PRODUCT LIABILITY BILL LOSES KEY SUPPORT

WASHINGTON-Product liability reform advocates still believe a comprehensive reform bill can be enacted during this Congress despite the defection of key Democratic lawmakers who supported previous efforts.

Opponents of the measure-S. 648, the Product Liability Reform Act of 1997-say that the refusal of Sen. John D. Rockefeller IV, D-W.Va., to support the current bill sounds the death knell for reform. Sen. Rockefeller, who had been the chief Democratic co-sponsor of previous Senate reform bills, voted against S. 648 when the Senate Commerce, Science and Transportation Committee mark-ed it up last Thursday.

Other committee Democrats who previously had supported reform joined hard-line opponents to vote against it. In the end, the measure won committee approval on a strict party-line 11-to-9 vote after minimal debate and no amendments.

"As much as I would like to make Fritz Hollings' day, I continue to strongly support product liability reform," said Sen. Rockefeller as he explained his decision to oppose S. 648. Sen. Ernest "Fritz" Hollings, D-S.C., has consistently opposed passage of any comprehensive federal product liability reform bill. During last week's hearing, Sen. Hollings called the markup a "sad occasion" as the panel considered what he called "an unconstitutional measure" that would violate states' rights.

Sen. Rockefeller said that while he supports product liability reform, passing a bill "doesn't make much difference if the president doesn't sign it."

That's what happened last year, when both houses of Congress approved H.R. 956 only to have it die with a stroke of the president's veto pen on May 2, 1996 (BI, May 6, 1996).

Although proponents of the new bill say they have attempted to address President Clinton's objections to last year's measure, Sen. Rockefeller said the changes they made "tend to be rather the easier ones." He said the bill's drafters had not dealt adequately with the president's objections to the previous bill's formula for awarding punitive damages and its treatment of joint and several liability for non-economic damages.

Sen. Rockefeller said his vote against the new bill was a signal it would not pass presidential muster. "I think we have to be realistic. I don't want another presidential veto," he said.

But he declined to close the door entirely on reform this year. "I look at this as kind of a work in progress."

"I know this isn't the final version of this proposal," said Sen. Slade Gorton, R-Wash., who co-sponsored previous product liability reform bills with Sen. Rockefeller. He and other GOP committee members made clear that they were quite willing to continue talking about possible changes to the bill before it hits the Senate floor, which may happen as early as late June.

But supporters said they wanted to get the bill moving quickly, as the Senate Republican leadership intended when Sen. Gorton, Sen. Majority Leader Trent Lott, R-Miss., and others introduced their version of the Product Liability Reform Act of 1997 as S. 5 early in the current session. The measure, which was identical to H.R. 965, was intended as a "placeholder" bill to be replaced with a new version at the appropriate time. Senate Republicans introduced the revised bill-S. 648-on April 24.

S. 648 contains most of the provisions of H.R. 956. These include limits on the liability of sellers of a defective product under many circumstances; defense against some suits alleging product liability when the product was deliberately misused or altered or when the plaintiff was intoxicated; limiting punitive damages under most circumstances to greater of twice the amount of damages awarded for economic and non-economic loss or $250,000; and limiting defendants' liability for non-economic damages to their proportion of responsibility under most circumstances.

S. 648 differs from its predecessor in several ways, most notably regarding its statute of repose, which prevents a person from suing over a defective product that has been in continuous use for a certain period of time. First, S. 648 would bring most goods under the statute of repose, except for products like drugs and asbestos that could cause latent injuries. Currently, the statute of repose applies only to workplace capital goods.

The change would eliminate the difference in treatment of the same good depending on where it was used, said Victor E. Schwartz, general counsel of the pro-reform Arlington, Va.-based Product Liability Coordinating Committee and a longtime champion of reform.

The new bill also would extend the statute of repose to 18 years from the 15 years contained in the previous measure. Mr. Schwartz said that 18 years is the same statute of repose set by a 1994 law limiting the product liability exposure of general aviation aircraft manufacturers.

Also, the statute of repose proposed in the new bill would pre-empt all state statutes of repose, whereas the previous bill would have pre-empted only those shorter than that set by federal law. Mr. Schwartz said establishing a uniform statute of repose "would extend people's right to sue in 16 or 17 states."

A couple of the other changes occurred after proponents "scrutinized very carefully" the reasons President Clinton gave for his veto, said Mr. Schwartz. As a result, the bill would specifically exempt from any protection barkeepers who sell alcohol to intoxicated patrons and gun sellers who sell firearms to felons. President Clinton cited concern about both possibilities as grounds for his veto.

In another bow to opponents' concerns, drafters of the bill also included a provision that would exempt breast implants from the general immunity granted manufacturers of raw materials used in medical devices.

Also removed from the new bill was a controversial workers compensation provision opposed by self-insurers and many insurers last year (BI, March 18, 1996). That section provided that-under certain circumstances-where a product manufacturer proved that the employer was at fault by substantially contributing to the cause of the accident by its actions, the employer or insurer would lose its subrogation lien to recover workers comp payments. Critics claimed this would have allowed double recovery, and would have shifted costs from the liability system to the workers compensation system.

After last Thursday's committee vote, however, opponents of the bill questioned how meaningful the changes were.

"I'm not convinced they're very sincere about addressing the president's concerns," said Richard Vuernick, legislative director of Citizen Action in Washington. "I think it's dead for the time being," he added.

Joanne Doroshow, a staff attorney with Public Citizen, another Washington-based consumer group, agreed. "They're going backwards from where they were last year. I think it's a pretty bad sign for their side that they couldn't work anything out by now."

Not surprisingly, Mr. Schwartz disagreed with that analysis.

The changes show "that the Republicans are not trying to make political statements. They're trying to come up with a reasonable approach," he said.

Mr. Schwartz also defended not making more changes in the liability formula despite the president's unhappiness with it, because it wasn't clear exactly what would be acceptable to the president. The president's objection to the formula is that the calculation of economic damages would discriminate against low-income and unemployed persons and children.

"Before we start cutting muscle, we ought to have a damn good X-ray of the patient," he said.

In fact, "the thing that was important was they didn't try to fix joint and several and punitive without Sen. Rockefeller," said Pat Rowland, the executive director of the PLCC. Negotiations will continue, he said, adding that "they're warming up the engines on the House side," where no reform bill has yet been introduced.

"Product liability, or any liability changes have difficult roads ahead of them. Without bipartisan support, it has no chance at all," pointed out Tom O'Day, who retired last year as associate vp of the Alliance of American Insurers and is now an independent Washington consultant. He had worked on the product liability reform issue for more than a decade.

The New York-based Risk & Insurance Management Society Inc., which has consistently supported reform, "is still analyzing the bill," said Paul Brown, director-government affairs. "To the extent that it is similar to last year's bill, we would again support the measure. We do recognize, however, that a bill similar to last year's would probably not pass muster with the president again. With the loss of Sen. Rockefeller's support, passage of the bill, not to mention making it veto-proof, will be quite difficult," he said.

Another pro-reform observer had a more optimistic assessment.

"I don't think that the party-line vote is that significant. Rockefeller and (Sen. Byron) Dorgan (D-N.D.) said the right things and basically had a disagreement over strategy and the process. We're confident that by the time the bill gets to the floor of the full Senate, the problems can be worked out," said Lawrence Fineran, assistant vp at the National Assn. of Manufacturers in Washington.

"People are committed to finding a solution, and they're going to keep working at it," said Mr. O'Day.

Meanwhile, in another reform-related move, the PLCC has retained former White House Counsel Jack Quinn as an adviser.