At What Cost Safety?
[Sorry, the video for this story has expired, but you can still read the transcript below. ]
ELIZABETH FARNSWORTH: Are courts awarding excessive amounts to consumers who sue for defective products? That is the issue once again before Congress. Republicans had tried to limit awards as part of their Contract With America last year, but that effort was defeated. Now they are back with a compromise version and with the support of some key Democrats. The Senate is expected to vote as early as tomorrow, the House later this week. President Clinton announced this weekend he would veto the bill.
The legislation would limit punitive damages to either $250,000 or two times so-called compensatory damages, awards for economic loss and pain and suffering. The higher amount would be awarded to the plaintiff. Businesses with 25 or fewer employees would pay the lower amount. A judge would be permitted in some cases to assess additional punitive awards for egregious conduct by large manufacturers and municipalities. The measure would limit each company’s liability for non-economic damages, such as pain and suffering, to the business’s percentage of responsibility for damages and would reduce the amount of damages that are awarded if the product was misused or altered.
We now turn to two people who’ve been involved in the debate: Joan Claybrook, the president of Public Citizen, the consumer advocacy organization founded by Ralph Nader; and Paul Huard, a senior vice president for the National Association of Manufacturers. Thank you both for being with us. Mr. Huard, this bill is far more focused, more limited, than the bill that had passed the House. Is it worthy of support?
PAUL HUARD, National Association of Manufacturers: Oh, absolutely. I think what has happened here is that the practical realities have settled in on the House, which was much more ambitious and did have a so-called Contract With America provision. They have fallen back basically to a bill that has been in the making for close to fifteen or twenty years, which has strong bipartisan support, indeed was developed, primarily while the Democrats were in control of both Houses of Congress as supporters such as Chairman Dingell of the House Commerce Committee, an ardent Democrat who supports this bill, Sen. Rockefeller, moderate, if anything, hardly a man who is a front for the business community, this again a very reasonable, moderate bill, goes back many years, is not really something that’s sprang out of whole cloth in the Contract With America, which is the charge now being leveled by some people. And we hope the President will reconsider his decision and sign it.
ELIZABETH FARNSWORTH: Joan Claybrook, the bill does have wide bipartisan support. What’s wrong with it, in your view?
JOAN CLAYBROOK, Public Citizen: It also has wide bipartisan opposition, I should point out. What’s wrong with this bill is that it would remove law and order for American corporations when they manufacture defective products that harm individuals. The whole purpose of our court system where these cases are litigated, the civil justice system, the envy of the world, by the way, is so that individual consumers can go into state court and to challenge manufacturers when they misbehave. And it’s a very potent and powerful capability. It’s one of the few things.
ELIZABETH FARNSWORTH: They can still do that, though, under this, couldn’t they?
MS. CLAYBROOK: But in a much more limited way, and it’s so potent because it allows the average consumer to challenge the largest corporation in America. We talk today, particularly the business community talks today about personal responsibility for welfare mothers and yet, here they are fighting to get rid of their own personal responsibility when they manufacture their products, and indeed, that will happen, because the purpose of a civil justice system is to compensate individuals to deter manufacturers from manufacturing unsafe products, to punish those who engage in egregious misconduct, and to provide information to the rest of the consumers and prevent unsafe products from being manufactured.
ELIZABETH FARNSWORTH: Okay. Let’s go through some of the specifics and let you describe why you think this would remove protections and you describe why you think it wouldn’t. The caps on punitive damages.
MS. CLAYBROOK: Well, caps mean that the largest corporations get the most protection, i.e., if you’re General Motors and you have billions of dollars of profits every year and a $250,000 cap is applied to you, it’s like a fly swat and so they’re doing exactly the opposite of what [they] should do, and what juries do on their own without this interference from the federal government, which is to apply a large reward for a larger corporation.
ELIZABETH FARNSWORTH: Okay. Mr. Huard on that.
MR. HUARD: One of the longstanding concepts of anglo saxon jurisprudence is the punishment ought to fit the crime, and the opponents of this bill are constantly talking about the need to punish corporate wrongdoers. I can well imagine in the criminal justice system, the outrage that would occur if you could draw 30 years in prison for jaywalking, and what we’re saying is there ought to be some proportionality. There are, indeed, many large compensatory damage awards. Where a compensatory damage award, for instance, of five or ten million dollars is awarded, the punitive damages would be ten or twenty million. And there are many cases of egregious conduct where you get large punitive damage awards. What we’re saying here is that if you have a relatively small economic injury, and I will cite the proverbial $400 paint scratch on the BMW, you oughtn’t be hit with $21 million in punitive damages. That’s just ridiculous. It ends up costing the American consumer a lot of money because people have to build this into the cost of the product.
ELIZABETH FARNSWORTH: Ms. Claybrook, what about the compromise that was reached? A judge, if there were really egregious wrongdoing by a company, could go beyond the limitation. Doesn’t that provide some of the protection you would want?
MS. CLAYBROOK: No, it really doesn’t. And there, there are two defects. The second defect in this punitive damage provision is that it bases it on your, your damages. The way that punitive damages really should be awarded is to look at the conduct of the manufacturer, the size of the manufacturer, how long they knew the product was defective, how many people were injured, whether they resisted taking it off the market, all those are the factors that should be considered and are considered by juries today. This bill prevents that and says, for example, if you’re a woman who had a Dalkon Shield and you could no longer have children as a result, you have small economic damages. You can’t punish that manufacturer or allow the jury to decide they want to punish that manufacturer for knowingly selling that product, knowing that people wouldn’t be able to have children if they used that product. And so the additur provision which you’re asking about, which was added to the bill, is very complex and difficult, very, umm, cumbersome and costly and difficult to administer and the manager’s report says, in fact, the conference report on this bill, that it’s unlikely to be used with great frequency, and, in fact, it’s state law where they have it, it’s not–there’s not use frequently.
ELIZABETH FARNSWORTH: Mr. Huard.
MR. HUARD: Well, the fact is, is that the punitive damage cap is not limited to economic damages, and, indeed, if you have a woman who has lost the right to bear children, and the jury chooses to award her $10 million for pain and suffering, which they easily could, the punitive damage cap is $20 million. This is not insignificant. People that are painting this as protection for American corporations–
ELIZABETH FARNSWORTH: Because there is no limitation on the pain and suffering.
MR. HUARD: That’s correct.
MS. CLAYBROOK: Oh, yes, there is. There is in certain cases.
MR. HUARD: Compensatory damages.
MS. CLAYBROOK: Well, there is, there is in joint and several cases, i.e., in cases where there’s more than one defendant, non-economic damages are completely limited. So, in fact, that’s not true. There are many tricky things in this highly complex bill which are very difficult for the American public to understand and even very difficult for most lawyers to understand. Indeed, it is a federal overlay, you understand, on state law. Today, these cases are litigated under state law. Now we’re going to have a, a federal overlay that’s been written by the business community. It’s a one-way street just for them. There’s nothing in there really for consumers, and that the state courts and juries are going to be limited. They’re not going to be able to use their judgment, listen to the evidence and the facts that they hear and make their own judgments.
ELIZABETH FARNSWORTH: This is one of the reasons that the President has given for vetoing the law, that there is this federal involvement. What do you think about that?
MR. HUARD: Well, I could only describe that as egregious hypocrisy. You know, this is based on the interstate commerce clause. I can imagine the howls we would hear from Ralph Nader if we said let’s let the states determine whether you ought to have air bags in cars or seat belts in cars. Basically, we are talking about products, we are talking about products that move in interstate commerce, and about having uniform standards.
MS. CLAYBROOK: But those aren’t uniform. They’re a one-way street. They’re uniform for the business community. If a state law is more disadvantageous to consumers, this still leaves it alone. If a state law is more advantageous to consumers, it’s limited by this bill. This is not a uniform bill.
ELIZABETH FARNSWORTH: Okay. Mr. Huard, I want to move on to the whole question of joint liability, which–
MR. HUARD: Sure.
ELIZABETH FARNSWORTH: –would be abolished. Tell us why this is important. Explain what is in the law and why you think it’s important.
MR. HUARD: Well, again, I’ve heard the other side here talk about personal responsibility. If you’re only 2 percent liable for an injury and the other side was 98 percent liable, in some cases it’s going to be the plaintiff. Now, this says if you alter or misuse the product, you remove the safety bars from the equipment, and then you lose a finger, if you’re 98 percent responsible for your injury, the other side is 2 percent responsible, they’re only going to have to pay 2 percent. Now, in the case of joint and several liability, this is being limited only to non-economic damages, your full loss of wages, your compensatory damages for medical expenses, you can still go to the deep pockets and hit someone who is only 1 percent liable for 100 percent of your economic damages, only in the area which tends to be a little fuzzy-wuzzy, the pain and suffering awards, are they going to say a manufacturer that is 2 percent liable only has to pay 2 percent of the award. Now, if that’s not personal responsibility, if that’s not reasonable, I don’t know why we’re here.
ELIZABETH FARNSWORTH: What do you think? What is wrong with that, in your view?
MS. CLAYBROOK: Well, first of all, this is really a damages provision, and it was designed by judges in order to have fairness to the consumer. Where there’s more than one defendant, it says that whatever defendants are there and that caused the injury–remember, these all have to be people who caused the injury, all entities that caused the injury–then the consumer must be fully compensated. And if it has to come from one, that’s fine; if it can be shared, that’s fine. And that’s the reason for the rule, and they’re denigrating pain and suffering awards and damages by saying, well, in the case of pain and suffering, we dismissed that as being terribly important, and, therefore, you don’t get full recovery, and so, again, in the case of someone who loses their reproductive rights, they don’t get full recovery where there’s more than one defendant, the court’s saying.
ELIZABETH FARNSWORTH: Do you reject the argument that the supporters of this bill, including Democrats, make, that there needs to be reform of tort law because there have been, there are damages that are given that are way out of proportion to the injury?
MS. CLAYBROOK: I completely reject it, for two reasons. One is the current system has the capacity to deal with that. That’s what the appeals courts are all about, the right to a new trial, the decisions by the judges to reduce the award if they think it’s egregious.
ELIZABETH FARNSWORTH: Okay. Let me stop right there. What about that argument, what’s wrong with the way the current system is dealing with it?
MR. HUARD: Well, the current system is loaded against the defendants. What happens is, is products get withdrawn from the market, even though they’re valuable products, because companies make a common sense calculation. There was something called Bendectin, an anti-nausea drug. The company’s annual profits from that, selling it, were $13 million. Their liability costs were $15 million. They withdrew it from the market.
MS. CLAYBROOK: But lots of them they don’t withdraw. And so the issue is first of all does the current system handle it, and the answer is yes, and the second issue is, is there an overload of cases that warrants making some enormous change like this? This is the most massive preemption of state law in the history of the United States.
ELIZABETH FARNSWORTH: You don’t think the figures are there to show that there’s an overload of–
MS. CLAYBROOK: There absolutely is not. The total number of product liability cases is something under 100,000 a year. It’s closer to 60,000 a year. The number of punitive damages in the last 25 years is 355. The, the cases themselves are so small compared to all the other cases in the court system the, the insurance for liability has gone down by 40 percent since 1987. The total cost to the liability system is $4 billion, which is what we pay for dog food every year, so this is not an overloaded system.
ELIZABETH FARNSWORTH: What about these figures? What about those figures?
MR. HUARD: Well, like a lot of figures, it’s hall-full, half-empty. What they don’t tell you is how many manufacturers pull products off the market because of litigation. What they don’t tell you is how many manufacturers settle for outrageous sums because of the fear of punitive damages.
ELIZABETH FARNSWORTH: So those–
MS. CLAYBROOK: That’s included in the total of $4 billion. This is from the National Association of Insurance Commissioners who did a calculation of the total cost, the total cost of attorneys’ fees and compensation in the liability, in the product liability system.
ELIZABETH FARNSWORTH: Okay. In the little time we have left, if the President has said he will veto this bill, does it mean it’s dead?
MR. HUARD: Well, it may mean it’s dead for this Congress. We certainly, having fought for this for close to 20 years, will come back next year if we have to. We still hope the President will change his mind. I realize that’s an uphill fight, so it may well be dead.
ELIZABETH FARNSWORTH: What do you think?
MS. CLAYBROOK: It should be dead, and we applaud the President for doing this. These guys have spent hundreds of millions of dollars pushing a bill that in any other situation would have died a natural death because it’s not needed, not wanted, and it will harm consumers. But because they have an endless supply of cash to put behind this and pay their lobbyists and give campaign contributions, they just keep pushing the same bill and the members keep pushing it because, you know, the cash rolls in, and they keep doing it.
ELIZABETH FARNSWORTH: That’s–
MR. HUARD: The trial lawyers are the biggest campaign contributors–
ELIZABETH FARNSWORTH: That’s all the time we have.
MS. CLAYBROOK: Not compared to the businesses, nothing.
ELIZABETH FARNSWORTH: That’s all the time we have. Thank you both very much.