to the safety of others. All of these evidentiary tests for punitive damages would wipe out state standards in products cases, but one new test is particularly troubling.
Based on our research, only one state in the country -- New Jersey -- has a statute that requires plaintiffs to show a cause and effect relationship between the defendant's egregious conduct and the injury to the plaintiff. The provision in the deal to require plaintiffs to show by "clear and convincing" evidence their injury is "the result of" defendants flagrant indifference imposes this new punitive damages requirement on every state in the country. If this language is interpreted strictly by the courts, it could be tantamount to a bar on punitive damages awards in cases where it is not possible to show a direct causal link between the defendant's egregious behavior and the plaintiff's individual injury.
For example, in an automobile defect case, suppose the plaintiffs seek punitive damages against the automobile manufacturer because the company covered up studies showing that the vehicle was dangerous and lobbied members of Congress to keep federal regulators at bay. The jury might be outraged at evidence that the car maker covered up a defect and acted in an underhanded way to avoid regulation, but depending on the circumstances, it might be impossible for the plaintiffs to prove by clear and convincing evidence that the company's actions directly resulted in the plaintiff's particular, individual injury, even if the company's behavior is clearly relevant to the events surrounding the plaintiff's injury. Based on our research, this is a new, additional requirement for plaintiffs seeking punitive damages currently exists in only one case.
As added insurance that a tough causation requirement for punitive damages be the effect of this federal intervention, industry groups and others had proposed to the Clinton administration that the language in this section be modified to require that a plaintiff establish by clear and convincing evidence that a defendant's conduct was the "proximate cause" of the injury. The administration rejected this proposed change, but the significance of the difference between the two versions is unclear. In a memo from a lawyer representing the corporate promoters of the bill, the "proximate cause" amendment is characterized as a "slight modification" of the language presently in the bill; the memo argued the change was needed to "utilize traditional tort language that courts would understand." While it would be hoped that, should this bill ever become law, judges would not set the causation bar impossibly high for plaintiffs seeking punitive damages, that result is clearly what both big and small businesses will push for in the courts.
Again, this is an unprecedented preemption of state law standards that would apply in all products liability cases covered by this bill. This provision alone dispels the myths that this legislation is narrow, carefully crafted, and does not significantly disturb state tort law.
Statute of Repose for Workplace Injuries (Sec. 107). The bill provides a statute of repose for durable goods if there is an applicable workers' compensation law that covers the product-related accident. The statute of repose completely cuts off a manufacturer's liability for a defective product after a certain number of years, in this case 18 years. The statute of repose overrides many states' laws that allow injured workers to sue manufacturers of products responsible for causing workplace injuries to recover full damages for the harm caused by the defective product.
Under this provision, workers injured by defective products, including those built to last much longer than 18 years, like workplace elevators and industrial machinery, are prevented from recovering any compensation from manufacturers of defective products over 18 years old if the worker is covered by a state workers' compensation law. (This section excludes commercial passenger transportation vehicles.) Workers' compensation laws allow employees hurt on the job to get only partial compensation for their injuries and lost wages. For example, many laws provide workers with only a couple years of disability payments for a lifetime injury, and prohibit compensation for non-economic damages, such as for loss of fertility, loss of a limb or permanent disfigurement. The employer cannot be sued by the worker for any additional amount. That is why most state laws allow injured workers to sue responsible third-parties including manufacturers of products responsible for causing workplace injuries. That way, workers may recover full damages (compensatory and punitive) for their injuries in cases when someone other than the employer was at fault.
This statute of repose provision in the Rockefeller-Gorton bill changes this balance for no justifiable reason. It discriminates against workers. If a consumer is injured by the same product that injured the worker, the consumer could still sue the manufacturer and receive full compensation plus punitive damages, since their injuries would not be covered by workers' compensation and hence not barred by the federal statute of repose. Even employers would be able to sue a manufacturer of a defective product covered by the statute of repose to recover commercial losses due to the need to replace the product -- and perhaps replace the injured worker. It is only workers who may not sue manufacturers of defective older products to receive full compensatory and punitive damages.
Asbestos Problem (Sec. 107). Civil damages cases involving workplace exposures to asbestos could be wiped out by the Rockefeller-Gorton deal. In the statute of repose section of the bill, there is a parenthetical exception for injuries caused by "toxic harm." While part of the stated intent of the "toxic harm" exception is to exempt asbestos cases from the 18-year statute of repose, the language in the current bill will not accomplish this goal. "Toxic harm" is not defined in the bill. Without a definition, its meaning will be determined on a case by case basis and there is considerable uncertainty whether asbestos would be treated, as a matter of law, as a toxic substance. There is much scientific evidence to the contrary. Generally, a toxin is a poisonous substance. As stated long ago in a 1964 Journal of the American Medical Association article, "Asbestos is not currently considered a toxic substance since it does not produce systemic poisoning." Instead, it is a naturally-occurring mineral which causes a slowly progressive fibrotic reaction in the lungs that can induce cancer, often 30 to 40 years after inhalation.
In order to avoid any termination of asbestos or other cases intended to be covered by the "toxic harm" exemption,"toxic harm" should be defined as: "Harm caused by acute or repeated exposure to naturally-occurring or synthesized minerals or mineral products, organic compounds, microorganisms, biological products, radioactive compounds, or any chemical or hazardous substance listed by the Centers for Disease Control Agency for Toxic Substances and Disease Registry." Yet, despite repeated suggestions from consumer groups, "toxic harm" remains undefined and the future of asbestos litigation, as well as products cases based on exposure to other substances, is at best uncertain and could be wiped out by this bill.
Negligent Gun Manufacturers and Sellers (Sec. 102(a)(2)(B)). Gun manufacturers are not exempted from this bill, therefore they are completely protected by the bill's liability limits. As noted above, small companies that could be covered by the punitive damages cap and other special protections contained in the Rockefeller-Gorton proposal include typical manufacturers of Saturday Night Special guns and other cheap, concealable, low-quality handguns. All gun manufacturers, large and small, will benefit from the tougher standards imposed on plaintiffs seeking punitive damages.
The bill exempts gun retailers (and other retailers) from its provisions for two types of liability theories for negligent sales: negligent entrustment and negligence per se. The intent of this section is to exempt from the bill actions brought by consumers injured as a result of negligent sales including gun sales. However, the bill fails to fully accomplish this purpose. According to the Violence Policy Center, there are additional liability theories that have been used successfully against firearm retailers and proprietors of target ranges that would still be covered by the bill's extremely broad "product seller" and "product liability action" definitions. For example, theories of nuisance and trespass have been used successfully by plaintiffs harmed by firearms. Under these and other theories, an injured consumer would have to show that the seller was negligent, breached an express warranty or engaged in intentional wrongdoing. Thus, the bill would provide substantial benefits for gun companies.
Seller Liability (Sec. 103). The bill eliminates strict liability for product sellers, both large and small, and replaces it with a negligence standard which requires consumers to prove that the seller of the product failed to use reasonable care. This provision protects sellers where there was no reasonable opportunity to inspect the product, or if inspection would not have revealed the aspect responsible for the harm. Seller liability is maintained for violations of an express warranty, or for intentional wrongdoing.
Strict liability for product sellers is the standard developed by courts over the years because they recognized that stores are often in the best position to spot a product defect, learn about a defect in the course of business, and to notify consumers about the dangers. Under this new standard, retailers no longer have a duty to warn their customers about known product defects or even have an incentive to stop selling products they know are unsafe. In addition, by holding every defendant in a product's chain of distribution -- including product sellers -- strictly liable, the tort system can alleviate the need for the injured consumer to discover and use difficult-to-obtain evidence about which among several defendants was responsible for a particular product defect and the resulting injury. The seller liability standard preempts more consumer-friendly state laws and creates a federal negligence standard that can be very difficult and very expensive for plaintiffs to prove.
Statute of Limitations (Sec. 106). The bill establishes a two-year statute of limitations from the date the injured consumer discovered, or in the exercise of reasonable care should have discovered, the harm. This provision fails to incorporate a key rule of law that has been adopted and approved in many jurisdictions around the country, and is the majority rule in medical products cases. The rule was developed in the DES case of Dawson v. Eli Lilly Co., 543 F. Supp. 1334 (D.D.C. 1982). The Dawson rule holds that before a statute of limitations commences, three conditions must be met: 1) the victim must have discovered the injury; 2) the victim must have discovered the cause of the injury; and 3) the victim must have notice of wrongful conduct or wrongdoing on the part of the potential defendant. The Dawson rule recognizes that it is knowledge of a potential cause of action against a wrongdoer -- not just knowledge of the disease -- that should start the statute of limitations running. Without this rule, a woman who is unable to conceive a child, who learns years later that her infertility was due to an IUD that she wore five years before, and discovers the manufacturer knew it caused infertility but withheld this information, would be precluded from suing and holding the manufacturer accountable. The legislation's statute of limitations does not make it clear that it incorporates the last element of the Dawson rule and, therefore, may bar such injured victims from filing lawsuits. At the very least, it is sure to spawn a flood of litigation over an issue that most states have already resolved.
Partial Breast Implant Exclusion (Sec. 102(a)(2)(B)). The bill contains an exception to the limits on liability for breast implant cases where the harm to the plaintiff was caused by silicone gel or a silicone envelope of a silicone gel implant. Previous versions of the products liability deal exempted all breast implant cases from the liability limitations. The new breast implant exclusion is narrower, meaning that some breast implant cases will be limited by the bill's provisions. Harm caused by breast implant components other than silicone gel or a silicone envelope of a silicone gel implant would be subject to the bill's limitations. Under this proposal, manufacturers, distributors and sellers of saline and polyurethane breast implants could be protected by the bill's limitations on civil actions, including the higher standards for proof required to get punitive damages, regardless of whether or not they knew their products were dangerous. Companies that put new breast implant products on the market that contain substances other than silicone that cause future injuries would be protected from full liability.
Women should be particularly concerned about the weakening of products liability law in this way. History shows that many defective products causing the most serious injury or death have been products marketed specifically to women, including breast implants, DES, the Dalkon shield IUD, and high estrogen birth control pills.
Biomaterial Supplier Immunity. Title II of the proposed Rockefeller-Gorton bill contains a provision that would give substantial immunity to companies that supply "raw materials" and "components" used in the manufacture of medical implants, even if there are deadly consequences that result from use of these "biomaterials." The proposal would provide immunity for biomaterial suppliers at the outset of litigation, prevent traditional discovery against them, and require courts to dismiss claims against them, even if their conduct was negligent or intentionally tortious and caused harm to the plaintiff. Only after a trial against an implant manufacturer has been completed can the manufacturer or plaintiff "implead" the biomaterial supplier to seek contribution for their liability. This strange abuse of the traditional impleader process provides no fair opportunity for injured consumers to sue a biomaterial supplier under most circumstances.
This is yet another provision in the bill that violates the President's 1996 veto message. This deal extends practical immunity even to biomaterial suppliers who knew or should have known that their product would cause injury or death. Yet, President Clinton stated in his veto message that such suppliers "should not receive any protection from suit."
Public Citizen strongly opposes this practical immunity as a major reduction of rights that consumers have under present law. Again, this provision is not needed in any case. The biomaterial industry has no history of substantive liability decisions against them. Providing them with the special legal protections they demand under these circumstances would establish an extremely damaging precedent for further extraordinary federal intrusions on state tort law authority, based on sudden and unsupported assertions that an industry can not survive without immunity. These arguments are designed to frighten Congress and the public, not inform them. The biomaterial provisions should be rejected in light of these facts.
Congressional Findings (Sec. 110). Unlike earlier versions of the Rockefeller-Gorton products liability deal, the latest draft of the bill contains findings that are unsubstantiated, untrue, and completely objectionable. For example, the findings state that ". . . the products liability laws of one State can have adverse effects on consumers and businesses in many other States . . . . " There is no evidence to support this contention. The finding that products liability awards increase the cost and decrease availability of products are long-standing industry claims that have never been substantiated. The assertions in the findings section that reference consumers and plaintiffs leave a completely false impression that products liability laws that do not restrict lawsuits hurt consumers -- and that this bill does something to benefit consumers. Both propositions are patently and misleadingly untrue. Not surprisingly, the findings make no mention of the number of people killed or injured every year by dangerous or defective products in and the amount of economic loss and pain and suffering caused by these injuries.
Conclusion. An analysis of this bill makes clear that it is not a narrow, measured response to those calling for limited liability in products cases. If enacted, the Rockefeller-Gorton deal would be the most severe federal limitation of consumers' and workers' rights and substantial preemption of state tort law ever enacted in this country's history. This bill imposes intrusive federal mandates on state courts. This bill relieves corporations of responsibility for their misconduct, even if their acts are intentional and no matter how grievously their products injure. This bill will shift the cost of compensating injured Americans from corporate wrongdoers to taxpayer-funded health and disability programs. This bill will stop citizen-jurors and judges from evaluating all the evidence in products liability cases and, if warranted, setting punitive damages sufficient to deter defendants from causing future harm. This bill does nothing for injured consumers and their families; it takes away their rights while protecting the ability of businesses to recoup their economic losses related to defective products without limitation.
This information was prepared with substantial assistance from Joanne Doroshow, Executive Director, Citizens for Corporate Accountability and Individual Rights (CCAIR).