<DOC>
[109th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:26646.wais]
WORKPLACE GOODS JOB GROWTH AND COMPETITIVENESS ACT OF 2005
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
COMMERCIAL AND ADMINISTRATIVE LAW
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
ON
H.R. 3509
__________
MARCH 14, 2006
__________
Serial No. 109-91
__________
Printed for the use of the Committee on the Judiciary
Available via the World Wide Web: http://judiciary.house.gov
_____
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COMMITTEE ON THE JUDICIARY
F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
HENRY J. HYDE, Illinois JOHN CONYERS, Jr., Michigan
HOWARD COBLE, North Carolina HOWARD L. BERMAN, California
LAMAR SMITH, Texas RICK BOUCHER, Virginia
ELTON GALLEGLY, California JERROLD NADLER, New York
BOB GOODLATTE, Virginia ROBERT C. SCOTT, Virginia
STEVE CHABOT, Ohio MELVIN L. WATT, North Carolina
DANIEL E. LUNGREN, California ZOE LOFGREN, California
WILLIAM L. JENKINS, Tennessee SHEILA JACKSON LEE, Texas
CHRIS CANNON, Utah MAXINE WATERS, California
SPENCER BACHUS, Alabama MARTIN T. MEEHAN, Massachusetts
BOB INGLIS, South Carolina WILLIAM D. DELAHUNT, Massachusetts
JOHN N. HOSTETTLER, Indiana ROBERT WEXLER, Florida
MARK GREEN, Wisconsin ANTHONY D. WEINER, New York
RIC KELLER, Florida ADAM B. SCHIFF, California
DARRELL ISSA, California LINDA T. SANCHEZ, California
JEFF FLAKE, Arizona CHRIS VAN HOLLEN, Maryland
MIKE PENCE, Indiana DEBBIE WASSERMAN SCHULTZ, Florida
J. RANDY FORBES, Virginia
STEVE KING, Iowa
TOM FEENEY, Florida
TRENT FRANKS, Arizona
LOUIE GOHMERT, Texas
Philip G. Kiko, Chief of Staff-General Counsel
Perry H. Apelbaum, Minority Chief Counsel
------
Subcommittee on Commercial and Administrative Law
CHRIS CANNON, Utah Chairman
HOWARD COBLE, North Carolina MELVIN L. WATT, North Carolina
TRENT FRANKS, Arizona WILLIAM D. DELAHUNT, Massachusetts
STEVE CHABOT, Ohio CHRIS VAN HOLLEN, Maryland
MARK GREEN, Wisconsin JERROLD NADLER, New York
RANDY J. FORBES, Virginia DEBBIE WASSERMAN SCHULTZ, Florida
LOUIE GOHMERT, Texas
Raymond V. Smietanka, Chief Counsel
Susan A. Jensen, Counsel
Brenda Hankins, Counsel
Mike Lenn, Full Committee Counsel
Stephanie Moore, Minority Counsel
C O N T E N T S
----------
MARCH 14, 2006
OPENING STATEMENT
Page
The Honorable Chris Cannon, a Representative in Congress from the
State of Utah, and Chairman, Subcommittee on Commercial and
Administrative Law............................................. 1
The Honorable Melvin L. Watt, a Representative in Congress from
the State of North Carolina, and Ranking Member, Subcommittee
on Commercial and Administrative Law........................... 2
The Honorable Howard Coble, a Representative in Congress from the
State of North Carolina, and Member, Subcommittee on Commercial
and Administrative Law......................................... 3
The Honorable William D. Delahunt, a Representative in Congress
from the State of Massachusetts, and Member, Subcommittee on
Commerical and Administrative Law.............................. 4
The Honorable Steve Chabot, a Representative in Congress from the
State of Ohio, and Member, Subcommittee on Commerical and
Administrative Law............................................. 26
WITNESSES
Ms. Elizabeth Sitterly, Esq., Legal Counsel, Giddings & Lewis,
LLC, Cincinnati Machine, Fond du Lac, Wisconsin
Oral Testimony................................................. 5
Prepared Statement............................................. 7
Kevin McMahon, Esq., Partner, Nelson Mullins Riley & Scarborugh,
LLP, Washington, D.C., on behalf of the National Association of
Manufacturers
Oral Testimony................................................. 9
Prepared Statement............................................. 11
Mr. Andrew Popper, Professor of Law, Washington College of Law,
American University
Oral Testimony................................................. 13
Prepared Statement............................................. 15
James H. Mack, Esq., Vice President, Government Relations, The
Association for Manufacturing Technology, McLean, VA
Oral Testimony................................................. 19
Prepared Statement............................................. 21
APPENDIX
Material Submitted for the Hearing Record
Statement of Mark J. Nuzzaco, Government Affairs Director, NPES,
The Association for Suppliers of Printing and Converting
Technologies on H.R. 3509...................................... 38
WORKPLACE GOODS JOB GROWTH AND COMPETITIVENESS ACT OF 2005
----------
TUESDAY, MARCH 14, 2006
House of Representatives,
Subcommittee on Commercial
and Administrative Law,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 1:05 p.m., in
Room 2141, Rayburn House Office Building, the Honorable Chris
Cannon (Chairman of the Subcommittee) presiding.
Mr. Cannon. I'd like to call to order this hearing of the
Commercial and Administrative Law Subcommittee.
And we'll be considering H.R. 3509, the ``Workplace Goods
Job Growth and Competitiveness Act of 2005.'' This legislation,
introduced by Representative Chabot, would establish a
nationwide, 12-year statute of repose for durable goods in the
workplace. This bill seeks to address a fundamental problem for
American manufacturers, the long tail of liability that extends
for creating long-lasting quality goods.
Through ingenuity of design and quality of craftsmanship,
American manufacturers produce a range of workplace goods,
whose useful life exceeds 12 years. Many of these goods have
been in service for decades. In one case, a machine that
stamped a part for the first Smith Corona typewriter--before my
time, by the way--was used to create a piece of the Apollo
rocket over a 100 years later. This longevity comes at a cost--
a significant cost. These goods expose their manufacturers to
suits for products that left their control decades before, even
when subsequent owners have significantly modified the machine.
However, these suits beg the question: if the design,
manufacture, and warnings on a product were good enough to keep
it running for 10, 20, or 30 years, how are they suddenly
deficient when an accident occurs in the 40th year?
As previous hearings before the Judiciary Committee and
this Subcommittee have shown, the price of such litigation is
staggering.
A Tillinghast survey that came out yesterday showed that
tort costs in the United States reached $260 billion in 2004.
That amount equals 2.2 percent of the United States gross
domestic product. The utility of such litigation is often
questionable. Defendant companies, faced with possible runaway
jury verdicts, will often settle otherwise meritless claims.
And, as one of our witnesses will testify to today, nearly half
of the machine tool industry's litigation costs go to defense
lawyers. The claimants themselves see less than 30 percent of
the monies paid out by manufacturers and that amount is reduced
by a third or more for their attorneys' fees.
The only clear winners in this cycle of litigation are, of
course, the lawyers, many of which are very good people, I
might say as an aside.
H.R. 3509 addresses this problem by creating a nationwide
statute of repose for durable goods used in the workplace.
Black's Law Dictionary defines a statute of repose as a statute
barring any suit that is brought after a specified time since
the defendant acted; in this case, 12 years after the product
was delivered to its first purchaser, even if this period ends
before the plaintiff has suffered a resulting injury. This
differs from a statute of limitations, which is a statute
establishing a time limit for suing in a civil case based on
the date when the claim accrued.
Their purpose, however, is very similar: to promote justice
by preventing surprises through the revival of claims that have
been allowed to slumber until evidence has been lost; memories
are faded; and witnesses have disappeared.
H.R. 3509 is narrowly tailored to address this problem of
prolonged liability. The statute of repose contained in the
bill only applies to durable goods used in manufacturing as
opposed to consumer goods.
Further, the statute of repose does not apply to personal
injury or wrongful death actions unless the injured person is
covered by worker's compensation.
Therefore, every person would be compensated for his or her
injuries.
H.R. 3509 also contains exceptions relating to toxic or
environmental harms. The provisions of this bill are very
similar to statutes of repose that have been enacted in
approximately a dozen States. H.R. 3509 is very similar to a
bill that passed the House of Representative in the 106th
Congress as well as the statute of repose that Congress enacted
in the General Aviation Revitalization Act of 1994. That act
has been widely credited with saving the small aircraft
manufacturing industry in this country.
I'd like to thank Congressman Chabot for introducing this
legislation, and I look forward to hearing from all of our
witnesses today.
And with that, Mr. Watt, would you like to make an opening
statement?
Mr. Watt. Thank you, Mr. Chairman. I'll be----
Mr. Cannon. The gentleman is recognized for 5 minutes.
Mr. Watt. I'll be brief. I doubt I'll take 5 minutes. What
I really should do is just record this statement, because I've
given it so many times. It just seems like every time I turn
around, we're addressing this whole issue of tort reform in one
way or another. And we're addressing it at the Federal level.
And it just seems to me to be the most arrogant pursuit we
could possibly be engaged in at the Federal level, especially
given the fact that many of my colleagues who are pushing this
agenda came into Congress with the avowed purpose of returning
power to the States and expressing grave concerns about the
detriment that we are doing to States' rights.
Well, tort law throughout our history has been a primary
area in which the States have been paramount. And I just don't
understand how we can reconcile this assault on States' rights.
So this is not about substance for me. Actually, I'm told
that North Carolina has one of the more restrictive statues of
repose--6 years. Mr. Coble is over there. He's my expert on
these things, so he'll correct me if I'm wrong, and this
statute would have a longer statute of repose if we federalized
it than the North Carolina statute, so this can't be about the
substance of what we're doing. It's about who has the
prerogative to make that decision.
And I hate to be always the chairman of the States' rights
caucus in this Judiciary Committee. I'm just--I didn't come
here expecting to have to do that.
And so it's disappointing to me that we keep going down
this road over and over and over again, especially when the--
I'm not on the side of this that I was expecting to be on when
I came to Congress. I thought the Republicans were going to
fight this States' rights prerogative issue for me. I'm just
not getting any help from you all anymore.
So I'm disappointed. I'm here, but not to argue about the
substance, but to argue about whether the Federal Government
has the prerogative to impose itself on States over and over
and over again in every area of our life without justification
in my opinion.
With that--I took less than 5 minutes. I took less than 4
minutes.
Mr. Cannon. Yes.
Mr. Watt. So happy to yield back.
Mr. Cannon. I'm impressed and I'm wiling to be the co-chair
of the States' rights caucus with the gentleman if he would
like to create that.
Mr. Watt. It's created, Mr. Chairman. I just can't get any
Members on your side to join me because you all keep wandering
off the reservation to support legislation of this sort, which
is inconsistent, in my opinion, with the whole concept of
States' rights.
Mr. Cannon. Without entering into a debate, this Committee
is the Committee that exists to oversee the commercial
processes throughout the United States and to not let State law
interfere with the commerce of the country. And so while I'm a
States' rights advocate who was thrust into the middle of these
kinds of discussions and frankly have done a great deal of it
this year, probably more than we've done in the history of
Congress to date. That is last year we did--we passed
actually--had signed into law four tort reform actions which
are bills, of which I'm properly proud.
Would the gentleman from North Carolina like to make an
opening statement?
Mr. Coble. Well, I won't make a full opening statement, Mr.
Chairman.
Mr. Cannon. The gentleman is recognized for 5 minutes.
Mr. Coble. I want to thank my States' rights colleague from
North Carolina for elevating me to the high status of expert.
Mel, I thank you for you that.
I think Mr. Watt is embellishing my prowess. I'm not an
expert by any means. But I do think Mr. Watt is correct. And I
think our statute is 6 years in North Carolina.
This is an issue, folks, that many of my constituents and
perhaps, Chris, you and Mel may have had the same response. I
just indicate that this is an issue that needs attention and
resolving. That's why we're here today. And hopefully, you four
outstanding panelists can shed light upon that.
I thank you, Mr. Chairman.
Mr. Cannon. The gentleman yields back.
Mr. Coble. You got it.
Mr. Cannon. We're going to have to take a look at this
statute and make sure that it doesn't pre-empt the more
restrictive North Carolina statute if that is the case, which I
think we can probably do.
Mr. Watt. I'm sure you can.
Mr. Cannon. And all other States that are more restrictive.
And without objection, all Members will have 5 legislative days
to submit additional material for the hearing record.
I would now like to introduce our witnesses for today's
hearing. Our first witness is--oh, pardon me. Would the
gentleman from Massachusetts like to make an opening statement?
Mr. Watt. The co-chair of the States' rights caucus I'm
sure would like to----
Mr. Cannon. We're going to have four co-chairs. This has to
be bipartisan.
Mr. Delahunt. I move to strike the last word, and I will
not use all the 5 minutes, and I just associate myself. I was
listening to the remarks of the chairman of the States' rights
caucus, Congressman Watt, and I really do have to--I feel
compelled--I felt compelled to come down to the hearing, so I
can hear what I've heard before again and just say that you
know there's a--it is amazing, it really truly is, that those
that preach the loudest about devolution, States' rights,
really have turned their back on States' rights.
So I'm here to support the States and my chair, Congressman
Watt.
I would hope that the panelists could direct--or include in
their remarks if they simply could point to the need and some
of the data that exists and I guess I'd have a question, why 12
years as opposed to 18, and I'd also like to welcome an old and
dear friend of mine to the panel. That's Jim Mack. I'm sure he
disagrees with me on just about everything, but he's still my
pal. And with that, I yield back.
Mr. Cannon. The gentleman yields back.
I'm just hoping that if we get this caucus organized, that
maybe some of the people on this side the dais will get some
contributions from the trial lawyers and that may--who knows?
It might affect the judgment between the groups, although we
may still on this side want to do tort reform.
Our first witness is Ms. Elizabeth Sitterly, Legal Counsel
to Giddings and Lewis, a manufacturer of machine tools located
in Fond du Lac, Wisconsin. Giddings and Lewis is a division of
the Cincinnati Machine Company. Ms. Sitterly received her
Bachelor of Arts from Northwestern University and her Juris
Doctor from Chicago Kent College of Law. In her capacity as
Legal Counsel to Giddings and Lewis, Ms. Sitterly is
responsible for overseeing the product liability suits brought
against her company.
Our second witness is Mr. Kevin P. McMahon, Partner at
Nelson Mullins Riley and Scarborough. He is testifying on
behalf of the National Association of Manufacturers, where he
served as the Chairman of the Legal Issues Policy Task Force.
Mr. McMahon received his Bachelor of Arts degree from the
University of California at Santa Barbara, and his law degree
from the University of South Carolina School of Law.
In addition to his involvement with NAM, that is, the
National Association of Manufacturers, he is the Immediate Past
President and Chairman of the American Tort Reform Association.
I think those are the guys on our side of the aisle.
Our third witness is Professor Andrew Popper, Professor of
Law at American University's Washington College of Law.
Professor Popper received his bachelor's at Baldwin Wallace
College. He attended DePaul University's School of Law for his
Juris Doctor and subsequently earned his L.L.M. from George
Washington University National Law Center. Professor Popper
teaches a number of courses at American University, including
Torts.
Our fourth witness--our fourth and final witness is Mr.
James H. Mack, the Vice President of Tax and Economic Policy at
AMT, the Association for Manufacturing Technology, where he has
worked since 1975. Mr. Mack graduated from the University of
Wisconsin at La Crosse, where he earned a Bachelor of Science,
as well as from the University of Wisconsin School of Law. He's
been active in promoting a national statute of repose for a
very long time, and, in fact, testified before the House
Committee on the Judiciary on this very issue in the 106th
Congress.
Again, I welcome all of our witnesses, and I look forward
to hearing your testimony.
Before you get started, let me just draw your attention.
The light panel before you--there's one on either side. That
starts out green. After 4 minutes, it turns yellow, and then it
turns red. And that suggests it's time to wrap up. We're
actually interested in what you have to say, and if you go a
little longer, that's fine. If not, if it goes too long, I'll
tap the gavel and remind you.
Now, it's the practice of this Committee to swear in all
witnesses appearing before it, so if you would please stand and
raise your right hand.
[Witnesses sworn.]
Mr. Cannon. The record should reflect that the witnesses
all said yes, and you may be seated. We'll now proceed with our
first witness, Ms. Sitterly.
TESTIMONY OF ELIZABETH SITTERLY, ESQ., LEGAL COUNSEL, GIDDINGS
& LEWIS, LLC, CINCINNATI MACHINE, FOND DU LAC, WISCONSIN
Ms. Sitterly. My name is Elizabeth Sitterly. I'm Legal
Counsel for Giddings & Lewis, a division of Cincinnati Machine.
I've been an attorney for--okay. I'm sorry. I've been an
attorney for over 20 years, of which 19 have been dedicated in
some form to the defense of product liability actions; most
recently for the last 9 years with Giddings & Lewis, located in
Fond du Lac, Wisconsin.
Being part of the machine tool industry has been an
extraordinary learning experience. I've learned what an
integral part these companies and the machines these companies
produce play in our society.
The companies that I represent have been around for a long
time--G&L since 1852 and Cincinnati Machines since 1884.
Robust is the word commonly used to describe the machines
these companies make. They are the Cadillacs of their kind,
and, therefore, last for a very long time.
Anyone familiar with this industry will tell you that it's
cyclical, and the cycle has been down for the last few years.
To use my company as an example, in the last 5 years we have
not turned a profit. This lack of profitability, in part, was
caused by the exorbitant costs of litigating product liability
actions across the country.
These companies are in danger. Litigation costs are
strangling companies like mine. We're spending money not on
improving productivity and safety, but on defending claims
I was asked here today to share with you the experiences of
the product liability history of two venerable machine tool
companies.
If you would walk into my office today, you would find
that, of the 11 open product liability cases, eight of them
involve claims on products that were manufactured at least 12
years prior to the claimant's injury. The claims involve
products that were manufactured between 1941 and 1982. In the
last 2 years, I have resolved three cases. All three involve
machines manufactured 12 years before the date of the
plaintiff's injury. We've paid $740,000 in defense costs and
have paid $1.4 million in settlement costs. The largest
settlement in that time period was on a claim involving a
machine manufactured in 1966. This case is a good example of
why we need legislation such as H.R. 3509. An experienced
machine operator sustained a near amputation of his non-
dominant hand. Though the machine that the plaintiff was
injured on was manufactured in 1966, its design was born in the
1930's. There were 9,000 of these machine sold, and this was
the first claim of injury we've ever received. The plaintiff
was injured performing an operation in a way that was
specifically prohibited in our operator's manual. He was trying
to save time by doing it his way.
You're probably thinking this a great case for the defense,
but given the disfiguring nature of the injury and the
difficulty in finding expert testimony on a product of that
vintage, giving it to a jury was too great a risk. The matter
was settled in an amount over $700,000, but not before $410,000
was spent on preparing the defense.
In 9 years, I have taken only one case to trial. It was a
case that I believed could not be lost and involved a machine
that was built in 1982. It was so substantially modified from
the time it was shipped, that I thought no jury in the world
could find against us. Furthermore, the operator was trained
incorrectly and insufficiently and took a chance on ``beating
the machine,'' and he lost. But I was wrong to the tune of
$533,000. But that wasn't before we paid $409,000 to defend the
claim. The plaintiff was disappointed in the verdict as well.
His demand was in excess of $2 million, which wouldn't be
unusual in a case of this nature.
Honestly, when a plaintiff is injured on a machine that's
over a decade old, I'm hard pressed to take that case to trial
because of the difficulty in preparing that defense.
When machines are that old, none of the engineers involved
in the product design are still with the company. More often
than not, they're deceased. So the company has nobody left to
defend the design or the pains taken by them to make that
product safe, as that was defined at the time of manufacture.
It is also an almost insurmountable task to get a jury to
stay focused on standards that were in effect at the time the
machine was designed. The impact on the bottom line of the
Cincinnati Machine group of companies is staggering. Companies
like ours can't be looking over our shoulders in fear of what
liability lurks in the past, dedicating our scant resources to
create reserves for liabilities that never die.
We need to set our sites on the future, dedicating those
resources to R&D, to create safer, more productive machines.
The beauty of this bill is that it does not overreach in my
mind. It seeks to set a reasonable statute of repose in those
cases where the party sustained a workplace injury and was
compensated. This is a good piece of legislation. It supports
companies that make America more productive and competitive. We
respectfully urge its adoption. Thank you.
[The prepared statement of Ms. Sitterly follows:]
Prepared Statement of Elizabeth Sitterly
i. introduction
My name is Elizabeth Sitterly, Legal Counsel for G&L, a division of
Cincinnati Machine. I have been an attorney for over 20 years of which
19 have been dedicated, in some form, to the defense of product
liability actions--most recently, for the last nine years, with G&L.
Being part of the machine tool industry has been an extraordinary
learning experience. I have learned what an integral part these
companies and the machines these companies produce play in our society.
I have also learned the historically important roles these companies
have played, not the least of which has been to help aid in the defense
of this country. The companies that I represent have been around for a
long time--G&L since 1852 and Cincinnati Machine since 1884. ``Robust''
is the word commonly used to describe the machines these companies
make. They are the ``Cadillac's'' of their kind and, therefore, last
for a very long time.
Anyone familiar with this industry will tell you that it is
cyclical, and the cycle has been down for the last few years. It is
returning to an upward climb slowly. But to use my company as an
example, in the last five years we have not turned a profit. But for
the generosity of a benevolent corporate parent, G&L would have closed
its doors and with that lost its history and all its contributions.
This lack of profit in large part was caused by the exorbitant costs of
litigating product liability actions across the country.
These companies are in danger. Litigation costs are strangling
companies like mine. We are spending money not on improving
productivity and/or safety, but on defending claims involving machines
sometimes older than the people on this panel. This problem also
interferes with our ability to compete with our overseas competitors
who, unlike us, have no product liability laws to fear.
I was asked here today to share with you the experiences of the
product liability history of two venerable machine tool companies.
ii. the companies' product liability history 2002-2005
If you would walk into my office today, you would find that, of the
11 open product liability cases, eight of them involve claims on
products that were manufactured over 12 years prior to the claimant's
injury. The claims involve products that were manufactured between 1941
and 1982. All three of our recently resolved cases involve products
older than 12 years (1991--$225,000 settlement, $112,000 expenses;
1966--$700,000 settlement, $410,000 in expenses; 1942--$90,000 in
settlement, $151,000 in expenses). From 2003 to 2005, we have spent
over $740,000 in defense costs. We have paid $1.4M in settlements (out
of that amount less than half was paid with insurance dollars).
Therefore, in two years we have paid almost $1.3M on product liability
litigation.
The largest settlement in that time period was on a claim involving
a machine manufactured in 1966. This case is a good example of why we
need legislation such as H.R. 3509. An experienced machine operator
sustained a near amputation of his non-dominant hand. He sustained this
injury as he was trying to change an arbor on a horizontal milling
machine that was manufactured in 1966. These milling machines were
designed in the mid-1930s. The model that this gentleman was operating
was only slightly changed from the original design. Approximately,
9,000 of these machines were sold. The Company stopped producing
machines altogether in 1994.
The plaintiff was injured performing an operation in a way that was
specifically prohibited in the operator's manual. His employer and
fellow employees advocated the method he used at the time of the injury
to save time. The plaintiff's attorney proffered arguments regarding
standards, guarding and the like that were state of the art at the time
of trial rather than at the time the machine was manufactured. One of
the many frustrating aspects of this case was that, despite the large
number of these machines in the field and the amount of time that they
have been operated, the Company never had a claim on this type of mill.
You are probably thinking this is a great case for the defense. But
given the horrendous disfiguring nature of the injury, taking the risk
of what a jury might do with this was too great. The matter was settled
for an amount over $700,000 but not before $410,000 was spent on
preparing the defense. The company had a $500,000 Self Insured
Retention (SIR).
We also settled a case on a mill shipped in 1942. Here we settled
for $90,000 and spent $151,000 in defense costs.
In nine years, I have taken only one case to trial. It was a case
that I believed could not be lost and involved a machine manufactured
in 1982. It was so substantially modified from the time it was shipped,
that I thought no jury in the world could find against us. Furthermore,
the operator was trained incorrectly and insufficiently and took a
chance on ``beating the machine'' and lost. I was wrong to the tune of
$533,000. The plaintiff felt it was a loss, as his demand was well over
$2M. We paid $409,000 to defend this matter.
Honestly, given the nature of injuries sustained on machine tools,
I am hard pressed to take a case to trial. When machines are over 12
years old, none of the engineers involved in the product design are
still with the company. More often than not, they are deceased. So the
Company has no one left to defend the design or the pains taken by them
to make the product ``safe'' as was defined at the time of manufacture.
It is also an almost insurmountable task to get a jury to stay focused
on standards that were in effect at the time the machine was designed.
That is assuming there were standards that controlled design at the
time the machine was manufactured. All of these factors make it
difficult to take a case to trial, ESPECIALLY on an old product.
iii. the need for h.r. 3509
The impact on the bottom line of the Cincinnati Machine group of
companies is staggering. It is not only in the dollars paid out, but
also the increase in insurance premiums due to settlements or verdicts,
the damage to reputation in publicized outcomes, and the increased
litigation when ``word gets out'' that companies such as ours are
paying out for injuries on machines that were manufactured several
decades ago.
The dollars that have been paid out on the examples that I shared
with you today could be put to much better use on things such as
research and development. Developing newer, safer, more productive
machines adds to the well being not only of our group of companies but
to the economy as a whole.
This bill does not over-reach, it sets a reasonable statute of
repose in those cases where the claimant sustained a workplace injury
and is eligible for workers' compensation. No injured worker would go
uncompensated under H.R. 3509.
This is a good piece of legislation. It is sorely needed by
companies that make America more productive and competitive. We
respectfully urge its adoption.
Thank you for your attention.
Mr. Cannon. Right on time. Thank you. Mr. McMahon.
TESTIMONY OF KEVIN McMAHON, PARTNER, NELSON MULLINS RILEY &
SCARBORUGH, LLP, WASHINGTON, D.C., ON BEHALF OF THE NATIONAL
ASSOCIATION OF MANUFACTURERS
Mr. McMahon. Mr. Chairman, Members of the Subcommittee, my
name is Kevin McMahon, and I'm a Partner in the law firm of
Nelson Mullins Riley & Scarborough.
Today, I'm appearing on behalf of the National Association
of Manufacturers. Along with several other clients, our firm
represents Owens Illinois in litigation matters.
Owens Illinois is an active member of the NAM.
Additionally, I'm the Immediate Past Chairman of the American
Tort Reform Association and currently serve on its Board of
Directors and Executive Committee.
I've been involved in efforts to enact common sense legal
reforms at the State and Federal level for several years.
The NAM supports enactment of H.R. 3509, the ``Workplace
Goods Job Growth and Competitiveness Act of 2005,'' as
introduced.
H.R. 3509 would establish a national statute of repose of
12 years, a time beyond which a manufacturer would no longer be
expected to be responsible for claims attributable to workplace
durable goods. The NAM, with membership of manufacturers that
extends well beyond durable goods, however, would prefer to see
a final bill that would extend the coverage and reduce the
number of years before the bill's protections apply.
With that said, however, the NAM wants to see H.R. 3509
become law and will work with the sponsors and supporters to
ensure that any potential changes to the bill do not diminish
support for it.
In past Congresses, statute of repose legislation has
enjoyed strong bipartisan support in the House. In fact, H.R.
3509 is based on a compromise negotiated with the Clinton White
House during consideration of the Comprehensive Product
Liability Reform Measure.
The experience of the General Aviation Revitalization Act,
or GARA, which established an 18-year statute of repose for
makers of light, privately owned aircraft, demonstrates that a
Federal statute of repose can be successful. GARA, which was
passed during a Democratically controlled Congress and signed
by President Clinton in 1993, is credited with reviving an
industry that was once thought to be dead, and in the process
created thousands of jobs.
Perhaps more importantly, contrary to what plaintiff
attorneys and some consumer groups predicted, the skies are as
safe, if not safer, than they were prior to the enactment of
GARA.
Our country has a long history of encouraging the
development and production of useful goods for the benefit of
our society and the world, and that system is undermined by
excessive liability exposure.
The policy of the United States should be to recognize that
as products age, the responsibility for their integrity and
operability shifts after a reasonable period to those who
exercise control over them. Like manufacturers, owners and
employees have an equal responsibility to ensure that products
and tools they use are safe and effective for the job.
The statute of repose also recognizes that many owners take
the liberty of modifying their equipment. These alterations may
even go against express warnings issued by the manufacturer.
The longer a good has been separated from its manufacturer, the
more likely this is to occur.
Another difficulty with the passage of time is ironically
the progress of technology and the state-of-the-art
innovations. Defendants will themselves unfairly have to
explain why they did not think of an innovation that came 20 or
30 years after the time the good was produced.
Unlike Hollywood, manufacturers cannot go back to the
future to add innovation to products 60, 70, or 80 years old.
For example, Harris Corporation, a manufacturer of printing
equipment has been sued on equipment manufacture in 1922 after
decades of multiple modifications and alterations, which were
out of their control. How can this be equitable or just?
Some States have recognized this inequity in the legal
system and have enacted their own statutes of repose. In States
that have a fixed statute, the number of years usually begins
at the time of initial purchase. Some of these States limit the
application to workplace goods, but most apply to all goods.
Most States with a statute of repose have a shorter time
period than H.R. 3509. North Carolina, for example, has a 6-
year statute of repose that applies to all goods.
It's very important to highlight that under the current
language, someone who is injured on the job would be covered by
worker's compensation; and, therefore, would not be left
without a remedy. If there is no worker's compensation
coverage, then a statute of repose does not apply and claimants
can file a lawsuit.
Additionally, a statute of repose will simply help level
the playing field with some of our cheap international
competitors--Japan and the European Union. Both Japan and the
EU have 10-year statutes of repose that cover all goods.
As it is, U.S. legal costs are twice as high as a
percentage of GDP as our international competitors. According
to the Tillinghast study cited in yesterday's Wall Street
Journal, in 2004, total tort costs were $260 billion and nearly
$900 for every person in the country.
It's projected that the cost will rise to nearly $315
billion by 2007. Enactment of 3509 would begin to reduce the
substantial tort tax, which is a drag on innovation and job
creation.
I'll sum up. Even though 11 States have a fixed statute of
repose applicable to goods, their effect is limited by the fact
that 70 percent of domestic products travel in interstate
commerce; thus, only 30 percent of goods are manufactured and
sold in one State. That is why, like the GARA bill, Congress
should enact a Federal statute of repose Moreover, Federal law
establishing a statute of repose for 10 years or less that
covers all goods would be the best and preferred solution to
truly help the United States overcome its comparative
disadvantage in terms of legal costs.
If sponsors and other supporters concluded after consulting
with their colleagues that this is not politically feasible at
this time, the NAM would encourage passage of H.R. 3509 as a
meaningful step toward helping our domestic manufacturers
better compete with our international competitors.
On behalf of the National Association of Manufacturers, I
thank you for the opportunity to appear before you today, and I
would be happy to take any questions that Members of the
Subcommittee may have. Thank you.
[The prepared statement of Mr. McMahon follows:]
Prepared Statement of Kevin McMahon
Mr. Chairman, members of the subcommittee, my name is Kevin
McMahon. I am a partner in the law firm of Nelson Mullins Riley &
Scarborough. Today, I am appearing on behalf of the National
Association of Manufacturers (NAM). Along with several other clients,
our firm represents Owens Illinois in litigation matters. Owens
Illinois is an active member of the NAM. Additionally, I am the
immediate past chairman of the American Tort Reform Association, and
currently serve on their Board of Directors and Executive Committee. I
have been involved in efforts to enact common sense legal reforms at
the state and federal level for several years.
The NAM is the nation's largest industrial trade association
representing small and large manufacturers in every industrial sector
and in all 50 states. Through our direct membership and our affiliate
organizations--the Council of Manufacturing Associations, the Employer
Association Group and the State Associations Group--we represent more
than one hundred thousand manufacturers.
The NAM supports enactment of H.R. 3509, the Workplace Goods Job
Growth and Competitiveness Act of 2005, as introduced. It would
establish a national statute of repose--a time beyond which a
manufacturer should no longer reasonably be expected to be held liable
for a product--of 12 years for workplace, durable capital goods. The
NAM, however, would prefer to see a final bill that would extend the
coverage, reduce the number of years before the bill's protections
apply and allow states greater flexibility. With that said, the NAM
most wants to see H.R. 3509 become law and will work with the sponsors
and other supporters to ensure that changes made to the bill do not
diminish the support for it.
In past Congresses, statute of repose legislation has enjoyed
strong, bipartisan support in the House. In fact, H.R. 3509 is based on
a compromise negotiated with the Clinton White House during the
consideration of a comprehensive product liability reform measure.
Unfortunately, despite strong and bipartisan votes in the House, the
proposal was not taken up by the full Senate except as part of the
broader comprehensive bill.
The experience of the General Aviation Revitalization Act (GARA) of
1993, which established an 18-year statute of repose for makers of
light, privately owned aircraft, demonstrates that a federal statute of
repose can be successful. GARA, which was passed during a Democratic-
controlled Congress and signed by President Clinton, is credited with
reviving an industry that was once thought to be dead, and in the
process creating thousands of jobs. Perhaps more importantly, contrary
to what opponents of GARA predicted, the skies are as safe if not safer
than they were prior to the enactment of GARA.
It is a sad commentary on today's U.S. legal system that a statute
of repose even needs to be contemplated. Unfortunately, however, the
plaintiff's bar has brought lawsuits against products that are decades
(if not more than a century) old and, even more unfortunately, both the
federal and state judiciaries have allowed these lawsuits to go
forward.
Nothing lasts forever. Every perfectly designed and manufactured
product will eventually fail. Yet the law imposes a duty on those who
make things to do so responsibly, so as not to unreasonably put at risk
those who use them. Our country has a long history of encouraging the
development and production of useful goods for the benefit of our
society and the world, and that system is undermined by excessive
liability exposure. The policy of the United States should be to
recognize that, as products age, the responsibility for their integrity
and operability shifts to those who exercise control over them. It is
unfair and unreasonable to hold a manufacturer liable for long-term,
ordinary wear and tear, for natural degradation of materials, or the
effects of the environment or other outside forces. Like manufacturers,
users have an equal responsibility to ensure that the products and
tools they use are safe and effective for the job.
It is true that in the vast majority of cases involving older
products that the manufacturer/defendant almost always wins. Juries
tend to understand that owners need to take responsibility for upkeep
and routine maintenance. Thus, plaintiff's counsel will usually offer
to settle the case for less than the value of defending the litigation,
in full knowledge that the defendant's insurer will insist on a
settlement. While the plaintiff may be somewhat better off, a hefty
portion of his or her award will be needed to cover legal fees and
expenses.
A statute of repose also recognizes that many owners take the
liberty of modifying their purchases. These alterations may even go
against express warnings issued by the manufacturer. The longer that a
good has been separated from its manufacturer, the more likely this is
to occur.
Another difficulty with the passage of time is, ironically, the
progress of technology and other state-of-the-art innovations.
Defendants will find themselves unfairly having to explain why they did
not think of an innovation that came 20 or 30 years after the time that
the good was produced even though the product in question was
revolutionary in its safety features at the time of manufacture.
Harris Corporation, for example, has resolved printing industry
equipment cases during this millennium involving equipment manufactured
as early as 1922 and throughout each decade thereafter through the
'70s. Many of those cases involve issues related to industry standards
that are decades old and disputes over the affect of multiple
modifications and retro-fitting. Harris Corporation eventually sold its
printing industry equipment assets in the early '80s.
Another important consideration regarding the length of time
following an initial acquisition is the ability of the manufacturer to
notify purchasers about the need to replace a certain part, or to not
use the product in a certain manner. Even if the producer has
information about the customer, such as a purchase order, mail-in
warranty card, or credit data, the notice will be sent to the initial
acquirer only. If the product has been sold, bartered or given away,
there is little that the manufacturer can do to ensure that the notice
gets to the current owner.
Some states have recognized this breakdown in the legal system and
have begun to enact their own statutes of repose. Specifically, twelve
states have a ``fixed'' statute of repose of a set number of years,
while seven additional states have a ``soft'' statute of repose that
relies on terms and concepts such as ``useful life'' that are open to
litigation. Seven state supreme courts have found statutes of repose to
violate the state's Constitution and 26 states do not have a statute of
repose.
In the states that have a fixed statute, the number of years
usually begins at the time of the initial purchase, except for Vermont.
(That state has a special statute of repose of 20 years that applies
specifically to latent exposure to noxious medical agents.) Some of
these states limit the application to workplace goods, but most apply
to all goods. With the exception of Texas and Iowa--each of which has a
fixed, 15-year statute of repose--the other states with a fixed statute
of repose all have a shorter time period than does H.R. 3509. North
Carolina, for example, has a six year statute of repose that applies to
all goods.
The NAM appreciates that the number of years in the proposed
legislation has been lowered from 18 years in the past to the current
12. Eighteen was initially chosen because of the precedent found in
GARA. Since H.R. 3509 creates a uniform period of time, the NAM hopes
that an even lower number of years reflecting the consensus of the
states that have fixed statutes of repose (such as 10 or less?) could
be feasible for continued strong and bipartisan House support. Another
consideration would be to allow states that have chosen to enact
shorter statutes of repose to keep the length of time of their choosing
as long as they do not exceed the federal standard.
In addition, since most states with a statute of repose allow for
the coverage of all goods, the NAM would hope that the sponsors and
other supporters could consider extending the coverage. Under the
current language, of course, someone who is injured on the job would be
covered by worker's compensation and therefore would not be left
without any reparation. On the other hand, the basic principle
underpinning the need for a statute of repose remains the same:
purchasers need to take responsibility for upkeep and maintenance of
their products. Even the highest quality products wear down over time.
Consider as a hypothetical, for example, the case of a couple with
young children who buy a metal swing set. As the children grow up, the
swing set is used less and less, but remains standing in the yard. The
once-young children grow up, get married and have children of their
own. On a visit to grandma and grandpa's, one of the grandchildren is
allowed to play in the backyard. He begins to swing as strong as he
can. The old and, by now, rusted, swing set is not able to handle the
stress and collapses onto the grandchild. The family sues the swing-set
manufacturer and the jury awards millions of dollars in punitive
damages, even though the swing set had long outlived its useful life
and was allowed to rust.
In this example, should the swing-set manufacturer even have to
face the prospect of losing a jury award and, in the case of a small
manufacturer, possibly the entire business?
A statute of repose of 10 or fewer years applicable to all goods
will simply level the playing field with some of our chief
international competitors, Japan and the European Union (EU). Both
Japan and the EU have 10-year statutes of repose that cover all goods.
Moreover, many foreign firms have entered the U.S. market only
relatively recently, thereby putting established domestically based
companies at a competitive disadvantage because of the higher legal
costs they face connected with defending lawsuits against older
products. By the same token, well-established, long-standing American
companies are put at a competitive disadvantage with respect to new
domestic competitors that do not face the same long tail of exposure
from products sold years ago. This puts added financial pressure on
companies with substantial legacy costs to cut back or eliminate wage,
health care and retirement benefits, at a time when those crucial
elements of our standard of living are already at great risk.
As it is, U.S. legal costs are twice as high as a percentage of GDP
as our international competitors. According to Tillinghast-
TowersPerrin, in 2004 total tort costs were $246 billion, or nearly
$3,400 for every family of four. Enactment of H.R. 3509 would begin to
whittle down this ``tort tax'' and, if the political will is there to
improve its provisions, its contribution to reducing the tort tax will
become even greater.
Even though 11 states have a fixed statute of repose applicable to
goods, their effect is limited by the fact that 70 percent of domestic
products travel in interstate commerce. Thus, only 30 percent of goods
are manufactured and sold in one state. If a manufacturer were based in
North Carolina, for example, but 12 years later its merchandise ended
up in the possession of an owner in New Jersey (which does not have a
statute of repose) who did not perform the proper care, the 6-year
North Carolina statute of repose would not apply. Conversely, if the
manufacturer were based in New Jersey and the good ended up in North
Carolina, the chances are that the lawsuit would be filed in New
Jersey.
Thus, a federal law establishing a statute of repose of 10 years or
less and that covers all goods would be the best and preferred solution
to truly help the United States overcome its comparative disadvantage
in terms of legal costs. If the sponsors and other supporters concluded
after consulting with their colleagues that this is not politically
feasible at this time, however, the NAM would encourage passage of H.R.
3509 as introduced in order to at least begin to help domestic industry
better compete with our international competitors.
On behalf of the National Association of Manufacturers, I thank you
for the opportunity to appear before you today. I would be happy to
take any questions that the members of the subcommittee may have. Thank
you.
Mr. Cannon. Thank you, Mr. McMahon. Professor Popper,
you're recognized for 5 minutes.
TESTIMONY OF ANDREW POPPER, PROFESSOR OF LAW, WASHINGTON
COLLEGE OF LAW, AMERICAN UNIVERSITY
Mr. Popper. Good afternoon. Thank you. Two quick Supreme
Court cases before I get to my testimony. One Silkwood v. Kerr-
McGee, which held that tort law is inherently State law; and
two, CFTC v. Schor. In CFTC v. Schor, the Supreme Court said,
dealing with federalism, that there are often blendings in
functions between houses of Congress or between the Executive
and the Judicial, and the same is true with federalism and
State rights. But the Court says in Schor that when there is a
phalanx of activity that's in the wrong place, action has to
happen. And that is exactly the case with tort reform.
So in response to the comments earlier, I certainly align
myself with the positions that were made before. This is a
serious federalism problem.
Let me get to my statement. Think about tort reform for a
moment. This has never been a fair fight. Think about the
alignment of forces. On one side, you have the entire GNP. All
of American industry, all of American retailing and health care
and pharmaceuticals and the insurance companies. And for that
matter, you have the press, who would very much like to never
have to pay punitive damages when they defame into oblivion
some private citizen. That's on one side of the aisle.
On the other side, you have underfunded consumer groups who
are often fragmented. You have a few victims' rights groups who
have been somehow mocked as shameless seekers of underserved
damage awards.
And then you have trial lawyers, the people who protect you
when you're injured, the people who brought you the consumer's
rights movement, who have been horribly defamed and vilified
over the last few years. This is not a fair fight.
And when it comes to this specific piece of legislation,
this is a seemingly simple bill. It is unclear, however,
whether it could apply to regulatory actions. It is unclear
whether it affects recall litigation. It's unclear about
dealing with knowing concealment of defects. And, by the way,
since you raised GARA, now GARA is 18 years, and it has an
exception for fraudulent concealment. This bill does not. This
bill is unclear on vested claims. This bill is even unclear on
how it's supposed to achieve its stated objective of
competitiveness.
Those technical shortcomings in the bill, however, pale in
comparison to what's substantively wrong with this legislation.
This bill undermines incentives for better design. It
undermines incentives for innovation. It displaces
manufacturers from the cycle of liability, when they are the
ones who are in the best position to cover the claims from the
products they sold, from which they profited, and in the better
position to improve the long-term integrity of those products
themselves.
It undermines the whole theory of risk distribution, which
I thought was the predicate for tort reform in the first place.
It denies innocent injured persons of their right to redress of
wrongs in court, raising questions of fairness and due process
and access to the courts. It abolishes lawful claims of
consumers.
It seemingly exposes employers to greater liability rather
than sharing that liability with manufacturers, and, by and
large, statistically it deals with a tort reform fantasy: that
we have a large amount of claims involving older products where
there has not been a showing of a breach of a duty of care.
This bill punishes workers, not for filing at the wrong
time or bringing a frivolous claim. This bill punishes workers
for being hurt at the wrong time. It cuts away at incentives to
keep long-term records. It cuts away at the incentives to do
longitudinal studies. It cuts away at recordkeeping obligations
that manufacturers have now.
It undermines transparency in the production community,
because, gee, why should you talk about the deficits you know
about in your product if liability is cut off after 10 years.
It creates a de jure interference with private contract,
creating an incentive in the long run for courts to muddle the
common law meaning of due care.
It creates no incentive to recall products. It creates
tension in labor management relationships, because it's going
to take out of the cycle the true source of liability if there
is genuinely a defective piece of machinery.
In fact, there's not one line in this bill that helps
consumers. There's nothing to facilitate claims. There's
nothing to improve product quality. There's nothing to lessen
the costs that workers are going to sustain.
The fact of the matter is that the only thing this bill
does is legally and forever remove fault from at-fault
manufacturers.
This is tort reform, as I have come to know it: a series of
bills that have but one meaning--reducing accountability and
giving consumers absolutely nothing in exchange. It's not that
it's incomprehensible. In fact, it's perfectly understandable.
Who wouldn't want to be excused of responsibility after they
engaged in misconduct?
But the fact that it's understandable doesn't mean that
it's right or proper or fair or just, particularly to an
injured worker. It is none of these things, and I urge the
Committee to reject the legislation. Thank you.
[The prepared statement of Mr. Popper follows:]
Prepared Statement of Andrew F. Popper
My name is Andrew Popper.\1\ I appreciate the opportunity to
testify on H.R. 3509, a modest side-show in the broader tort reform
war.
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\1\ Biography at conclusion of testimony. (It is not the policy of
the Committee on the Judiciary to print witness biographies.)
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1. a short perspective on tort reform
Tort reform has always been an unfair fight. Think about the
alignment of forces. On the side of those seeking to limit liability is
the entire GNP. All of U.S. manufacturing, all of retailing, the health
care industry, the pharmaceuticals, the insurance companies, and even
much of the press who have abandoned consumers on this issue, with the
hope of never having to pay punitive damages when they defame into
reputational oblivion a private citizen.
On the other side, opposing these limits on accountability, are the
defenders of the tort system--underfunded and often fragmented consumer
groups, a few victims rights groups, some of whom have been mocked as
shameless seekers of undeserved damage awards and, of course, trial
lawyers. Trial lawyers--the architects of the consumer rights movement,
the advocates for you and me when we are injured, the lawyers who
represent the consumer perspective--have been horribly vilified by a
decades long comprehensive campaign to undermine their credibility.
This is hardly a fair fight.
And then there is the term ``tort reform.'' Laws that provide no
protection for consumers, no incentive for greater safety, and limit
the rights of those who lack power are hardly the stuff of reform.\2\
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\2\ Susan Lorde Martin, The Litigation Financing Industry: The Wild
West of Finance Should Be Tamed Not Outlawed, 10 Fordham J. Corp. &
Fin. L. 55, 75 (2004). ``Very cleverly, they have used the term `tort
reform' to refer to their efforts to make it harder for tort plaintiffs
to win cases and, when they do win, to receive awards that fully
compensate them for their injuries and adequately punish defendants for
egregious acts.'' Richard S. Miller, Tort Law And Power: A Policy-
Oriented Analysis, 28 Suffolk U. L. Rev. 1069, n.61 (1994). ``[T]he
proponents of `tort reform' have succeeded in grossly misleading the
public and its decisionmakers about the nature and dimensions of the
problems produced by tort law. . . .'' Andrew F. Popper, A One-Term
Tort Reform Tale: Victimizing the Vulnerable, 35 Harv. J. on Legis.
123, 127 (1998).
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And the data--or lack thereof--regarding the current civil justice
system. From the CRS report forward, no credible juried study documents
a crisis in the tort or insurance system \3\ that could conceivably
justify legislation that limits arbitrarily consumer rights, as does
H.R. 3509.
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\3\ Michael L. Rustad, Access To Justice: Can Business Co-Exist
with the Civil Justice System? The Closing of Punitive Damages' Iron
Cage, 38 Loy. L.A. L. Rev. 1297, 1417 n.354 (2005). ``Despite the
controversy over punitive damages, the empirical reality is that there
is no nationwide crisis requiring radical judicial tort reform.'' Tort
Questions, 16 Risk & Insurance 9, Vol. 16 (August 1, 2005). ``The
debate over the tort litigation crisis is driven by hyperbole, faulty
evidence and `secret' data, according to The Frivolous Case for Tort
Law Change, a recent study by the Economic Policy Institute. The
authors, economist Lawrence Chimerine and attorney Ross Eisenbrey,
found no evidence to link the tort litigation crisis with economic
difficulty. Nor did they uncover any evidence to connect benefits to
proposed tort system reforms.''
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2. the bill
H. R. 3509, a seemingly simple bill imposing a 12-year statute of
repose on civil actions involving durable goods, is flawed at a
technical level.
It is unclear whether it applies to regulatory post-repose actions
initiated by state or federal consumer protection agencies.\4\
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\4\ Jennifer R. Sentivan, The Statute of Repose Precludes Community
Affairs Department From Filing Enforcement Action, 12 New Jersey
Lawyer 17 (May 5, 2003).
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It is unclear whether it affects recall litigation in the post-
repose period.
It is unclear about what happens in the presence of knowing
concealment of design or structural deficits.\5\
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\5\ For a ``fraudulent concealment'' exception, see General
Aviation Revitalization Act of 1994, Pub. L. No. 103-298, 108 Stat.
1552, Section 2(b)(1), 49 U.S.C. 49101 et. seq.
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It is unclear what happens to vested claims--that is, injuries that
have already occurred (for which a claim has not been filed) prior to
the 12-year bar.
And it is unclear in text and import as to how it would meet its
stated goals of increasing competitiveness or reducing insurance.
3. the bill does not advance the interests of consumers
The technical shortcomings of the bill, however, pale in comparison
to the harm this bill will cause consumers.
The bill undermines incentives for better design, for innovation,
in products designed for long term use.\6\
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\6\ ``[T]he basic, if not singular, function of tort law is to
create incentives for reducing tortious risks. Optimally, tort achieves
this goal by threatening potential injurers with liability for all
losses their tortious conduct may cause, compelling them to internalize
the costs of tortious harm before they take risky action. . . .''
[footnotes omitted]. David Rosenberg, Mass Tort Class Actions: What
Defendants Have and Plaintiffs Don't, 37 Harv. J. on Legis. 393, 404
(2000). ``One manner in which tort liability may affect well-being is
through the incentives it creates for potential injurers to take care
or otherwise to adjust their behavior to reduce harm and thereby
decrease their chances of having to pay damages. . . .'' Louis Kaplow
and Steven Shavell, Fairness Versus Welfare, 114 Harv. L. Rev. 961,
1039 (2001).
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The bill displaces manufacturers from the liability cycle when they
are in the best position (a) to cover claims made from products they
sold \7\--and from which they profited--and (b) to improve the long
term integrity of the products they will sell in the future.\8\
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\7\ Manufacturers of products used the workplace have a duty to
warn of defects discovered after a product has been sold. Liriano v.
Hobart, 170 F.3d 264 (2d Cir. 1999). Quite obviously, they have a duty
to exercise due care in the design of such products, based on their
foreseeable use. With durable goods, the notion that those duties would
be extinguished arbitrarily after 12 years seems irrational,
particularly if the goods are marketed to an employer on the basis of
their ability to function effectively over longer periods of time.
\8\ Despite significant regulatory efforts [e.g., 29 U.S.C. 654
(2000), that requires every employer ``(1) shall furnish to each of his
employees employment and a place of employment which are free from
recognized hazards that are causing or are likely to cause death or
serious physical harm to his employees. . . .''], the American
workplace is not as safe as it should be. Every year, more than 6,000
workers die of workplace injuries. Tens of thousands are injured.
``Many worker deaths are the types of deaths that would make headline
news if the perpetrator was an ordinary citizen. For example, some
workers have been decapitated on assembly lines, ground up in a cheese
grinder, buried alive in corn, or seared to a furnace room floor.''
[footnotes omitted]. Elizabeth A. Lambrecht Karels, Current Public Law
and Policy Issues: Make Employers Accountable for Workplace Safety! How
the Dirty Little Secret of Workers' Compensation Puts Employees at Risk
and Why Criminal Prosecution and Civil Action Will Save Lives and
Money, '' 26 Hamline J. Pub. L. & Pol'y 111, 129, 143 (2004). Passing a
law that eliminates responsibility for those who design and sell
workplace equipment only exacerbates this situation.
---------------------------------------------------------------------------
The bill undermines the distribution of risk that underlies much of
the liability theory that has been argued by those seeking tort
reform.\9\
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\9\ Jan Allan Baughman, Comment, 25 Cap. U. L. Rev. 671, 703
(1996). ``Statutes of repose are reform measures that provide
unnecessary, inappropriate protection to manufacturers and insurers at
the expense of injured consumers. Important policies such as safety
promotion and risk-spreading are compromised. Injured plaintiffs are
denied redress for manufacturers' wrongs, regardless of a product's
defectiveness, notwithstanding a claim's legitimacy. Instead, an
arbitrary time period determines a manufacturer's liability.''
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The bill denies innocent injured persons their right to redress of
wrongs in a court of law \10\ raising questions of basic due process,
equal protection, and access to courts.
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\10\ States have long recognized that for certain activities and
products, statutes that restrict litigants' rights based on artificial
time frames can be greatly unfair. For example, in Terry v. N.M. State
Highway Comm'n, 98 N.M. 119, 120-23, 645 P.2d 1375, 1376-79 (1982),
the court held that a 10-year statute of limitations was unfair as
applied to architects, contractors, and engineers because their work
was designed to be used and relied upon well beyond that time frame.
The same can be said about durable goods. They are supposed to last far
beyond the 12-year limit H.R. 3509 suggests--presumably, that is why
they are referred to as durable. A number of states faced
constitutional challenges to such statutes, often finding the statutes
denied rights protected under a state constitution, e.g., Jackson v.
Mannesman Demag Corp., 435 So. 2d 725 (Ala. 1983); Turner Constr. Co.
v. Scales, 752 P.2d 467 (Alaska 1988); Hazine v. Montgomery Elevator
Co., 861 P.2d 625 (Ariz. 1993); Austin v. Litvak, 682 P.2d 41 (Colo.
1984); McCollum v. Sisters of Charity of Nazareth Health Corp., 799
S.W.2d 15 (Ky. 1990); Dickie v. Farmers Union Oil Co., 611 N.W.2d 168
(N.D. 2000); Hanson v. Williams County, 389 N.W.2d 319 (N.D. 1986);
State ex rel. Ohio Acad. of Trial Lawyers v. Sheward, 715 N.E.2d 1062
(Ohio 1999); Lyons v. Lederle Labs., 440 N.W.2d 769 (S.D. 1989);
Daugaard v. Baltic Co-op Bldg. Supply Ass'n, 349 N.W.2d 419 (S.D.
1984), abrogated by Cleveland v. BDL Enters., Inc., 663 N.W.2d 212,
224 (S.D. 2003); Nelson v. Krusen, 678 S.W.2d 918 (Tex. 1984); Sax v.
Votteler, 648 S.W.2d 661 (Tex. 1983); DeYoung v. Providence Med. Ctr.,
960 P.2d 919 (Wash. 1998); Kohnke v. St. Paul Fire & Marine Ins. Co.,
410 N.W.2d 585 (Wis. Ct. App. 1987), review granted 416 N.W.2d 296
(Wis. 1987), aff'd and remanded, 424 N.W.2d 191 (Wis. 1988).
---------------------------------------------------------------------------
The bill abolishes lawful claims of consumers before a consumer
could know of the risks they face.\11\
---------------------------------------------------------------------------
\11\ Friedrich K. Juenger, The Complex Litigation Project's Tort
Choice-of-Law Rules, 54 La. L. Rev. 907, 916 (1994). ``Agitation for
`tort reform' has produced a motley array of laws lobbied by powerful
and well organized special interest groups. The manner in which these
enactments curtail the rights of tort victims differs from one state to
the next. Among them are arbitrary caps on damages, stunted limitation
periods, `statutes of repose' that bar actions before they arise, as
well as provisions abolishing the collateral source rule or joint and
several liability, to name just a few. . . .'' (footnotes omitted).
---------------------------------------------------------------------------
The bill seemingly exposes employers to greater liability rather
than sharing that liability with manufacturers of defective workplace
equipment.\12\
---------------------------------------------------------------------------
\12\ If a worker's recourse is limited to workers' compensation,
after 12 years innocent workers suffering severe injury from workplace
accidents caused by defective machinery will have no ability to collect
for the broad ranges of compensable losses not covered by workers
compensation. ``Often, workers' compensation benefits paid to injured
workers are lower than the actual damages they have incurred.'' S.
Elizabeth Wilborn Malloy, The Interaction of the ADA, the FMLA, and
Workers' Compensation: Why Can't We Be Friends? 41 Brandeis L. J. 821,
849 (2003) [footnotes omitted].
---------------------------------------------------------------------------
The bill addresses a tort reform fantasy--litigation regarding
older durable goods--when in the grand scheme of things there is not
much evidence of litigation regarding long term goods.\13\
---------------------------------------------------------------------------
\13\ Robert Van Kirk, Note, The Evolution of Useful Life Statutes
in the Products Liability Reform Effort, 1989 Duke L.J. 1689, 1712-3
(1989). ``Some studies indicate that as many as ninety-seven percent of
all product related injuries occur within the first six years following
manufacture. Although proponents may use this figure to suggest that
relatively few plaintiffs will be affected adversely by a typical ten-
year statute of repose, the figure also suggests that many of the
arguments in favor of statutes of repose may be overstated. If only
three percent of all claims are eliminated by a six-year repose period,
then the efficacy of such statutes undoubtedly is called into question.
. . . [T]he insurance industry has failed to demonstrate that suits
against older products actually are responsible for a proportionately
larger share of damage awards. . . .''
---------------------------------------------------------------------------
The bill ignores the reality of variation in the anticipated life
of durable goods--the fact is, there are products designed, and priced,
for very long term use.\14\
---------------------------------------------------------------------------
\14\ ``Another drawback of a statutorily defined time limit is that
statutes of repose simply lack the flexibility to deal effectively with
products of varying anticipated lives. . . .'' Van Kirk, id. at 1714.
---------------------------------------------------------------------------
The bill punishes consumers and workers, not for filing at the
wrong time or bringing claims with questionable merit, but rather for
being injured by a defective product at the wrong moment in time.\15\
---------------------------------------------------------------------------
\15\ In DeLuna v. Burciaga, 2005 WL 1862395 (1st Dist., Aug. 5),
the court held that ``[a] statute of repose gives effect to a policy
different than that advanced by a period of limitations; it is intended
to terminate the possibility of liability after a defined period of
time, regardless of a potential plaintiff's lack of knowledge of her
cause of action.'' Reported in GARMISA, `Test Case' that Failed
Results in Legal Malpractice Claim, Chicago Daily Law Bulletin, Sept.
8, 2005, p. 1.
---------------------------------------------------------------------------
The bill cuts away at incentives to undertake long-term
longitudinal studies of risk or engage in long-term product monitoring
and record-keeping.\16\
---------------------------------------------------------------------------
\16\ The problems of document retention and record keeping are
troubling. Efficiency pressures and litigation anxiety have led
businesses to purge office environments of all documents arguably not
required to be maintained. Such purges have led to obstruction of
justice charges when investigations of misconduct are thwarted by
overly aggressive document retention policies. Christopher R. Chase, To
Shred or Not to Shred: Document Retention Policies and Federal
Obstruction of Justice Statutes, 8 Fordham J. Corp. & Fin. L. 721
(2003). It is quite easy to imagine a 12-year ``total shred'' policy
for equipment manufacturers if H.R. 3509 becomes law--and equally easy
to see how that policy would destroy the ability of injured workers to
develop proper product function/product failure histories.
---------------------------------------------------------------------------
The bill creates a de jure interference with private contracts,
limiting a sellers claim of ``useful life'' and the common law
obligations that would otherwise flow therefrom.\17\
---------------------------------------------------------------------------
\17\ ``At purchase, the expectations of both parties will embody a
generalized conception about the length of time the product will render
service. Intertwined with these expectations is an implicit
understanding that if the product contains a defect and is therefore
unreasonably dangerous, then the purchaser will be able to seek redress
from the manufacturer. Manufacturers cannot justifiably express
surprise or claim unfairness when injured parties ultimately bring
suit. Presumably, a manufacturer of industrial machinery understands
that her product is designed to last for at least a decade and perhaps
much longer. She must realize at the point of sale, therefore, that
suits may be brought against her at any time in the course of that
product's life.'' Van Kirk, supra, note 13, pp. 1714-15.
---------------------------------------------------------------------------
The bill undermines transparency, creating an incentive for a
manufacturer to be circumspect about data they may have on long term
use of their goods.\18\
---------------------------------------------------------------------------
\18\ It is already difficult to compel disclosure of material facts
outside of a clear duty to do so. Even in cases of arguable fraudulent
concealment of facts, courts have been cautious in finding a duty to
disclose information in the absence of a clear statutory or common law
duty to do so. Moses.com Securities, Inc. v. Comprehensive Software
Systems, Inc., 406 F.3d 1052, 1064-1065 (8th Cir. 2005). If H.R. 3509
passes, it will greatly limit the ability of an injured worker to get
data from a manufacturer in the post repose period.
---------------------------------------------------------------------------
The bill creates no incentive to recall products \19\ found to be
dangerous after extended use.\20\
---------------------------------------------------------------------------
\19\ Jeffrey A. Lamken, Note, Efficient Accident Prevention as a
Continuing Obligation: The Duty to Recall Defective Products, 42 Stan.
L. Rev. 103, 127 (1989). ``Concern over potential liability provides
efficient incentives to recall a defective product. . . .''
\20\ Cutting off liability, arbitrarily, may undermine the
incentives for better products and services. See Gary T. Schwartz,
Mixed Theories of Tort Law Affirming Both Deterrence and Corrective
Justice, 75 Tex. L. Rev. 1801 (1997).
---------------------------------------------------------------------------
The bill creates tension in terms of labor/management relations
since workers and employers would be denied access to the ``true
source'' of fault in a factory accident caused by defects in the
equipment or machinery used.\21\
---------------------------------------------------------------------------
\21\ Joan T.A. Gabel, Escalating Inefficiency in Workers'
Compensation Systems: Is Federal Reform the Answer? 34 Wake Forest L.
Rev. 1083, 1136 n.285 (1999) (``Workplace injuries involving defective
products are liability concerns for the product manufacturers as well
as the employers.''), citing Thomas A. Eaton, Revisiting the
Intersection of Workers' Compensation and Product Liability: An
Assessment of a Proposed Federal Solution to an Old Problem, 64 Tenn.
L. Rev. 881, 886 (1997). The workers compensation funds are simply not
sufficient to cover broad losses from devastating injuries. See Malloy,
supra, note 12.
---------------------------------------------------------------------------
The bill affects disproportionately low to moderate income workers
who are more likely to work in traditional blue collar employment
environments where exposure to equipment--as defined in the bill \22\--
is common.\23\
---------------------------------------------------------------------------
\22\ Suffice it to say that the incidents of equipment related
injuries in agriculture and industry are frightening. ``While there are
various reasons why farm injuries occur, many of the most severe
incidents are directly related to the use of farm equipment.
Agricultural machinery is becoming more complex and more powerful as
new technologies develop, creating an intense need for implements to be
as safe as possible.'' [footnotes omitted]. Nathaniel R. Boulton, Note,
The Farmer's Retort to Tort Reform: Why Legislation to Limit or
Eliminate Punitive Damages Hurts the Agricultural Sector, 9 Drake J.
Agric. L. 415, 427 (2004).
\23\ E.g. factory machinery (presses, mixers, joining apparatus,
molding machines, fork lifts, packing machines, steam or hydraulic
lifts, high power pumps), farm equipment, including balers and
tractors, and many types of construction tools from compressor to
drills, are all made to last longer than 12 years.
---------------------------------------------------------------------------
People injured by products used properly should have no less right
to compensation if they are injured in the 11th or 13th year of a
product's useful life.
There is not one line in this bill that actually helps consumers;
nothing to facilitate claims, nothing to improve product quality,
nothing to lessen worker costs for injuries.\24\
---------------------------------------------------------------------------
\24\ Legislation of this type leads inevitably to the conclusion
that our political system has made its choice: as between at-risk
workers and large corporations, the corporations are the favored
interest. ``[T]he environment created by the current executive
administration is to give lip service to the American worker while
giving a wink and a nudge to big business. . . .'' Lambrecht, supra,
note 8, p. 136.
---------------------------------------------------------------------------
And what arguments support the bill? H.R. 3509 relieves ``at
fault'' manufacturers of their responsibility.
4. conclusion
This is tort reform as I have come to understand it--a series of
bills that have but one meaning: reducing accountability and giving
consumers and workers nothing in exchange. It is not that it is
incomprehensible. In fact, the reasoning is all too understandable. Who
would not like to be excused of responsibility after they engaged in
misconduct? The fact that the reasoning underlying this bill is
understandable, however, does not mean that it is right, proper, just
and fair. It is none of those things. I urge the committee to reject
H.R. 3509. Thank you.
Mr. Cannon. You may not have noticed, but you ended exactly
as the red light came on. This is a remarkable panel. Thank
you. Mr. Mack, you're recognized for 5 minutes
TESTIMONY OF JAMES H. MACK, ESQ., VICE PRESIDENT, GOVERNMENT
RELATIONS, THE ASSOCIATION FOR MANUFACTURING TECHNOLOGY,
McLEAN, VA
Mr. Mack. Thank you, Mr. Chairman. This is not the first
time that AMT has appeared before this Committee in support of
product liability reform. Over the years, we've testified
before this and other Congressional Committees in support of
numerous product liability bills.
Because these bills were broader in scope than H.R. 3509,
some of their provisions drew controversy that could not be
overcome during their consideration by the Senate and or the
White House.
H.R. 3509 is different. It deals only with the issue of
over-age workplace products. It does not contain controversial
provisions on other product liability issues that have held up
passage in past years
Under this proposal, no injured worker would go
uncompensated. H.R. 3509 would only deal with claims involving
injuries allegedly caused by workplace durable goods for which
the plaintiff has received or is eligible to receive worker's
compensation.
For those specific kinds of cases, it would create a
uniform national statute of repose, preempting any State
statutes of repose that apply to these claims. Otherwise, State
law would continue to apply. Thus, State statutes of repose
that may cover consumer goods and other non-durable goods would
not be affected.
Why make a special rule for machine tools and other
manufacturing equipment?
Well, let me try to deal with that. Everything in this
hearing room, except for the people, was either made by a
machine tool or made by a machine that was made by a machine
tool. A strong machine tool industry is vital to America's
military and economic security. Our industry is very cyclical.
Price pressures are very strong. Profitability is very low,
even in good years. Domestic consumption of machine tools is 14
percent higher today than it was a year ago, but domestic
production is only up 7 percent. Imports now represent 65
percent of domestic consumption.
AMT estimates that the average age of machine tools
installed in American factories has climbed from 10 years, the
last time we testified in 1999, to 13 years in 2004. When a
factory decides to invest in new capital equipment, the old
machinery is usually not thrown in the trash heap. Instead,
companies who lack the resources for new machines purchase
these over-age machines, often altering them to fit their
needs.
This process is repeated, as newer machines are required
and older ones are resold. Safety features built into the
original equipment have sometimes been negligently or
intentionally disabled by employers or workers in an effort to
increase production or to avoid the nuisance of dealing with
guards or lockout mechanisms and other safety features.
The result of all these factors is a big overhang of
overage machine tools in the U.S. market, which are the subject
of four-fifths of our industry's lawsuits.
Under product liability law today in many States potential
liability for my industry's products is endless, literally
forever. Many of these machines built before Ronald Reagan
became President, before the creation of OSHA, before Neil
Armstrong walked on the Moon, before the Beatles came to
America, and yes, even before I was born 70 years ago are still
in use today.
The survey data contained in my written testimony documents
that such litigation is a drain on financial resources not only
from adverse settlements or verdicts, but from the cost of
successful defense.
Most cases involving overage machine tools never go to
trial, and if they do, a jury almost always finds for the
defendant. If a machine has functioned properly for 12 years,
it's highly unlikely that it was improperly designed.
However, even when these lawsuits are won, the litigation
nevertheless results in unnecessarily high legal and
transaction costs. The claimant's pleadings must be answered.
Depositions taken. Design experts consulted. Historical
records, if any, unearthed and evaluated. And the result is a
substantial expenditure of funds, additional litigation in our
courts, and the diversion of resources that could be invested
in greater competitiveness.
Our most recent financial performance report shows that the
median expenditure by our members for product liability costs
was 0.6 percent of sales, about half of this for insurance
premiums; the other half on settlement awards and out-of-pocket
costs.
This 0.6 percent may not sound like much until you learn
that in 2004, median after-tax profits for companies in our
industry was only 1.9 percent of sales.
Mr. Chairman, H.R. 3509 is a narrow bill that addresses the
problem of overage workplace equipment in the U.S. market for
manufacturers of that equipment. It's the end result of years
of negotiations with the Congress. It provides for two-way
preemption. It's limited to workplace products. It assures no
claimant would go uncompensated, and it contains a toxic harm
exclusion, including but not limited to exposures to asbestos.
It's essentially the same bill this Committee approved 5
years ago. And it--and the bill that the House passed.
It will improve the competitiveness of U.S. workplace
equipment manufacturers and at the same time it assures no
injured worker would go uncompensated. It's good legislation,
and we respectfully urge its adoption. Thank you, Mr. Chairman.
[The prepared statement of Mr. Mack follows:]
Prepared Statement of James H. Mack
i. introduction
My name is James H. Mack, Vice President of Tax and Economic Policy
at AMT--The Association For Manufacturing Technology--a trade
association whose membership represents over 350 manufacturing
technology providers located throughout the United States, almost the
entire universe of machine tool builders who operate here. Most of them
would be classified as small businesses, with only about a half dozen
having more than 500 employees. About 40 percent of our industry's
output is exported.
Pursuant to House Rule XI, clause 2(g)(4), I am obliged to report
to you that AMT received $225,100 from the Commerce Department's Market
Co-operator Development Program for a technical center in China. One
hundred sixty-five thousand three hundred dollars was disbursed in
2005. The $59,800 balance will be disbursed by the end of this month.
According to the U.S. Census of Manufacturers, 78 percent of the
companies in our industry have less than 50 employees. They build and
provide to a wide range of industries the tools of manufacturing
technology including cutting, grinding, forming and assembly machines,
as well as inspection and measuring machines, and automated
manufacturing systems.
Everything in this hearing room, except for the people, was either
made by a machine tool or made by a machine made by a machine tool.
Several years ago, the
Reagan and first Bush Administrations, responding to strong
encouragement of over 250 Members of Congress provided temporary import
relief for our industry, based on the threat posed to our national
security from Asian machine tool imports. They did so because of their
recognition that a strong machine tool industry is vital to America's
military and economic security.
Our industry is very cyclical. Price pressures are very strong, and
profitability is relatively low--even in good years. Domestic
consumption of machine tools is 14 percent higher than a year ago, but
domestic production is only up seven percent. Imports represent 65
percent of domestic consumption.
AMT estimates that the average age of machine tools has climbed
from 10 years in 1998 to nearly 13 years in 2004. When a factory
decides to invest in new capital equipment, the old machinery is
usually not thrown in the trash heap. Instead, companies, who lack the
resources for new machines, purchase these over-age machines, often
altering them to fit their needs. This process is repeated, as newer
machines are acquired and older ones resold. The result of all of these
factors is a big overhang of over-age machine tools in the U.S. market.
This exposes the manufacturers of the old equipment to costly
litigation.
ii. the need for a federal statute-of-repose for workplace durable
goods
Unlike a statute of limitations, a statute-of-repose measures the
time limitation from the date of the initial sale of the capital
equipment. Statutes of limitations, by contrast, typically impose a
time limit measured from the time of the injury or the discovery of its
cause.
Under product liability law today, in many states, potential
liability for my industry's products is endless--literally ``forever.''
Many of these machines--built before Ronald Reagan became President,
before the creation of OSHA, before Neil
Armstrong walked on the moon, before the Beatles came to America,
and yes, even before I was born seventy years ago--are still in use
today.
Although these machines were built decades ago to safety standards
of their day and although they are likely to have passed through
several owners--each of whom are likely to have made their own
modifications to accommodate their needs--they are still the subject of
four-fifths of our industry's lawsuits. Safety features built into the
original equipment have sometimes been negligently or intentionally
disabled by employers or workers in an effort to increase productions
or avoid the ``nuisance'' of dealing with guards, lock-out mechanisms,
and other safety features. But proving such circumstances is extremely
difficult. This litigation imposes liability in situations where our
members have not exercised control over the product for such a long
period that it is unfair to hold them accountable for the products
performance.
Such litigation is also disproportionately expensive and socially
unproductive. It is a drain on financial resources, not only from the
adverse verdicts, but from the costs of successful defense. Most cases
involving overage machines never go to trial, and if they do, a jury
almost always finds for the defendant. If a machine has functioned
properly for 12 years, it is highly unlikely that the machine was
improperly designed.
However, even when these lawsuits are ``won,'' the litigation
nevertheless results in unnecessarily high legal and transaction costs.
No matter how frivolous the actual facts, the claimant's pleadings must
be answered, depositions taken, design experts consulted, and
historical records, if any, unearthed and evaluated. The result is a
substantial expenditure of funds, additional litigation in our courts,
and the diversion of resources that could be invested in greater
competitiveness. Insurers know this and factor it into insurance
premiums.
This also results in legal extortion, in which baseless suits are
filed by entrepreneurial lawyers, who know that many companies and/or
their insurers will pay an out-of-court settlement rather than accept
the risk and high cost of defense. When a case does go to trial and the
jury finds for the claimant, the judgment can force a company to close
its doors. The $7.5 million verdict in 1996 involving a machine built
in 1948 against Mattison Technologies, a 100-year-old Rockford,
Illinois machine tool builder, led to the company's bankruptcy.
In contrast, the incursion by foreign machine tool builders into
the U.S. market is fairly recent (within the past 25 years). Therefore,
foreign machine tool builders do not bear the significant long-tail
exposure of U.S. builders. American companies that have been in
business for many years must factor into their prices the risk of
litigation involving thousands of overage machines. Our Japanese and
European competitors don't have those risks and those costs. Their
liability exposure is relatively small (both Europe and Japan have 10-
year statutes-of-repose, if they are sued in their home markets).
Enactment of a statute-of-repose for workplace durable goods would
therefore level the playing field for U.S. manufacturers and achieve
the uniformity and certainty necessary to produce the state-of-the-art
products for which we are noted.
iii. h.r. 3509
I appreciate the opportunity to testify in support of ``The
Workplace Goods Job Growth and Competitiveness Act of 2005'' (H.R.
3509). This is not the first time AMT has appeared before this
Committee in support of product liability reform. Over the years, we
have testified before this and other Congressional committees in
support of numerous product liability bills. Because those bills were
broader in scope than H.R. 3509, some of their provisions drew
controversy that could not be overcome during their consideration by
the Senate and/or the White House.
H.R. 3509 is different. H.R. 3509 deals only with the issue of
overage workplace products. It does not contain controversial
provisions on other product liability issues that have held up passage
in past years. Under this proposal, no injured worker would go
uncompensated. H.R. 3509 would only deal with claims involving injuries
allegedly caused by
workplace durable goods for which the plaintiff has received or is
eligible to receive worker compensation. For that specific category of
cases, the provision would create a uniform, national statute-of-
repose, preempting any state statutes-of-repose that apply to those
claims. Otherwise, state law would continue to apply. Thus, state
statutes-of-repose that may cover consumer goods and other non-durable
goods would not be affected.
Some earlier product liability bills had ``one-way preemption,''
which would create a federal statue-of-repose in those states with no
statutes-of-repose while preserving shorter state repose periods.
Unlike those provisions, H.R. 3509 has ``two-way preemption,'' which
will actually extend the repose period for capital goods to 12 years in
nine of the 11 states that have enacted time limits; but our members
are willing to accept that extension in order to achieve the certainty
a national period of repose would provide.
An additional eight states have enacted statutes-of-repose based on
the ``useful safe life'' of the product. This approach has proven to be
ineffective; because the ``useful safe life'' of each product must be
litigated in every case, and substantial transaction costs must still
be incurred.
iv. amt's 31st annual product liablity survey
Preliminary results of AMT's 31st Annual Product Liability Survey
indicate that our members and/or their insurers could reduce their
product liability costs by 62 percent, through adoption of a federal
product liability statute-of-repose.
Twenty-five percent of the respondents reported claims in 2005.
Virtually all of the claims were brought in state courts.
None of the closed claims reported from 2005 reached trial. Fifty
percent were settled for an average of $146,100 and the remaining 50
percent were dropped without awards being paid. In addition, companies
experiencing litigation had an average of three claims pending at
year's end.
Whether cases are won, lost, or settled--defense costs for our
members are substantial. The 1992 Insurance Services Office (ISO)
closed claims study shows that for every $10 paid out to claimants by
insurance companies for product liability, another $7 is paid for
lawyers and other defense costs. These transaction costs will be
reduced substantially, if Congress enacts H.R. 3509.
Based upon these survey results, every 100 claims filed against
machine tool builders ``cost'' $10.4 million--including $5.1 million in
defense costs and $2.3 million in subrogation paid to employers and/or
their workers' compensation carriers, regardless of employer fault or
the lack thereof. In other words, the current system provides $3.0
million to claimants (less whatever they pay out in contingency fees,
which average 33 percent) and $7.4 million in transaction costs.
If a 12-year statute-of-repose were to be enacted, the ``cost'' of
the same 100 claims filed against machine tool builders would be $4.0
million--a savings of $6.4 million or 62 percent. Eighty-four percent
of our members' closed and pending claims
(and the substantial transaction costs associated with them) would
have been eliminated by a 12-year statute-of-repose.
iv. conclusion
Mr. Chairman, H.R. 3509 is a narrow bill that addresses the problem
of overage workplace equipment in the U.S. market for manufacturers of
that equipment. It does not affect claims involving other products. It
establishes no precedent on whether states should enact statutes-of-
repose governing other products nor on the appropriate scope or length
of these statutes.
H.R. 3509 is the end result of years of negotiations within the
Congress. It provides for two-way preemption; it is limited to
workplace products; it assures no plaintiff would go uncompensated; and
it contains a toxic harm exclusion, including, but not limited to,
exposures to asbestos.
H.R. 3509 is essentially the same bill approved by the Judiciary
Committee in 1999 and passed by the House in 2000. If this bill is
broadened in an attempt to help manufacturers of non-workplace durable
goods, or to provide one-way preemption; no company will ultimately be
better off because the bill will not become the law of the land. The
concerns of other manufacturers can be addressed in other legislation
now or in the future.
By enacting H.R. 3509, as it is written, you would be declaring
that endless litigation involving overage workplace equipment in the
U.S. marketplace is a serious problem facing American producers who
are, after all, the foundation of our industrial economy; and that the
interstate commerce clause impels a federal solution. It is a problem
not faced by our Asian and European competitors in their own markets
nor, because of the longtail of exposure, in ours. The current system
has cost jobs, money, and time. The principal beneficiaries have been
lawyers on both sides of the counsel table. Advances in high-tech
products are slowed as a result. Resources that could have gone toward
the development of new technology and higher productivity for America
have been expended on wasteful transaction costs with a relatively
small percentage of total litigation dollars going to injured workers.
Enactment of H.R. 3509 will improve the competitiveness of U.S.
workplace equipment manufacturers by driving down their litigation
costs and cutting down on meritless lawsuits. At the same time, it
ensures that no injured worker would go uncompensated. Passage of
similar legislation relating to private aircraft has revitalized the
domestic aircraft industry.
This is good legislation, and we respectfully urge its adoption.
Thank you for your attention. I would be pleased to respond to your
questions.
Mr. Cannon. Thank you, Mr. Mack. The Chair would now
recognize Mr. Watt for 5 minutes for questioning.
Mr. Watt. Thank you, Mr. Chairman, and I appreciate your
allowing me to go first. And I apologize to the witnesses
because I need to leave to make something that's over at 2
p.m., and I'm trying to get there just for a few minutes.
I guess I'm tempted to pick up on the personal
responsibility tack that Professor Popper picked up on, since
that was the other mantra that a number of my colleagues came
into Congress on--personal responsibility. I'm not sure exactly
how I think this bill supports that or the proposition of
States' rights, but I'm not going there. He covered that.
I'm tempted to pick up on the 7,000 plus machines that were
sold by Ms. Sitterly's employer with only one lawsuit. But I
don't think I'll go either, because that's really not
substantively what I'm concerned about.
What I am concerned about is Mr. McMahon's comment. Not
concerned, I just want to get more clarity because I'm not sure
under the standard that you have put forward here, whether
there would be any State tort law anymore. This notion that any
time you have some movement in interstate commerce, that gives
you the basis for Federal preemption, just talk to me a little
bit about what your theory is on what the standard for States
should be in this area and then maybe I can get a better idea
of what you think the standard ought to be.
Mr. McMahon. Right. Well, Congressman Watt, as you know,
the Constitution gives Congress the power to legislate in
matters of interstate commerce, so the issue is what particular
scenarios arise where it becomes compelling for Federal
preemption. With regard to the particular issue we have before
us and workplace durable goods, as I indicated in my testimony,
70 percent of the products that are manufactured in one
particular State will be sold and resold and sold and resold
over period of time and moved in many different States.
And, therefore----
Mr. Watt. But this bill applies to 100 percent. It doesn't
apply to 70 percent. Even if you accept that proposition, then
what about the machine that was sold 15, 18, 20 years ago. It
sat in the same State. You're saying that because that machine
moved in interstate to get to that location, all of a sudden
the Federal Government has some preemptive right to tell what
the statute of limitations ought to be?
Mr. McMahon. Well, again, I think it's a balancing of
equities and an issue of fundamental fairness. I think you have
to be cognizant of the fact that because so much machinery
moves State to State that in order to have a situation where
you don't have a patchwork quilt, if you will, of differing
State laws that apply and that manufacturers would have to then
prescribe to all of these varying standards. There are many
inequities there. It's inefficient. It's not cost effective.
Mr. Watt. Is it constitutional? Yeah. That's a good point.
Mr. McMahon. I--yeah. Okay.
Mr. Watt. But, you know, I'm just----
Mr. McMahon. I understand.
Mr. Watt [continuing]. You know I'm trying to get some
understanding of under your theory whether there would be any
State tort law. Well, let me postulate this case. This is the
one I always enjoy talking to my colleagues about. You got a
doctor who's operating on a patient inside North Carolina, a
patient certainly not straddling the State line. Maybe the
doctor is using a piece of operating equipment that was bought
in another State. That's enough to get you interstate
preemption, Federal preemption or you're saying--where's the
line here. I'm just trying to figure out what is the----
Mr. McMahon. Right. Well, first of all----
Mr. Watt. What is the logical line that we are going to
draw here between what the Federal Government's right is and
what the States have to do.
Mr. McMahon. Right. Well, first of all that good would have
to be 12 years earlier.
Mr. Watt. No. I'm not talking about under that. I'm talking
about. That was my shot at others' tort reform that they
already did, which I couldn't for the life of me understand why
medical negligence is a matter of Federal law as opposed to
State law. Nobody operates or sees a patient across State
lines. Now, maybe once and a while, I do live on the South
Carolina line, and I concede that some of my constituents may
go to South Carolina and get inferior medical care. Or some of
their constituents might come to North Carolina and get
superior medical care, whichever way you want to look at it. I
hope nobody from South Carolina is watching this. I get a lot
of nasty phone calls.
But I just--I mean I don't even--I don't understand what
the standard would be here that would give the Federal
Government the right to just--I mean and it's not substantive.
I mean North Carolina has got a shorter statute of repose, but
it seems to me that North Carolina ought to have that right to
decide what the--whether it's going to have a statute of repose
and what the statute should be. What is the justification for
even from a business standpoint taking the North Carolina 6-
year statute of repose and making it a 12-year statute of
repose?
Mr. Mack. Congressman, could I perhaps help----
Mr. Watt. Yes, sir.
Mr. Mack [continuing]. And----
Mr. Watt. Help me please.
Mr. Mack [continuing]. Help add to the confusion here.
The--I can't address anything other than product liability
cases here. That's what the subject of this hearing is about.
And if you're asking what is the justification for a Federal
preemptive statute addressing product liability cases, let me
try to give you one.
The insurance industry rates its product liability claims
on a national basis, with good reason. North Carolina has a
very short statute of repose for capital goods or for all
products. One of our members in North Carolina or perhaps a
woodworking machinery company in North Carolina pays the same
insurance rates as a company in New Jersey. Why?
Mr. Watt. I appreciate it, Mr. Mack. I hear what you're
saying, but now you're telling me that----
Mr. Watt. Without objection, the gentleman is recognized
for an additional minute.
Mr. Watt [continuing]. Just because the insurance industry
rates on some national basis that that's some basis
constitutionally for doing something.
Mr. Mack. Well----
Mr. Watt. I just don't accept that. Nor do I accept the
fact that just because a machine moved in interstate commerce
15 years ago, that somehow the Federal Government has the right
to tell that State what their statute of repose ought to be.
That is--that is a radical departure from where the law has
been in this country, and my--based on everything I know--you
know, I just don't understand how we get there from here.
Mr. Mack. Sure. The courts I think have, as I understand
it, have interpreted the 14th amendment to give Congress the
right to enact legislation that affects interstate commerce.
Then really it seems to me the question that you're asking is
should it do so. What justification is there to follow this
constitutional prerogative that Congress has and hopefully in
our written testimony and what we will say through the
afternoon's hearing that we will provide some justification for
doing that would satisfy your concerns, Congressman.
Mr. Watt. I obviously am not picking on anybody. I'm just
trying to get a standard here.
Mr. Mack. No, I know.
Mr. Watt. I appreciate it. I yield back, Mr. Chairman. And
I appreciate you for allowing me.
Mr. Cannon. The gentleman's time has expired. Once again, I
just might note that I've invited the new--the Chairman of the
Proposed Democratic States' Rights Caucus to take up as his
first issue the elimination of the Department of Education. I
will see if that--if we can gain some bipartisan support on
that.
Thank you. Mr. Chabot, would you like to make an opening
statement?
Mr. Chabot. Yes.
Mr. Cannon. Without objection.
Mr. Chabot. Mr. Chairman, I ask unanimous consent to make a
statement, and I'll keep it much shorter than the 5 minutes.
But I'd thought as the principal sponsor of this
legislation, I wanted to take just a couple of minutes why I
think we do need this important liability reform.
American manufacturers of durable goods are frequent
targets of litigation over products that are decades old and
have met all safety standards when that particular product was
put onto the market. The endless tale of liability puts U.S.
manufacturers at a disadvantage with their foreign
counterparts. Most often, when these suits are brought to
trial, defendant companies win, as has been mentioned. However,
because it costs so much to litigate these claims, companies
must often settle within their insurance limits and these
manufacturers are then forced to incorporate the risk of
litigation in the form of higher prices, which then ends up on
the backs of the consumers.
This bill will help save millions of dollars that would
have otherwise been spent on these types of frivolous lawsuits,
resources that could be used to compete in the global
marketplace and create jobs back home; therefore, it would be a
much better use of these dollars.
I also wanted to highlight the three core aspects of the
bill. Number one, H.R. 3509 imposes a nationwide statute of
repose. This national standard will provide needed stability in
the marketplace. And secondly, because the bill would only
apply to plaintiffs who are eligible to receive worker's
compensation, no one would go uncompensated, as has also been
mentioned.
Twelve years is an adequate amount of time to test a
product's viability without needlessly barring victims from the
courthouse.
Since the 106th Congress, I've worked to pass a national
statute of repose for durable goods in the workplace. In fact,
in the 106th Congress, the legislation passed the House and
then passed both bodies of Congress in product liability reform
legislation that was then unfortunately vetoed--unfortunately,
in my view, by President Clinton.
Since that time, I've continued to work with national
groups like the National Association of Manufacturers and small
groups located in my district in Cincinnati, Ohio, who continue
to pay settlements in frivolous cases, because it will cost
more to defend the case than to settle.
Jobs in the district that I represent, for example, are
continually threatened by frivolous suits and, in fact, back in
2001, a local company, Madison Grinder, was forced to close its
doors after a products liability suit.
Just the machine tool industry alone employs over 1,500
workers in the Cincinnati area. I might note, however, that it
wasn't too long ago when that 1,500 jobs was 7,000 jobs in the
Cincinnati area. It was always one of the premier areas for the
machine tool industry.
After the passage of several tort reform measures this
year, I'm pleased to see that we're once again highlighting the
runaway litigation costs that businesses in our country face at
the expense of the average consumer.
And I want to thank you, Chairman Cannon, for holding this
hearing, and we appreciate the testimony of the witnesses thus
far. I think whichever side they're on, I think it's really
been excellent. And I yield back my time.
Mr. Cannon. I thank the gentleman. Thank you for
introducing this legislation. We very much appreciate it. And
without objection, all Members will have 5 days--5 legislative
days to submit opening statements or additional materials for
the hearing record. Hearing no objections, so ordered.
At this point, we're a little bit out of order, because Mr.
Watt needed to leave. So if it's okay, Mr. Delahunt, we'll call
on Mr. Coble. Is that? Thanks. Mr. Coble--the gentleman is
recognized for 5 minutes
Mr. Coble. Thank you, Mr. Chairman. Bill, are you on a
short leash? Do you need to go earlier?
Mr. Delahunt. No. I'm fine.
Mr. Coble. Okay. Mr. Chairman, thank you for holding this
hearing. Thank you all for being with us.
Mr. Mack, what impact would the 12-year statute of repose
have upon a worker's ability to receive worker's comp and would
employers still be held liable for injuries that occur on the
job?
Mr. Mack. Well, under the provision of 3509, the only time
it comes into play is when the claimant is eligible for
worker's compensation, so we say unequivocally that no injured
worker would go uncompensated.
Mr. Coble. So no negative impact?
Mr. Mack. It would not in any way affect the claimant's
right to get worker's compensation or ability to get worker's
compensation, and only those persons who are injured in the
workplace and are eligible for worker's comp would this bill
be--go into effect.
Mr. Coble. All right. Now, you mentioned durable goods, Mr.
Mack. Comment a little bit more in detail, if you will. What
goods are intended to be included in the bill's definition and
what goods are not intended to be included?
Mr. Mack. Well, I think basically it is intended to cover
equipment like the stuff our folks make, which I indicated,
makes other things.
It might be construction equipment--equipment that is used
in the workplace to either produce a product or to work on a
project that--and I think under the definition of the bill is
intended to have a life of at least 3 years; is subject to
depreciation under the Internal Revenue Code; is used in the
trade or business for the production of income. It's intended
to cover workplace products that are used in the workplace that
cause traumatic injury. The last time we had this hearing, 5 or
6 years ago, there was a long discussion about toxic harms and
how do you define toxic harms and the Committee, in its wisdom,
provided a definition in the markup for toxic harm----
Mr. Coble. I know, and my time is about to run out, Mr.
Mack.
Mr. Mack. But it specifically said asbestos isn't covered.
Mr. Coble. Mr. McMahon, talk to me about two-way preemption
versus one-way preemption.
Mr. McMahon. Sure. I mean two-way preemption means that the
statute of repose will be extended in States that currently
have a fixed-time statute, like North Carolina has 6 years,
that would now be extended to 12 years under that bill.
One-way preemption creates Federal statute of repose in
States with no current statute of repose and preserves the
shorter statute of repose, so in North Carolina, it would be 6
years.
So many claim that that is unfair or has been claimed as
unfair and so, therefore, under this bill, there is two-way
preemption, not one.
Mr. Coble. And North Carolina would then be under the 12
year?
Mr. McMahon. Correct.
Mr. Coble. Okay. Mr. Chairman, in closing--I'm about out of
time here--this matter is clearly subject to interpretation,
some good, some bad. But I've heard horror stories. Ms.
Sitterly, you mentioned some that simply demand our imagination
in resolving it. You want to give one more before the red light
turns on? Before the red light illuminates in my eye and the
Chairman hammers me down?
Mr. Cannon. If you could turn the mike on, please?
Ms. Sitterly. I just recently settled a case on an mill
that was shipped in 1942, and we spent $151,000 in defense
costs and then settled it for $90,000. And I mean 1942. So I
think that's reason right there.
Mr. Coble. Well, what caused the injury?
Ms. Sitterly. A lot of comparative negligence honestly on
the operator. He stuck his hand in the mill. So the employer
trained him poorly, provided him with gloves, when the operator
manual clearly stated no gloves are to be used.
Mr. Coble. And the defendant was the original manufacturer
I take it in that case?
Ms. Sitterly. It was. Yes.
Mr. Coble. I see the red light, Mr. Chairman. Thank you,
sir.
Mr. Cannon. The gentleman yields back. Mr. Delahunt.
Mr. Delahunt. Yes. Thank you.
Mr. Cannon. The gentleman is recognized for 5 minutes
Mr. Delahunt. Yeah. I thank the Chair.
Counsel Sitterly, have you testified before the Wisconsin
State Legislature?
Ms. Sitterly. I have not.
Mr. Delahunt. You haven't? Has there been a proposal made
before the Wisconsin State Legislature that would embrace
basically the legislation that's before us now?
Ms. Sitterly. I'm afraid I don't know the answer to that.
Mr. Delahunt. You don't? Do you know if anybody has gone to
the Wisconsin State Legislature or the Administration in
Wisconsin and put forth legislation or a proposal that would
deal with I guess the word is horror stories or frivolous
lawsuits?
Ms. Sitterly. I'm afraid I don't know. I think they should,
though, if they haven't.
Mr. Delahunt. Well, that's my point. I mean I think they
should, too. If all these horror stories--and I'll accept your
version, okay and your conclusions--it's inarguendo, as we say.
I mean I sit here and I wonder, you know, I think the key
question was asked by Mr. Watt. You know, where is the line and
when is the Commerce Clause implicated? Maybe--I just jotted
some notes down. It's to ensure stability in the marketplace.
Maybe that's it. But, you know, this Constitution gets to be a
pesky thing sometimes when it doesn't work to your particular
advantage.
You know that's the problem with constitutions. You know
they can cause you aggravation and cause you to go out and
spend some money. But, you know, we heard--we hear the term
frivolous lawsuits thrown around. You know, I'm sure some
lawsuits are frivolous except can you--somebody give me a
definition that we could implicate into legislation.
I mean we're a democracy that prides ourselves in giving
access to the courts. And you know the Federal justice system
simply can't accommodate. But when I reflect and think of the
arguments that my friends and colleagues make who support this
legislation, I just--you know why not just file a bill and
abolish, you know, the--you know, State judicial systems. Now,
let's get a new amendment and update it. Maybe things have
changed because of the changes in the marketplace. Professor?
Mr. Popper. Well, that's a terrible idea. Thank you. Just
to comment on these horror story questions. I mean the real
horror story is the fact that there's 6,000 workers who die in
the workplace every year. There are tens of thousands of people
who are horribly injured. I made reference to it in my
testimony at Footnote 8.
Now, you want horror stories. There are horror stories of a
person ground up in a cheese grinder, buried alive in corn, or
seared to a furnace from the floor. The workplace is not a safe
place. We do our best. But when you try and think about
legislation that's balancing out profitability on one hand and
excess profitability in many cases, against basic safety from
those who are least able to protect themselves, I think the
balance has to tilt the other way. I mean in--and on this
federalism question, gee, you know the Constitution isn't all
that clear on a lot of areas, but one thing it is clear on and
that is it was written to limit the power of the Federal
Government, not to expand it.
Mr. Delahunt. Well, I--if I may, Professor, you know, as
I'm reading this bill for the first time, and I--as I read it,
I think there's some equal protection issues that are
implicated here as well in terms of how we treat different
victims.
You know and two-way preemption, I don't think that really
solves the constitutional issue, Mr. McMahon, and I'll
pronounce your name properly.
Mr. McMahon. One Irish to another.
Mr. Delahunt. These non-Irish, they just don't know how to
do it. I mean I can't believe what I've been hearing.
Mr. McMahon. We're close to St. Patrick's Day.
Mr. Delahunt. You know that's right.
But I mean we've heard these arguments, you know, before,
and, you know, Ms. Sitterly, I mean, you have had 7,000 cases
and only one went to trial? Did I catch that right?
Ms. Sitterly. Nine thousand machines. Yes. Yeah.
Mr. Delahunt. Okay. And only one went to trial. You know my
position is if--I think that the insurance carriers don't--I
think they take an easy approach, okay. And I don't think they
go to trial often enough. And when I hear arguments such as,
you know, oh, these are complicated cases. Well, I don't think
that most jurors are dumb. I really don't. And, you know,
there's that instinctual, common sense that you know that
people have, especially when it's done in a collective way.
I really do believe in the justice system, you know----
Mr. Cannon. Without objection, the gentleman's time will be
extended by 1 minute.
Mr. Delahunt. Thank you, Mr. Chairman. And I'll--I'll try
not to just ramble on.
But, you know, you got to tell these insurance companies,
if you're a company, hey, defend these things. If there are
frivolous lawsuits out there, go to trial. Go to trial and
establish the fact that, you know, that that's unacceptable and
is creating costs. I haven't seen any of the data, but, you
know, the whole profitability that Jim Mack brings up about .06
percent and 1.9 percent. I dare say an analysis is that if this
is a piece of our non-competitiveness, it's such--it's almost
infinitesimal, and that there are, you know, other factors that
are going into the equation that are hurting us competitively.
I mean I can think of you know those jobs going overseas and
labor costs and a whole variety of other things. But you know
those who might have a particular agenda when they come to tort
reform try to make it sound as, you know, these are runaway
costs for all these frivolous lawsuits and yet whenever I ask
for any data, I don't get any. I just get free-for-all. With
that, I'll yield back.
Mr. Cannon. Thank you. Very close to that additional
minute. We appreciate that.
Mr. Chabot.
Mr. Chabot. Thank you, Mr. Chairman.
Mr. Cannon. The gentleman is recognized for 5 minutes.
Mr. Chabot. Thank you. Before, I answer--ask questions, I
would just comment that the gentleman from Massachusetts I mean
I would stipulate that most juries aren't dumb and I, however,
think that many of the cases don't make it to trial. They get
settled. It's causing insurance rates to go up. It's making
U.S. companies less competitive. That's one of the reasons that
we have lost an awful lot of jobs in this country.
And perhaps--I'll open this up to any of the panelists--my
understanding is the statutes of repose in some of the other
countries--Japan, Korea, and others and relative to lawsuits--
does put us at a tremendous disadvantage, and if one of the
members would like to discuss that, either Mr. Mack or Mr.
McMahon.
Mr. Mack. Sure. The--yeah--both the EU and Japan have 10-
year statutes of repose that apply across the board to all
products, including those that cause toxic harms. I mean it--
and I'm not advocating that. But the point is that our
principal competitors are basically insulated from lawsuits in
their home market and in each other's markets by these statutes
of repose, and, therefore, don't have in their home markets or
each other's markets long tails of liability.
Mr. Chabot. Okay.
Mr. Mack. Now, in the United States, a Japanese company or
a European company is subject to the U.S. laws whatever they
are. But in our market, our home market, our members are
subject to this long tail of liability and the incursion of
foreign imports to the degree they are now is relatively
recent.
So a Japanese company or a European company or a Korean
company, because it doesn't have this long tail of liability,
when it goes to insure the products that it does sell in the
United States, the costs are infinitely lower, and their
overall liability costs are infinitely lower than a company
that has been around for a long time in the United States and
has produced jobs in the Cincinnati area for a gazillion years.
Mr. Chabot. Thank you. Mr. McMahon, I don't know if you--if
that was sufficient. It probably was. Let me get at a different
question, and you've already answered this to some degree, but
could you once again very briefly explain why the statute of
repose should be a Federal issue, and why we're moving forward
that way; why you think this is an appropriate route for the
Congress to go?
Mr. McMahon. Sure. I'd be glad to, Congressman.
As you know, Congress has the authority to act here under
article I, section VIII. The Constitution gives Congress the
power to legislate matters of interstate commerce. As was
raised in my testimony, at at least 70 percent we know of
manufactured workplace durable goods are moving in interstate
commerce. So even if you had a perfect set of State laws that
protected manufacturers and frankly balanced the rights of
manufacturers with plaintiffs, because that product is moving
across, especially a product, say, 30 years old that has been
owned and resold and sold and resold and moved in and out of
different States and all around that you don't have the ability
to apply any one State's particular law. Essentially, you can
allow plaintiff's attorneys to forum shop and because it has
been so many places and pick a jurisdiction in which they want
to file a claim, the manufacturers have no certainty; they have
no predictability because they don't know which particular laws
they're going to be held accountable to.
Mr. Chabot. And just to be clear, if a State, say, North
Carolina has a 6-year statute of repose, it goes up to 12?
Mr. McMahon. Correct.
Mr. Chabot. If the State had 15, it comes down to 12?
Mr. McMahon. Correct. That's two-way preemption.
Mr. Chabot. Right. And if a State has nothing, it's 12.
Mr. McMahon. Twelve.
Mr. Chabot. So 12 is going to be the statute of limitations
nationwide?
Mr. McMahon. Correct.
Mr. Chabot. Ms. Sitterly, let me conclude with you if I can
real quickly.
You mentioned in your testimony that you're hesitant to
bring cases to trial. Could you expand on that and the factors
that companies like yours must consider when evaluating a case,
even if it is frivolous.
Ms. Sitterly. Well, first, when you're dealing with----
Mr. Chabot. I think the mike's not on there, too.
Ms. Sitterly. I think it is. There.
Mr. Chabot. Okay.
Mr. Shays. The first thing is on a machine that's been
manufactured a decade or more ago, you have to retrieve the old
records and that implies that you can find the records, and
then you need to find an engineer, an expert, who is familiar
with the standards as they existed at the time. And then you
have to be able to have a jury focus on those standards and not
just go to the standards of today.
And also the fact that the transaction costs of defending a
case--depositions and outside experts and the cost that the
company bears on the witnesses that are in-house, for example,
the engineers. I mean instead of doing their jobs, they're out
preparing for depositions and the like. And also in machine
tool industries are usually graphic, and you have great
sympathy on the part of the plaintiff as well.
So those are some of the factors that we look at when we
decide whether or not we're going to take a case to trial or
settle it.
Mr. Chabot. Thank you. Thank you, Mr. Chairman.
Mr. Cannon. The gentleman yields back. Thank you. And
again, thank you, Mr. Chabot, for introducing this legislation,
which I think is great. And I'll talk about that. In fact, I'm
going to get on the soap box in a minute like many other people
have, but I have a couple of questions. First, Mr. McMahon,
previous versions of this bill as well as the General Aviation
Revitalization Act have contained an 18-year statute of repose.
Why is the 12-year statute of repose better?
Mr. McMahon. Mr. Chairman, that is a good question. You
know, why 12 years?
I think the key notion is a reasonable time period. As you
stated, GARA is 18 years. Nine of eleven States with statutes
of repose have--are shorter than 12 years. Japan and EU have 10
years. But they apply to all consumer goods. I know many
members of the NAM would support moving to that level, 10
years. The original or one of the original provisions related
to the statute of repose was in the Contract with America. That
was 10 years. Twelve years seems to be a more modest number
than past efforts at Federal legislation. It's also the mean,
between 6 and 18.
Mr. Cannon. Thank you. In addition to the 11 or so States
that currently have a fixed statute or term statute of repose,
an additional half dozen States, including my home State of
Utah have enacted a statute of repose that was ultimately held
unconstitutional under that State's constitution for violating
a right to trial or open courts provision.
First, is there any reason why a statute of repose would be
unconstitutional under the United States Constitution? And
second, why should Congress pass a law that effectively forces
those States to adopt a statute of repose when it would not be
constitutional for their State legislature to do so?
Is there any difference than the situation that occurred
when Congress passed the General Aviation Revitalization Act?
Mr. McMahon?
Mr. McMahon. I think GARA sets the precedent. I think it
explains the rationale. You know ultimately, this is a policy
decision. You want to balance the equities and adopt reasonable
limits on long tail liability. Again, products moving in
interstate commerce, this is a particular area similar to GARA
where there is an availability to do it, and I believe a desire
to do it, a justification I should say for it.
Mr. Cannon. Thank you, Mr. Mack, do you have any comment on
that constitutionality question?
Mr. Mack. Well, you're correct that some States have
provisions in their State constitutions dealing with open
courts and access to courts and the like, which provisions do
not appear in the United States Constitution and, therefore, do
not--would not bar a Federal statute of repose. I would argue
that the legislature in those States, having seen the need to
pass a statute of repose. One could argue that the people of
those States, represented by their legislatures and governors
do--would like to see some restraint on lawsuits involving
overage products.
The trend line, by the way, in States that have adopted
fix-termed statutes of repose has been to both in Texas, in
Connecticut, in Colorado, which I think are the most recent to
restrict the application to workplace injuries, perhaps for the
reason that this legislation does we should be able to argue
that no injured person, no injured worker under these--under
this bill would go uncompensated.
Mr. Cannon. Thank you. You know, I was struck, Mr. Popper,
by your comment that the real tragedy is the--first of all that
the workplace is not a safe place, and that the real tragedy is
6,000 deaths and you described a couple of ways people have
died recently in some graphic detail, and that is a matter of
concern. I personally have worked in that very unsafe
workplace--in a coal mine and also in a steel mill, and one of
the things that really strikes me, from my own personal
experience, and having watched the development of society over
the last few years is that there has been a dramatic reduction
in the number of people that are dying in the workplace.
And you talked earlier about the likely effect that this
bill would have on innovation and on design, and suggested that
that would be negative.
My own experience is that the global workplace has changed.
The paradigm has changed, and the companies that are going to
continue to compete have to be focused on design. They have to
be focused on innovation, but they have to also be able to have
an endpoint to the liability that their prior products have
caused.
Now, on the other hand, the reason injuries have declined
and deaths have declined is in large part because there's a
partnering between people that buy equipment and people that
design and sell equipment. And so people that have equipment or
resell equipment or move equipment and buy equipment from
people who've bought it before and they haven't used, there's a
huge incentive on the part of those people to be safe.
There are also incentives to make money and then to cut
corners and sometimes you get employees who cut corners and
unfortunately you let--there are employers who let employees do
that. I will never forget the yelling at I got when I didn't
card out an electronic circuit that I was involved in helping--
or working in the context of, because that was a company that
was deeply concerned about safety. Not all companies are.
But the key here-and the reason I think this legislation so
important--is that to the degree that you have--you bid up the
number of jobs, in other words, as you remove these obstacles
to new jobs, and the economy has more jobs, then part of the
compensation package becomes a safer work environment and
people move away from the kind of world view that allows people
to do dangerous things, and they move more toward the harsher
and safer world. It would be harsher in the sense that you
correct people that do unsafe things.
And over time, as we do that, we then refocus on innovation
and improved design and the effect of that is not just that
American workers, of whom 6,000 died last year, not only are
those American workers going to be safer, but around the whole
world workers are going to be safer.
So if we're really concerned about workers--in the first
place, how on earth do you compensate 6,000 deaths? That's a
very difficult problem.
On the other hand, how do you avoid the deaths, and it
seems to me that at some point you have to be looking at how we
create a world that in which the incentives align to create a
safer workplace. And it seems to me that this bill does that,
because it creates a virtuous cycle between the machine
manufacturer and his future business and the machine operator
company and his future business.
Did you want to comment on that, Mr. Popper?
Mr. Popper. Of course. Thank you. I guess we're going to
have to agree to disagree. Let's make the positive assumption.
Let's make the optimistic assumption that you're right; that
the workplace safety records have improved. And I think there's
a lot of data to that effect.
Mr. Cannon. That's not an assumption. I mean there's
massive data to that over the last--if you take last 20 years,
I mean the trend line is massive. Now, if it--whether it will
continue or not that's a different question. I agree. And we
may----
Mr. Popper. Right.
Mr. Cannon [continuing]. May not be so optimistic about
that, but there are lots of reasons to believe that we would.
Mr. Popper. Even if--making that assumption, why in the
world would you want to pull out of the marketplace a primary
incentive to make the workplace safer? You maintain liability
standards with the manufacturers, if that's had a positive
effect, then great.
This piece of legislation pulls out the rug from under the
workers, because right now----
Mr. Cannon. Can we interact on this just a little bit,
because----
Mr. Popper. Surely.
Mr. Cannon [continuing]. It seems to me that what this
legislation does is it says to the employer I'm the guy who's
going to be stuck, because the manufacturer is going to get off
the hook. And so the guy who's in charge of safety now has a
much higher reason to not be the deep pocket in the lawsuit. Is
there not some of that?
Mr. Popper. I don't really think that's the dynamic that
will occur, because the employer is going to have its liability
limited by worker's compensation. They're not going to be
liable in major product liability cases. They're not going to
be liable when there are foreseeable losses. They're not going
to be liable when the manufacturer is sitting on a longitudinal
study about downstream risk. They're not going to be liable for
any of that. They're going to be only liable to the extent that
there's worker's comp, which, as you know, is an exclusive
remedy and bars the kind of civil litigation that you're
describing.
Mr. Cannon. Unless there is negligence or gross negligence
depending upon the State standard on the part of the employer
and allowing a machine that's been modified to the point that
it's dangerous probably constitutes that kind of negligence in
many cases. I mean you got lots of standards in different
States.
Mr. Popper. Right. And the fact of the matter is I'd be
curious in seeing any case law which suggests that where there
is significant product modification, a manufacturer of a
product, who produced the product as originally constructed in
good order and followed regular due care regimes was, in fact,
liable. As you know, if there is significant modification of a
product, the manufacturer doesn't bear the same----
Mr. Cannon. But we're not talking about the manufacturer.
We're talking about the company that buys the machine and
operates it.
Mr. Popper. Precisely. Precisely.
Mr. Cannon. That company, but I think what we've had
testimony of is that juries do strange things here, and my
personal experience in this regard is fairly significant and
juries, in fact, do--they want to take care of the individual
who has the problem. If you happen to get in front of one,
there's probably going to be conversation one way or another.
So it isn't a question here of the larger societal
question. Moving away from the--what you're just describing is
not liability on the part of the manufacturer of the equipment
and toward responsibility on the guy who really can actually
control the safety of the workplace environment, which the
employer who bought the equipment.
Mr. Popper. Right. And in the event that you have that
scenario and the employer bears liability--that's what I was
testifying about before--that creates a tension that's really I
don't think particularly healthy, and I do think the
manufacturer ought to stay in there. And if it is a product
that has a useful life that goes well beyond this 12-year
period, it's inconceivable to me that you would eliminate that
regime of responsibility. Who benefits in this? Certainly not
the worker. Certainly not the employer. The only one who
benefits in this is the manufacturer, who's going to shore up
profitability and to me it's like the constitutionality
question, frankly.
You know I gave you a whole series of cases that question
the constitutionality of statutes of repose, but it's a policy
question. This is a policy question as well. And it seems to me
that if the policy that you're really concerned about is
vitality of the American marketplace, then you want to optimize
the incentives on the producers of durable goods to be
responsible for those goods, particularly when they
malfunction. And this legislation frankly is inexcusable in
that it would allow for a manufacturer who's fraudulently
concealed a deficit in the machine to be immunized after 12
years. You don't even do that with GARA.
Mr. Cannon. Well, but I think the point is that within the
12 years that defect that may you've suggested be concealed is
probably going to become apparent or if it's not concealed,
then there's just a better design possibly out there in the
mind of God and somehow we infer some part of that better
design.
It seems to me the failure of your logic is that somehow
we're going to stop the innovation or stop the promulgation of
those kinds of designs that make it more safe. And it seems to
me that the logic on the other side of this equation, which is
employer wanting safe employees, bidding up the cost of is
employment by increasing the safety for his employees, wanting
better equipment, having the ultimate liability if he messes
with the equipment and leaving the equipment manufacturer out
of the cycle, that seems to me to be a virtuous cycle that
increases the rate at which we're progressing toward fewer
deaths and fewer injuries in the workplace. And that's why I
think this is really actually a very good piece of legislation.
I want to thank the panel for having been here today. We
appreciate your comments, your input. It's been very valuable.
Do you have more questions?
With that, we stand adjourned. Thank you.
[Whereupon, at 2:38 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record
Statement of Mark J. Nuzzaco, Government Affairs Director, NPES, The
Association for Suppliers of Printing and Converting Technologies on
H.R. 3509
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