Good morning, ladies and gentlemen. The
Senate Judiciary Committee will now proceed with our hearing on
the subject of defective products, with a focus on whether the
imposition in certain extraordinary circumstances of criminal
penalties would promote individual and corporate
The essential issue is that when an individual knowingly,
maliciously, intentionally engages in reckless conduct which
results in the death of another person, such conduct
constitutes malice at common law and supports prosecution for
murder in the second degree. The issue which the Committee will
be exploring is whether that would be, as a matter of public
policy, appropriate for legislation at the Federal level.
I would have preferred to have held this hearing last
Tuesday when it was originally scheduled, but the Judiciary
Committee has had a very, very heavy workload and we were
occupied with the immigration reform legislation, so we had to
put it off. And the question was whether we put it off for
several weeks or try to move ahead, and many witnesses were
lined up and we thought we would do it on Friday, since we had
an open date.
Friday is not a very good day to hold hearings from the
point of view of having Senators present, but it is a good day
to hold hearings from the point of view of being uninterrupted
because the Senate is not in session today, so there will not
be votes, which frequently occur which delay the hearings.
Senators characteristically return to their home States as
soon as the Senate is not in session to take care of business
in their home States. As a matter of fact, later today I will
be back in Pennsylvania myself. We have heard that at least one
other Senator plans to attend, and we will see what develops
and there may be others who come in.
The issue at hand came into very sharp focus many years ago
with the Pinto case, where there were corporate documents which
showed that the gas tank was placed in a dangerous position
because it was cheaper to put the gas tank in that locale and
to pay damages for injuries and deaths, that it would be a
matter of corporate profitability.
That case made a fair size impact on me personally. I was
district attorney of Philadelphia at the time. There ultimately
was a prosecution in that case by a local prosecutor in
Indiana, I believe, and there was an acquittal. From all
indications, the case was not handled as well as it might have
been, certainly not as well as a Federal prosecution would be.
Welcome, Senator Kohl.
The problems continue at the present time with story just
last week in the New York Times concerning the Guidant
Corporation, where there was knowledge for 3 years that its
heart defibrillator might short-circuit and fail after being
implanted. The publication in the New York Times suggested that
a number of patients might have died there, and the problem is
as current as the Guidant case and we will hear some testimony
on that today.
In selecting the matters to be presented in the hearing, we
necessarily have gone to some cases which are old cases, and
they have been selected because they make the point. To the
extent that this conduct continues at the present time is
something which we will endeavor to determine.
It is not our intent to create any further problems for any
companies which are having tough times in a tough market. I
think it not inappropriate to note that foreign manufacturers
illustratively of automobiles would have liability. Even though
the cars were manufactured out of the United States, where they
are sold in the United States and injuries occur in the United
States, that would be within the jurisdiction of Federal
legislation. So as a competitive matter, it would balance out.
Let me yield at this time to my distinguished colleague,
Senator Kohl, of Wisconsin.
STATEMENT OF HON. HERB KOHL, A U.S. SENATOR FROM THE STATE OF
Thank you very much, Senator Specter. I
appreciate very much your calling this hearing today. It is an
unfortunate truth that from time to time consumers are injured
by products they purchase. Your bill tries to minimize the
frequency of these injuries by punishing anyone who would
knowingly sell unsafe items. That is an admirable and a serious
approach to the issue, but not the only one.
Another way to protect consumers is to let them know when
the products they buy have done harm to others. This is the
goal of a bill that I have supported for many years called the
Sunshine in Litigation Act. This bill would curb the ongoing
abuse of secret settlement agreements in Federal courts. The
result of this abuse is to keep important health and safety
information from the public.
The problem is not hard to understand. Typically, an
individual sues a manufacturer for an injury resulting from a
product defect. The injured person has limited resources and
faces a corporation that can spend an unlimited amount of money
to delay and defend the case. Facing a formidable opponent,
plaintiffs often seek to settle the litigation. In exchange for
the award that they sought, the victim agrees to keep secret
information disclosed during the litigation. While the
plaintiff gets a respectable settlement, the defendant keeps
secret the information about the defective product. Others
eventually pay the price, as the public remains unaware of
critical public health and safety information that could
potentially save lives.
The most famous case of abuse involved Bridgestone-
Firestone tires. From 1992 to 2000, tread separations of
various tires were causing accidents across the country, many
resulting in serious injuries and even fatalities. Instead of
acting responsibly, Bridgestone-Firestone quietly settled
dozens of lawsuits, most of which included secrecy agreements.
It wasn't until 1999 when a Houston public television station
broke the story that the company acknowledged its wrongdoing
and recalled 6.5 million tries. But by then, it was too late to
prevent many unnecessary injuries and deaths which occurred.
The case of General Motors fuel tanks also demonstrates the
problem. An internal memo showed that GM was aware of the risks
from crashes of trucks with side-saddle fuel tanks which
eventually led to an estimated 750 fatalities. When victims
sued, GM disclosed documents only under protective orders and
settled these cases on the condition that the information
remain secret. GM used this type of fuel tank for 15 years
before it was discontinued.
There are no records kept of the number of confidentiality
orders accepted by the State or Federal courts. However,
anecdotal evidence suggests that court secrecy and confidential
settlements are prevalent. Beyond General Motors and
Bridgestone-Firestone, secrecy agreements had real-life
consequences by allowing Dalkon Shield, Bork-Shiley heart
valves, Con Edison cable covers and numerous other dangerous
products to remain on the market.
The Sunshine in Litigation Act is a modest proposal that
would require Federal judges to perform a simple balancing test
to compare the defendant's interest in secrecy against the
public's interest in health and safety information.
Specifically, prior to making any portion of a case
confidential or sealed, a judge would have to determine by
making a particularized finding of fact that doing so would not
restrict the disclosure of information relevant to public
health and safety.
Moreover, all courts, both Federal and State, would be
prohibited from issuing protective orders that prevent
disclosure to relevant regulatory agencies. Of course,
important trade secret information could still be kept private.
This legislation does not prohibit secrecy agreements across
the board. It does not place an undue burden on judges or our
courts. It simply states that where the public interest in
disclosure outweighs legitimate interests in secrecy, then
courts should not shield important health and safety
information from the public.
Mr. Chairman, letting sunshine in on these secret
settlements would complement your legislation on defective
products, and I hope that we can work together on this issue to
Thank you, Mr. Chairman.
Thank you very much, Senator Kohl.
Senator Leahy, the Ranking Member of this Committee, could
not be here today. When the hearing was rescheduled, he could
not make it. He had other business in his State to attend to.
But without objection, we will make his statement a part of the
record. The first paragraph I think it appropriate to read
Senator Leahy in his statement writes, quote, ``Today, we
convene to discuss the merits of legislation that would provide
Federal criminal penalties for the introduction of dangerously
defective products into the stream of interstate commerce. This
is important legislation that could protect millions of
Americans and its potential is something we should carefully
explore. Today's hearing is a good start, and I commend
Chairman Specter for his efforts here.
Our first witness this morning is Dr. Barry Maron, Director
of the Hypertrophic Cardiomyopathy Center at Minneapolis Heart
Institution Foundation, and was active in disclosures on the
Guidant defibrillator case. Dr. Maron received his
undergraduate degree from Occidental College, in Los Angeles,
and his M.D. from Tulane University in New Orleans.
By way of brief additional introduction, the New York Times
just yesterday published a story accounting for certain events
in this matter, and one worth noting specifically was a
memorandum submitted by a consultant, Dr. Richard Fogus, who
told the company that their decision to withhold data about
device defects was a breach of ethical duty and has subjected
patients to the risk of serious bodily harm or, beyond that,
Dr. Maron, thank you for joining us. The rule of our
Committee is that there be 5-minute opening statements, and
before you testify I would like to have all the witnesses stand
and have the oath administered, which is the Committee's
Do each of you solemnly swear that the testimony you will
give this Senate Judiciary Committee will be the truth, the
whole truth and nothing but the truth, so help you God?
May the record show that all have answered in the
Dr. Maron, the floor is yours.
STATEMENT OF BARRY J. MARON, M.D., DIRECTOR, HYPERTROPHIC
CARDIOMYOPATHY CENTER, MINNEAPOLIS HEART INSTITUTE FOUNDATION,
Thank you, Chairman Specter, Senator Kohl. As
you mentioned, my name is Dr. Barry Maron. I am a cardiologist,
in Minneapolis, at the Minneapolis Heart Institute.
Hypertrophic cardiomyopathy, also known as HCM, is a
genetic form of heart disease and the most common cause of
sudden cardiac death in young people, including athletes. Since
2000, I have promoted the implantable defibrillator as a
preventive therapy for sudden death in hypertrophic
cardiomyopathy, and with good reason, for we have demonstrated
repeatedly that the defibrillator is life-saving by virtue of
recognizing and automatically terminating lethal disturbances
of heart rhythm.
In 1999, I and my colleague, Robert Hauser, treated a 21-
year-old student, Joshua Oukrop. He had a severe form of this
disease and was at high risk for sudden and unpredictable
death. We recommended that a defibrillator be implanted as a
prophylactic measure in late 2001. The model is Guidant Prizm
Three-and-a-half years after receiving his defibrillator,
Joshua Oukrop died unexpectedly while on vacation in Utah.
Analysis of the defibrillator by Guidant found that a short-
circuiting defect caused the device to become electrically
inoperative and to fail. When the defibrillator tried to issue
a life-saving shock, electrical energy short-circuited and
dissipated, and therefore did not enter Joshua's heart as it
should have and he was unprotected and he died.
Shortly thereafter, in a meeting with four Guidant
executives, I learned that this precise problem had been known
by the company for over 3 years, but only to Guidant and to any
physicians or patients. It was obvious that Guidant believed
that it was correct, and even prudent, to conceal all
information related to such defibrillator defects. I was asked
for my opinion on this strategy and I said I think this is
going to be the biggest mistake you will ever make. They said
they did not agree.
Mr. Oukrop's reaction, the father: ``I told Joshua that the
defibrillator was his best chance, that it would allow him to
survive and live his life, and you are telling me that they
knew all along?'' In fact, at that time Guidant did know. They
had already documented 25 other similar short-circuited
defibrillators and had already made adjustments in 2002 to
newly manufactured defibrillators to correct the problem.
Still, Guidant had not informed physicians, patients or the
Government. Furthermore, and perhaps most disturbing, the
company continued to sell old defibrillators known to be
Therefore, this death was not due to an unforeseen, random
component failure, as the company once suggested, but, in fact,
was a systematic, repetitive, and to some extent predictable
problem that cannot be anticipated or monitored. In effect,
Guidant had taken over the primary medical management of
thousands of high-risk defibrillator patients without their
permission. It was the executives who were practicing medicine
in this situation and not the physicians.
Only because the facts of this unfortunate situation were
documented in a series of New York Times articles by Barry
Meier have these problems in the defibrillator industry become
evident to all. In fact, these circumstances ultimately led to
the largest recall of defibrillators and pacemakers in the 25-
year history of this industry.
The Guidant affair is about patients and their physicians,
and the overwhelming importance of informed consent and full
disclosure to patients through their physicians. Patients have
the right to know any information that could potentially impact
their risk for injury or death. It simply is not ethical to
withhold such information. Patients must have this autonomy,
the opportunity to make important medical decisions in
conjunction with their fully informed physicians.
It is also important to establish what the Guidant affair
is not. It is not a statistical issue. It is not about
percentages and probabilities, because patients are not
numbers. They are individuals with a reasonable expectation
that industry will communicate openly and accurately with their
physician. I think most observers agree that that did not
happen here. One of our patients told a Guidant executive,
quote, ``It is just not your call to make,'' unquote. Most of
the cardiovascular community, I think, would agree with that.
It is time for greater oversight, greater transparency and
communication between industry and the physician community in
order to restore the trust of patients in powerful medical
devices such as the implantable defibrillator. To make it
criminal to knowingly sell defective defibrillators would, I
think, have the desired effect on the willingness of companies
to make full disclosure. However, such a bill would have to be
drawn narrowly enough to avoid a potentially chilling effect on
law-abiding companies whose products could, in fact, have
occasional random defects.
Thank you for the opportunity to tell this story to the
Thank you, Dr. Maron.
We had extended an invitation to Guidant to come in and
participate in the hearing so that they would have an
opportunity to respond to what Dr. Maron has testified to.
Ordinarily, we await the conclusion of the entire panel before
Senators question and we will follow that as a generalization
here today, but in an effort to get Guidant's point on the
record contemporaneously with your testimony, Dr. Maron, I note
that your statement says that Guidant executives believed that
it was correct, and even prudent, to conceal all information
related to such defibrillator defects.
To state their position to the extent you can, when you say
that they believed it was correct and even prudent, what
factors would lead Guidant to that conclusion?
Yes. That argument includes the idea that they
did not want to frighten the general public, and part of that
would have been that--and this is their position, obviously,
not mine--patients would have their devices removed, these
potentially defective devices, and replaced with other devices,
and that would place these patients at undue risk.
The risk I think they are talking about there is the small
risk of infection which is treatable. It is less than 1
percent, and every patient who has a defibrillator must have
their device removed and replaced every 5 years, on the
average, anyway. So the argument is a little bit weak in the
sense that they are suggesting a danger by replacing
defibrillators that would have to be replaced anyway as a
course of the standard management of their disease and the
Thank you, Dr. Maron.
[The prepared statement of Dr. Maron appears as a
submission for the record.]
Our next witness is Mr. Brian Panish,
lead plaintiff's counsel in the products liability case against
General Motors involving a defective 1979 Chevrolet Malibu fuel
tank that caused serious bodily injury to several people. Mr.
Panish received his undergraduate degree from California State
University and his law degree from Southwestern University Law
Mr. Panish, you are going to be testifying about a case
which is admittedly an old case, and I think that ought to be
plain on the record so that those who are listening to it
understand that these events happened a long while ago and do
not necessarily mean that General Motors is engaging in the
same conduct at the present time. But the case did receive
considerable public attention because of the underlying facts
and it was decided that this is a case which had value for a
public understanding of the nature of the problem.
Thank you for joining us and we look forward to your
STATEMENT OF BRIAN J. PANISH, PANISH, SHEA AND BOYLE, LLP, LOS
Well, thank you. Good morning, and I thank the
members of the Committee for inviting me to speak here today.
This issue is an issue extremely important to the health and
safety of all Americans, and I am pleased that the Senate
Judiciary Committee is taking the time to examine it in detail.
I am also encouraged by your willingness, Senator Specter,
to consider additional legislative steps that would complement
the civil justice system in helping to deter corporations from
selling products that they know are dangerous. I look forward
to working with the Committee on this issue.
I have seen firsthand the devastating impacts that
corporate deceit can have on a family. I represented Patricia
Anderson and her four children in a case against General Motors
that went to trial in 1999.
That went to trial in 1999?
Was the trial, yes, sir.
Patricia and her children suffered horrendous and
disfiguring burn injuries by General Motors because General
Motors put a car on the market, the Malibu, that it knew
contained dangerous defects related to the placement of the
fuel system. If the tank had been designed differently, the
vehicle would not have exploded when it was rear-ended and the
children would have suffered only minor injuries and walked
On Christmas Eve, Patricia and her children were returning
from church in their 1979 Malibu. As they approached an
intersection, their vehicle was rear-ended and the gas tank,
due to its close location to the bumper, was punctured,
resulting in leakage of fuel and a huge explosion. Patricia saw
smoke and flames and heard her children asking Jesus to help
them. Her 8-year-old daughter Kiontra tried to shield her
younger brother and sister from the flames with her body. As a
result, she received horrific burn injuries.
Several witnesses immediately rushed to the vehicle trying
to free the passengers, but the door knobs were too hot to open
the doors. So they used a shopping cart to smash the window to
remove the passengers. As a result of the fire, Patricia and
her children suffered third-degree burns over large portions of
their bodies and underwent numerous skin-grafting surgeries
which involved taking healthy skin from other parts of their
bodies and grafting it to the unhealthy skin that had been
burned. The burns resulted in loss of limb, severe scarring and
significant deformities. The scarring resulted in serious pain
to the children as they grew, causing future surgeries, loss of
range of motion and serious psychological damage.
General Motors knew what was going to happen.
this horrible story more outrageous is that the injuries were
preventable. Before General Motors sold the gas tank in the
Malibu, they knew that the placement was dangerous. The
evidence revealed that they knew a safer location of the fuel
tank existed, that they had performed cost/benefit analysis
comparing the cost of human life in a dollar amount versus the
cost of redesigning the fuel system. They knew that its testing
was woefully inadequate and they made a conscious decision to
sell a product they knew was dangerous and could cause death or
At trial, we established and the evidence proved that
General Motors knew for several decades that a safer design
existed. As far back as 1961, Ed Cole, a design engineer who
later became president of General Motors, had patented an over-
the-axle tank that had been proposed that GM had designed
prototype vehicles for and had tested. GM again had engineers
perform cost/benefit analysis evaluating the location of the
fuel system, and in this case less than 11 inches from the rear
bumper, in a memo which later became known as the Ivey memo,
and I have provided copies.
Mr. Ivey determined that about 500 deaths per year were
caused by fuel-fed fires and they, General Motors, would spend
an average of $200,000 per fatality. Mr. Ivey further concluded
that based on the number of vehicles on the roadway, General
Motors would spend approximately $2.40 per vehicle to prevent
fuel system-fed fires. The amount to redesign and place the gas
tank in the alternative location cost $8.59. At trial, the
chief design engineer of fuel systems testified that performing
cost/benefit analysis of human life was despicable. Finally, in
1983, this memo came to light and Mr. Ivey was interviewed by
General Motors lawyers and admitted that, in fact, he had
performed this memo for his superiors, that he was directed to
perform it, and the jury was able to hear the cold, calculated
decisions that General Motors made.
Patricia Anderson and her children's lives will never be
the same. Perhaps your attention to this issue will avoid
similar outcomes for other families. This case illustrates the
vital role the civil justice system plays in both revealing
facts that are important to the public's health and safety and
attaining some measure of justice for those families injured or
killed due to the deliberate actions of others.
Sadly, this is not the only example of corporate executives
choosing to risk the lives and futures of families like the
Andersons for a few extra dollars of profit. Not too long ago,
we faced the Ford-Firestone crisis. I encourage any additional
steps this Committee can take to see that only safe products
are put on the market and that if a product well on the market
is determined unsafe that the manufacturers do the right thing
and remove it from the market. The threat of criminal sanctions
could help corporate execs make better and safer choices.
I thank you for your time and welcome any questions you may
have. Thank you.
[The prepared statement of Mr. Panish appears as a
submission for the record.]
Thank you very much, Mr. Panish.
Our next witness is the former Governor of the State of
Michigan, Mr. John Engler, now the President of the National
Association of Manufacturers--three-term Governor, actually,
from Michigan, with extensive experience as majority leader of
the Michigan State Senate before that. He has his undergraduate
degree from Michigan State and his law degree from Thomas
Cooley Law School.
We welcome you back to the Judiciary Committee, Governor
Engler. You were here to testify about the asbestos crisis,
which has caused serious injuries to tens of thousands of
people and resulted in 77 bankruptcies and an enormous drain on
the economy. I mention that because it is relevant as to your
contribution and help to the Senate, and also to say that we
are still working on asbestos. So you may be recalled at a
But today you are here representing the National
Association of Manufacturers and we welcome you to give another
perspective on this issue.
STATEMENT OF JOHN ENGLER, FORMER GOVERNOR OF MICHIGAN, AND
PRESIDENT, NATIONAL ASSOCIATION OF MANUFACTURERS, WASHINGTON,
Thank you very much, Mr. Chairman. I am
delighted to be back, and I also want to compliment you on the
work that you have been doing this week on immigration, also a
very important topic. We are grateful for you and the
Mr. Chairman, the National Association of Manufacturers is
the Nation's largest industrial trade association, representing
small and large manufacturers in every industrial sector in all
50 States, including Senator Kohl's State of Wisconsin. Through
our direct membership and our affiliated organizations, the
Council of Manufacturing Associations, the Employer Association
Group and State Associations Group, we represent more than
100,000 manufacturers. We are grateful for the invitation and
the opportunity to testify on this very important question:
Would it be wise to make the act of knowingly allowing a
defective to be introduced into the stream of interstate
commerce a criminal offense?
While this proposal may be well-intentioned, the NAM
believes it is fraught with many unforeseen and potentially
counterproductive consequences. The National Association of
Manufacturers does not defend any manufacturing employee who
would intentionally introduce a defective product into the
marketplace. However, we are here today because of our concern
about the real-world and practical difficulties of
criminalizing what often are subjective judgments.
There already are criminal statutes at the disposal of a
U.S. Attorney to address this kind of behavior. This relatively
new idea of criminalizing product liability has been explored
by Congress at least twice in the recent past, in 2000--this
has been mentioned already--when the Transportation Recall
Enhancement, Accountability and Documentation Act was passed.
That was the Firestone-Ford matter.
More recently, a criminal penalties provision for maritime
products actually showed up in the Senate-passed Coast Guard
Authorization Act of 2004. That language didn't have the chance
to come before this Committee, was not publicly debated, ended
up being modified in conference and ultimately tied to
In both cases, the NAM felt that the committees with
jurisdiction over criminal penalties--and that would be the
respective Judiciary Committees of the Senate and House--needed
to explore the issue more carefully. Here is why. Thousands of
decisions are made in a manufacturing company everyday by the R
and D staff, by the engineers, product and quality personnel,
assembly line and factory floor workers.
Defining ``product defect'' is one of the most complex and
varied aspects of product liability, as evidenced by the
numerous variations of product defect standards among the
States. At the same time, the legal concept of what constitutes
a criminal act is sort of being whittled away by the courts.
Imagine the dilemma faced by a manufacturer who keeps very
precise records about products that are returned. What if one
or more proved to be defective? Even if the defect rate is
extremely low, would the manufacturer knowingly be placing a
defective product into the stream of interstate commerce simply
because the product line is not one hundred-percent defect-
free? Are we seeking to hold a manufacturer criminally liable
for the one-in-a-million problem? By the same token, would
criminal intent be established if there was a warning label and
that warning label was not clear enough for every single
consumer user of the product to understand?
Every product can cause injury under some circumstances.
Justice Breyer wrote, ``Using this vivid example, over the next
13 years we could expect more than a dozen deaths from ingested
toothpicks,'' end quote. If product liability violations were
criminalized, actual victims also might find themselves forced
to wait out the criminal justice system.
Mr. Panish's example of a trial that took place in 1999--
that would be a long wait, almost as long as some of those
asbestos cases, Senator. But no judge presiding over civil
litigation is certainly going to force an individual involved
to forswear his or her right to Fifth Amendment protections.
The criminalization of product liability law could impede
safety, as companies delay improving products for fear it will
be seen as an admission that their products are dangerous.
Poorly conceived legislation could end up forestalling
fact-finding, including how and why the problem occurred. It
could also worsen the U.S.'s comparative advantage, or in this
case disadvantage, in legal costs which, expressed in GDP
terms, are twice as high as in other industrial nations that we
compete everyday with.
As you consider this matter, I hope that this Committee
will remember the genesis of punitive damages in the common law
is that they were to serve as a substitute punishment and
deterrent for acts that would be difficult to criminalize. We
are pleased that the Judiciary Committee is studying the issue.
We hope the Committee will carefully weigh the arguments and
conclude that the proposal to criminalize product liability as
prepared today is not a good idea.
We are happy to answer questions, Mr. Chairman.
[The prepared statement of Governor Engler appears as a
submission for the record.]
Thank you very much, Governor Engler.
Our next witness is Professor Frank Vandall, a professor at
the Emory School of Law. He has written extensively on torts,
product liability and design defects of consumer products. He
received his undergraduate degree from Washington and Jefferson
College, near Pittsburgh, and his law degree from Vanderbilt
Thank you for coming to Washington today, Professor
Vandall, and we look forward to your testimony.
STATEMENT OF FRANK VANDALL, PROFESSOR, EMORY SCHOOL OF LAW,
Mr. Chairman, Senator Sessions, it is my
pleasure to be here. I would like to discuss with you two
concepts--preemption and non-enforcement of the law.
Preemption is a recent development and holds that Federal
statutes or regulations may preempt a State statute, regulation
or the common law. Preemption emanates from the Supremacy
Clause of the Constitution, Article VI, section 2. My reading
of the key cases--Cipollone v. Liggett, Geir v. American Honda
and Medtronics v. Lohr--is that the Federal courts can decide
to preempt State law at will. The goal in a preemption case is
to discern the intent of Congress. Therefore, it is on a case-
by-case basis and there is no black letter law of preemption.
The bill as drafted leaves open the risk that it may be
interpreted to preempt State products liability law.
Non-enforcement refers to the issue of whether or not a
particular written law will be enforced. Because of
insufficient funds and a shortage of personnel in the
investigative and prosecutorial levels, there is a real risk
that the Act will not be enforced. People respond to the level
of enforcement, not the written law. This can be shown by
driving on the interstate in Atlanta, Georgia. The speed limit
is 70 miles an hour. The people travel at 80 miles an hour,
until they see a police car. Then they slow down to 70 or 65.
My concern is the interplay between preemption and non-
enforcement. Once the bill is passed, it is likely that the
courts will hold that it preempts State products liability law
because it occupies the field. This would be a tragedy because
civil products liability law is the cheap and effective method
of deterring defective products.
Further, because of the high cost of prosecuting corporate
executives and social realities--that is that the judges and
the CEOs come from the same class, have similar educations and
perhaps are golfing buddies--the Act will not likely be
enforced. The reality is that corporate executives and
employees will not likely be prosecuted. The result will be
that although the Act will not be enforced, it will be
interpreted to preempt State products liability law. The
solution is easy, and that is that the bill should clearly
state that Congress does not intend to preempt State statutes,
regulations or the common law with this Act.
In conclusion, I am in favor of the bill if the phrase
``Congress does not intend to preempt State law'' is inserted.
I am opposed to the bill if it could be interpreted to preempt
State products liability law. I am concerned that the Act will
not be fully enforced. In my opinion, a better solution than
the bill would be to shore up and support the civil products
liability system. The product system police, the litigation
attorneys, are trained and ready.
[The prepared statement of Mr. Vandall appears as a
submission for the record.]
Thank you very much, Professor Vandall.
We now turn to Professor Robert Steinbuch, from the
University of Arkansas School of Law, formerly counsel to
Senator Michael DeWine, a distinguished member of this
Committee, and Professor Steinbuch was special counsel to the
Justice Department at one time.
He received his undergraduate
and master's degrees from the University of Pennsylvania, and a
law degree from Columbia.
The floor is yours, Professor.
STATEMENT OF ROB STEINBUCH, PROFESSOR, UNIVERSITY OF ARKANSAS
AT LITTLE ROCK, WILLIAM H. BOWEN SCHOOL OF LAW, LITTLE ROCK,
Thank you, Mr. Chairman, Senator Sessions.
It is an honor to be back before this Committee.
Currently, only corporations are exposed to civil liability
for risky corporate behavior. Corporate executives do not face
a comparable liability. Corporate actors, however, receive the
benefits of risk-taking by corporations. These corporate actors
externalize the costs of risky behavior, but internalize those
benefits. The result is excessively dangerous behavior and
Your legislation, Senator, will correct this. Your
legislation will correct the incentive asymmetry that is
created by this dual system of liability. It places non-
transferrable costs directly on corporate actors. Your
legislation will create appropriate incentives for data
collection and investigation, and appropriate incentives for
disclosure. A core premise underlying the efficient market
theory is that adequate information is disseminated to the
public. Your legislation will pursue this goal.
Senator, if Sarbanes-Oxley can impose criminal penalties on
corporate actors for financial wrongs, surely we can have the
same standard for acts that kill. There have been several
criticisms levied against your legislation. First is that it is
hard to define a defect or an excessively dangerous product.
Let's be clear about what we are talking.
There are many products on the market today that are
dangerous, but not excessively dangerous. There are many
products on the market today that are dangerous, but have no
defects. More Americans die in car accidents over 2 years than
died in the whole Vietnam war, but cars are not inherently
defective. They have an inherent danger. That is acceptable.
A defect is defined in several ways; as Mr. Panish
described, one refers to the introduction of a risk that is
beyond what is already in the marketplace. That is
unacceptable. There are several examples of this, some
discussed already here. You mentioned the Ford Pinto case, a
well-known case; the Dalkon Shield case, where the company
allowed women to be subjected to defective products that injure
or kill for years before it was disclosed.
Also, Senator, I am involved with the Chest Pain Society,
and through this work I have come to learn a little bit about
heart attacks. If you are having a heart attack, you go to a
hospital. You go because you want an angioplasty. You want that
blocked blood vessel to be opened. Well, there are many
hospitals that don't have this capability, but they want your
business, and so they advertise the ability to treat chest pain
Mather Memorial Hospital in New York is one such hospital.
They put out this flyer which is entitled ``Community News.''
It looks like a news report. It contains articles looking like
news reports. It is not a news report. It is an advertisement.
In that advertisement, they say patients are seen and evaluated
within moments of their arrival for chest pain and appropriate
treatment is begun immediately.
The problem with this advertising, Senator, is that they
can't do angioplasty. What is the appropriate treatment? The
American Heart Association and the American College of
Cardiology says it is angioplasty, but this hospital advertises
for your business. That is misleading. That causes death.
Another concern raised about your bill, Senator, is that
there may be rogue prosecutors and law enforcement pursuing
these cases for their own personal interest. Well, I guess that
is a possibility. I do know, Senator, that you as well as
Senator Sessions were both prosecutors, and I trust in the
public service of people like you to do the right thing.
There is also the suggestion that criminal prosecution
would delay civil recovery. That is simply wrong. Civil cases
run parallel to criminal cases. Indeed, any plaintiff's
attorney worth his salt wants the criminal case; it helps his
Senator, I thank you for listening to my remarks and I am
open to any questions.
[The prepared statement of Mr. Steinbuch appears as a
submission for the record.]
Thank you very much, Professor Steinbuch.
We now turn to Mr. Victor Schwartz, who chairs the Public
Policy Group at Shook, Hardy and Bacon, and has been co-author
of the most widely used tort case book in the United States. He
has an undergraduate degree from Boston and a law degree from
Columbia. Mr. Schwartz has appeared before Congressional
committees with some frequency over the past couple of decades,
to my knowledge, and he is very, very experienced in this
We welcome you back, Mr. Schwartz.
STATEMENT OF VICTOR E. SCHWARTZ, SHOOK, HARDY AND BACON, LLP,
Thank you, Senator, and good morning to you,
Senator, and to Senator Sessions. I have been pleased to be
invited here today. The U.S. Chamber Institute for Legal
Reform, thousands of members, and the American Tort Reform
Association asked me to be here on their behalf. But they have
heard me before, so they said they are not responsible for
anything I say.
I do want to address something in this proposed bill
because it it relates to a topic that I have learned from the
people who taught me law, Bill Prosser, and for 30 years Dean
Wade, my coauthor. They first attempted to define ``defect'' in
Restatement of Torts (Second), where they said a defective
product was unreasonably dangerous to the user or consumer.
That is what they said.
This definition of defect spawned more case law than any
other words in the history of torts, conflicting all over the
place. What is a design defect? What is a warning defect? Case
books, law books, thousands of pages. Can such a word be used
to describe a crime? You can know something, and a knowing
standard is a very important standard, but if what you know is
a non-descriptive word, it really isn't fair to somebody
because they have no notice of what the crime is.
Senator Sessions, you pointed that out in the TREAD Act
when that was going through and helped modify it so there
wasn't a non-descriptive word used for a crime like ``defect.''
From 1992 to 1998, I worked with the brightest law
professors in America. I learned then what I saw today: you can
have two law professors and four opinions. But I also learned
that the trouble of defining ``defect'' persists. We tried to
define ``defect.'' It is in Restatement of Torts (Third). We
did a better job, I think, because of the 30 years of
experience that we had, but it is still an opaque concept.
Just take the recent Vioxx cases. In the first case, Vioxx
manufacturers lost a $253 million judgment under ``defect.'' In
the second case, in Atlantic City, a jurisdiction that is
friendly to plaintiffs, Merck won. In the third case, which was
in Texas, there was a hung jury. In the next case, which was
the same case moved over to Louisiana, there was a defense
verdict. I don't think we want the criminal law to depend on
standards like that, a roulette wheel of that type.
The bill also tries to talk about comparative safety, and
that is an important concept, but any product that is made
today has a degree of safety and you usually can find a product
that is safer and less safe. The bill suggests that the one on
the bottom of the food chain is going to be criminally viable.
But if they are, then you go up one more. How many safety
features are on a product may depend on the price of the
product. If you buy a toaster oven for $100, it is going to
have more features than one for $20. But this would, apart from
searching for something that I think is very hard to find, and
that is a defective product, cause manufacturers to shun less
expensive products that do the job, but really are not
dangerous at the level that deserves punishment. And let me
We have punitive damages. If anything, there is over-
heating in the system now. Just as Sandra Day O'Connor said,
punitive damages have run wild in this country and people don't
know when they are going to be punished or how they are going
to be punished or where. It is over-heated at this point, and
that is why constitutional constraints have been put on
punitive damages. It is really not a wise thing right now to
add yet another vague alternative and make it criminal.
I did want to add to the record an article by Professor
Wheeler, who tried the Pinto criminal law case. I didn't append
it to my testimony because I didn't want a lot of paper sent up
here, but I think you would find it informative.
In a nutshell, this is an idea that really does sound good.
We don't want manufacturers to be killing people, but to put a
crime based on the topic of defect is putting a crime based on
a fog. And we don't want our Department of Justice to be there
where instead of doing their job, you have good friends, like
one who testified earlier, kind of waiting outside to see if
there is going to be an indictment, because even if there was
the slightest hint of an indictment, I assure you there would
be a product liability pinata lawsuit following that that no
one has ever seen before.
I thank you for your time. I look forward to your
[The prepared statement of Mr. Schwartz appears as a
submission for the record.]
Thank you very much, Mr. Schwartz.
Our final witness is Mr. Donald Mays, Senior Director for
Product Safety and Consumer Services at Consumer Reports. He
received his undergraduate and master's degrees from Manhattan
Thank you for joining us today, Mr. Mays, and we look
forward to your testimony.
STATEMENT OF DONALD L. MAYS, SENIOR DIRECTOR, PRODUCT SAFETY
AND CONSUMER SCIENCES, CONSUMERS UNION, YONKERS, NEW YORK
Good morning, Chairman Specter and Senator
Sessions. I am Donald Mays, Senior Director of Product Safety
and Consumer Sciences for Consumers Union, publisher of
``Consumer Reports.'' Thank you for providing me the
opportunity to come before you today to discuss ways to improve
the quality and safety of the consumer marketplace and support
all efforts to achieve this important goal.
The ultimate question before the Committee today is whether
or not criminal penalties will ensure corporate accountability.
Will the threat of jail time serve as an effective deterrent in
preventing dangerous products from reaching the hands of
consumers? Will it force manufacturers to think twice? Would
such legislation have prevented Ford-Firestone?
Before we answer those questions, I believe that it is
critical to look at why legislation targeting marketplace
accountability is necessary for the consumer interest, which,
based on my experience, I believe to be very much the case.
My career has focused on product safety and performance
testing for manufacturers and retailers, as well as for
consumers. I believe I bring to the floor a unique perspective
of someone who understands the competitive pressures of getting
new products to the marketplace as quickly and as economically
as possible. And from a consumer perspective, I understand the
need to trust that all the products in the marketplace are
produced with a high degree of integrity and safety.
My breadth of experience includes work in laboratories and
factories both here and abroad. It has exposed me to countless
examples of suppliers that failed to diligently build safety
into their products. What is more disturbing are cases that I
have seen where manufacturers and retailers have continued to
sell unsafe products, despite the emergence of a clear hazard
pattern that results in serious injury.
My product safety work and expertise have led me to six
overall conclusions that I would like to share with the
Committee. No. 1, many injuries are avoidable if adequate pre-
market safety testing is conducted. Two, manufacturers do not
always react responsibly when informed that their products
could potentially cause a repeated pattern of death or injury.
Three, due to changes in the global marketplace, consumers
face increased risk from defective products. Four, there is a
lack of compliance with voluntary safety standards. Five, there
is inadequate enforcement authority, resources and activity by
Federal agencies. And, six, civil penalties may not be an
effective deterrent in preventing unsafe products from being in
the marketplace. An example: a $750,000 civil penalty levied
against Wal-Mart in 2003 for failing to report safety hazards
with fitness machines cost the company an equivalent of their
sales rung up in only 1 minute and 33 seconds.
So, clearly, Consumers Union strongly believes that the
consumer marketplace does, in fact, need greater
accountability. Consumers Union supports the introduction of
legislation clearly designed to deter company employees with
decisionmaking authority from knowingly jeopardizing consumer
safety. And on this point, please let me be clear. We
understand that any company can make a mistake, but it is what
companies do after they have taken the time to do their due
diligence and establish that they have a defect that could
likely cause bodily injury or death that should be the focus of
this bill. If companies don't go public and they continue to
sell their defective products, then the individuals responsible
should be punished to the fullest extent possible.
We believe the language of any legislation should be
targeted so that responsibility cannot be avoided by company
representatives who have the power to ensure that unsafe
products are not marketed. In addition, knowledgeable employees
who fail to pass along this information to appropriate
government agencies should be held criminally responsible.
Without this important information, government watchdog
agencies are ineffective.
Furthermore, we believe the scope of any bill should be
broad enough to underlie the entire marketplace and include not
only traditionally manufactured products, but also vehicles,
foods and drugs. A company representative that knowingly allows
the introduction of tainted meats or hazardous pharmaceuticals
to the market should be just as culpable as manufacturers that
produce unsafe vehicles. We believe that the triggers for
determining when a product is defective must be clearly defined
and that an appropriate definition of ``defective'' is when a
product could potentially cause a repeated serious injury or
Finally, this legislation should be expanded and address
head-on how a company whose employees are prosecuted under the
law must deal with removing their defective product from the
marketplace. While it sends a strong message to make corporate
officials responsible for their misdeeds, it is also important
to take timely and effective measures to inform and assist
consumers who still have the unreasonably dangerous product in
their home. To prevent future death and injury, the product
itself should also be placed behind bars so that it cannot
cause anymore harm.
Therefore, we urge you to consider expanding corporate
duties to include an intensive effort on the part of the
manufacturer to get the defective products off the market.
Companies should at least be required to spend advertising
dollars to inform consumers about their defective products with
as much splash and sophistication as they spend on marketing it
in the first place. Effective legislation to ensure responsible
corporate behavior must focus on appropriate liability in a
court of law and accountability in the court of public
I thank the Chairman and other members of the Committee for
the opportunity to testify and I look forward to answering
questions. Thank you.
[The prepared statement of Mr. Mays appears as a submission
for the record.]
Thank you very much, Mr. Mays.
We will now proceed with 10-minute rounds of questions by
the Senators on the panel, Senator Sessions and myself.
Beginning with you, Mr. Mays, you made reference to a case
involving Wal-Mart. What are the facts of that case?
Wal-Mart continued to sell some exercise devices
in their stores even after they knew that they were causing
injury to customers who were actually trying the equipment out
in their stores. Their failure to report that information to
the Consumer Products Safety Commission, as required by Section
15(b), resulted in a civil penalty of only $750,000.
Are there many similar matters called to
the attention of the Commission?
There are many similar matters. Failure to report
incident data to the Commission is probably the most common
cause of civil penalties.
Mr. Schwartz, do you think that the
possibility of a criminal sanction would have any effect at all
on judgments of corporate officials in evaluating safety
precautions which are expensive, contrasted with the evaluation
of what their damages would be if the safety precautions are
That is a good question and it does call for
speculation, but I don't think so. I think that right now they
can lose their jobs and they can lose their market share
completely on a product once it is branded in the product
liability system as being bad. It takes some time, and that
threat, potentially millions and billions of dollars, is
I think if there are additional penalties in the CPSC, that
may be needed. That is a different question as to whether you
introduce something that is very vague, very hard to
understand, and illusory to kind of grab onto. So I don't think
it will. Specific penalties, sir, that would be very clear and
easy to understand might be needed in some areas, and they may
help proper decisionmaking.
In what areas?
Well, let's take the CPSC. If there isn't
proper reporting of defective products to the CPSC, current
penalties may be insufficient. People have a reason to know
when they are supposed to report to the CPSC.
Those penalties go against the company,
not the individuals.
That is right. The separation of individuals
and the companies is nothing that I have seen in my practice in
30 years. They are the company.
You think there would be no difference
between an impact of a decisionmaker, say a chief executive
officer, if he or she faced criminal sanctions, contrasted with
the punitive damages in a civil case which would be awarded
against the company and a cost really to the shareholders?
As the appendix to my testimony shows, there
are criminal sanctions for very serious acts by individual
executives, and State attorneys general have power, which you
would know, to go after people personally if they have the
evidence that they have done something criminally wrong.
On defects in products?
Well, not on defects in the products, and
that is, I guess, the core of my testimony. ``Defect'' is one
of those words that we think we know what it means, but not
when it gets down to actually defining it, it is hard enough to
define it in tort law. It is one of those words that we think,
ah, I know what that means, like we may think we know what a
reasonable person is in tort law.
I take it your answer is no.
Well, I began with ``no,'' but then you
wanted to get me to ``yes,'' so I went back to ``no.''
I didn't hear a ``no.'' If I had heard a
``no,'' I would have moved on to the next question. The
question isn't whether there are some penalties scattered
through the State law books. The question is whether there is
any real program which deals with defects. And I will use that
word; I think we can define it. I think there are many terms
that are difficult to define. You started to move on to the
definition of ``reasonable.'' There are tens of thousands,
hundreds of thousands of cases written on it, but on individual
cases we deal with it.
That is why, Mr. Schwartz, I come back to the question as
to whether the existing laws which you refer to involve
products, and your answer to that was no.
Well, the product liability laws are
amazingly strong, over-strong, in my view, and this separation
of somehow an executive, because he may not feel personally
that he is going to go to jail, needs additional deterrence I
have answered. I think when people are working in the
companies--I work with them every single day of my life--they
are thinking carefully about what decisions they are making,
what warnings are to be on products. I have spent hundreds of
hours on this and I don't see the need for any additional
criminal deterrence to get to the right decision. That is just
based on my experience.
Well, summarize for us again what are
existing criminal deterrents.
Well, there are existing criminal laws on
manslaughter, negligent homicide and other provisions, and they
are spelled out more carefully in the appendix to my statement.
But I think that the power of----
But those don't refer specifically to
No, they don't, but they can capture somebody
who has knowingly and willfully tried to intentionally kill
another person. I mean, those words we understand. We know what
those words mean. We have always been kind to one another and
we just happen to differ here, but the tort law classes--I was
thinking of Fleming James, who may have been your teacher back
In tort law classes, they will say, ``Well,
what about this? What about that? '' It is all vague. You step
over into the criminal law and then there are very precise
rules that govern conduct, and I think the two worlds shouldn't
be put together.
When you describe the sequence of events,
including manslaughter, those are not available to the Federal
Well, there are State prosecutors and State
tort laws. I don't see a need for Federal intervention and the
Department of Justice getting into the area of defective
I take it your answer then to my question
is they do not apply for Federal prosecutions.
That is right.
OK, we got there.
Dr. Maron, tell us a little bit about the defibrillator.
How does it work? What is its structure? What are the
Well, it is a sophisticated device that has been
in the marketplace for 25 years that is intended to----
And what happened to your patient?
Well, what happened was the device short-
circuited, literally, and therefore the electrical energy that
was intended to go into the heart to defibrillate, to restore
normal rhythm, did not. It was dissipated. As a consequence, it
was a non-functioning device at the precise moment that it was
intended to function and was implanted for that reason.
And did Guidant, the manufacturer, know
about that kind of a defect?
Yes. At the time of the death, they had 25 other
examples, including 4 near-deaths, with precisely the same
defect, the short-circuiting.
How do you know that Guidant knew that?
They told us. It is a matter of record. There is
Professor Steinbuch, you mentioned the
Dalkon Shield case. In passing, could you amplify what the
facts were in the Dalkon Shield matter?
Senator, I am not an expert on that case,
but I can tell you that the company put out a product for women
to use, an IUD, that turned out to be severely flawed. It made
women much more prone to infection, and then the company
discovered this defect and did not disclose it to the public.
And many women were injured, and I believe some women died as a
result of this product.
And what were the facts, as you
understand them, with respect to the knowledge on the part of
the A.H. Robins Company which manufactured the Dalkon Shield
Well, I think it is the same issue that Dr.
Maron just spoke about, and this is the same issue that
pervades product defect cases. Companies discover that there is
a defect. They have complaints and the complaints are processed
and they are analyzed and they are evaluated. And they don't
share this information with the public. They don't allow the
public to make these choices. Today, we live in a complex world
where a strict application of the concept of caveat emptor is
no longer appropriate.
My time is almost up, so I want to come
to a core question. Do you think the response from corporate
executives would be different in notifying in the public, as
you put it, if a potential criminal sanction was present?
Absolutely, Senator. Corporate tenure has
been on the decline. People move from company to company, and
the response of civil liability often comes after corporate
actors leave individual corporations. Putting the
responsibility on them criminally will carry along with them
wherever they are and their actions will reflect that.
Thank you very much, Professor, and I
will turn now to my distinguished colleague, Senator Sessions.
By way of a brief introduction, you might be interested to know
that yesterday at this time we had the tables arranged
differently and we had a dozen Senators in this room going over
a 300-page statute on immigration reform. And one of our most
active participants was Senator Sessions, who had an array of
amendments, and we went through them one by one.
We did our best to focus on an issue and, when we had a
Committee consensus, to move on so that we could have some
prospect at some time of finishing that bill. One of the most
interesting moments that Senator Sessions and I were both
involved in was a complex amendment offered by Senator Feingold
which no one understood. I won't say Senator Feingold didn't.
You would have to examine the transcript.
But the way we function is we have papers and we have
assistants behind us and when we come to a question that we
don't know the answer to--and I know this will be hard for you
to believe that there are some questions we don't know the
answers to--we turn to our assistants. And the communication is
not very good on these complex questions, and we had gone
around for about 30 minutes on an issue and we were getting
nowhere. And as Chairman, I set the question aside until we
could find out what we were talking about. We were analogizing
it to Charlie McCarthy and Edgar Bergen, with the staff
assistants trying to tell us what was happening here. But it
just wasn't working, so we moved on. That is what you call a 1-
STATEMENT OF HON. JEFF SESSIONS, A U.S. SENATOR FROM THE STATE
Thank you, Mr. Chairman, and you have
done a good job with immigration. It is a very difficult,
difficult issue and people have some various views about it and
it is important. You have also moved the asbestos bill, which
is also hugely important. Some of these witnesses are aware of
that or have even testified with regard to that.
We have had the PATRIOT Act, a Supreme Court Justice, and
what else this year?
Chief Justice Roberts, Justice Alito. I
could go on and on.
I don't think there has been a Committee
that has been this busy--and then he had the gall to tell us
yesterday that if we didn't want to show up at the hearing, we
ought not to be on the Committee. I was glad I was there, so I
knew you weren't talking about me.
Well, that kind of talk is very seldom
engaged in in the Senate. But you can't transact business--you
need a quorum--unless Senators are present. It is a high-
visibility Committee, a very popular Committee, and as Chairman
I want the members present if they want to be on the Committee.
Well, it was a correct comment.
Mr. Chairman, I would just----
Would you begin Senator Sessions's time
again at 10 minutes? Thank you.
I would just note that as a person who
spent the better part of my political or governmental career as
a prosecutor, almost all of that as a Federal prosecutor, and 2
years as attorney general, I have become somewhat uneasy about
the vague criminal laws that we are passing. I think that is a
legitimate criticism of what Congress and State legislatures
You remember the old burglary statute, you know, breaking
and entering. You had to break in the door, then you enter with
intent to commit a felony therein. Robbery was the taking by
force and violence of a thing of value from a person. These
were the elements, and you knew what the elements were and you
knew what you had to prove. And this is where you are talking
about a person's liberty, where you are going to put them in
the slammer and send them off to the big house.
Now, we have not been quite so scrupulous about taking
people's money, you know. You need less proof to take people's
money, and Mr. Panish has probably done that more than once. I
have tried to a few times, but probably haven't been as
successful as he has been in suing people for money. It is a
different deal, so I just want to point that out.
I would note that the bill itself uses the words ``knowing
and reckless introduction of a defective product.'' My
understanding of current law in most States--and I missed most
of the colloquy you had over manslaughter or other type
things--most States do have laws that deal with reckless
misconduct. But if you read the legislation that has been
introduced, ``reckless'' is in the description of the bill, but
not in the words of the statute. In fact, it just says any
person who introduces into commerce a product known by that
person to be defective and capable of causing death shall be
fined. So it is getting pretty scary here a little bit.
And you mentioned corporate executives come and go. You
come in and you are president of a corporation and somebody
sends you a memo, and then the next thing you know, you have
been indicted by a Federal prosecutor under this new law. So I
do think we have a responsibility to draw the statute clearly
before we put somebody in jail, particularly in light of the
fact that they can be sued for punitive damages today.
Mr. Vandall, I think you raised a very valid point about
the likelihood or the ability to prosecute. I think we can have
a very, very uneven, aberrational type of prosecution depending
on the mood of their prosecutor or their predilection almost
entirely. It is hard to have a basic standard, it seems to me,
with regard to these cases.
I got a note from George Terwilliger that you had invited
him, former Deputy Attorney General of the United States and a
longtime prosecutor, who was going to be a witness on this
panel and couldn't come for personal reasons. I got his
statement during the hearing, so I haven't read it, but I think
he expressed some of those same concerns, in general.
With regard to a civil case, Mr. Panish, what do you have
to have before you can file that complaint and ethically
maintain a cause of action? What are your standards there?
Well, Senator, you need to have some evidence
that support the various elements. As you mentioned in your
criminal example, you need to have evidence that supports your
elements that you need to prove for your case.
You are not totally free to sue somebody.
I mean, you, as a lawyer, can be sued if
you over-reach. What is the basic standard for a plaintiff
lawyer in a defective suit, preponderance of the evidence?
In a court of law, depending on the various
elements, preponderance is one standard. In California, the
You can file a suit for less than
preponderance of the evidence, can't you?
Anyone can file any lawsuit they want, but in a
product liability case, when you are a lawyer taking on a case
like that against the manufacturer, you better have your ducks
lined up if you think you are going to be successful for your
client. The manufacturers are not going to roll over. It is
going to be a----
Well, I know that, but I guess I would
just make the obvious point that you can file and commence an
action, a civil action, easier than a prosecutor can commence a
criminal action, assuming there is a responsible prosecutor.
Second, with regard to obtaining information, when you file
a suit, Professor Schwartz, you can take the deposition of the
person and compel them to testify and provide evidence, can you
Yes, you can, extensively.
And in a criminal case, of course, you
can't. If the defendant is a target of the grand jury, they are
able to refuse to answer and refuse to produce any documents in
their personal control. But if you are suing someone civilly,
you can obtain all kinds of documents from them in an easier
fashion, isn't that correct?
Sure, warehouses full.
Warehouses full. And it is out of this
that good plaintiff lawyers have found the Ivey memo, have
found the memo in asbestos that proved that asbestos companies
knew that this was a dangerous product and people shouldn't be
exposed to it. Yet, they took no action. This was 50 years ago.
I think you have a lot less of it today than you used to have.
But 50 years ago, they had this information and they didn't
tell people and people died as a result of it. So we kind of
know how that all plays out.
But it is a much easier thing to pursue a civil suit and we
have set it up that way. When it goes to the jury, the question
is do you believe by a preponderance of the evidence that they
violated the standards of care that are called for, and
therefore how much damages do you want to give them, an award.
That is how it works.
In a criminal case, you have got to take a case before a
grand jury. You can't get as much evidence and you have to
prove the case beyond a reasonable doubt, and the leeway for a
prosecutor to try a case at trial is much more difficult. So I
say that, as a practical matter, if you are going to take out
after a corporation who you may have some reason to believe
through the Vioxx deal is doing something wrong, you are
committing yourself to a very long period of time with many
more roadblocks than a good civil lawyer would have in pursuing
the same case. So I don't think you are going to have a whole
lot of them.
Now, Professor Schwartz, you are the author of the most
widely used torts textbook in America today. Is the descendent
of Prosser on Torts that I had, I guess. You may have been on
the book then, I think--perhaps you were--when I was in school.
So I guess I would ask you about your Vioxx example. That
was curious to me that you had such aberrational verdicts. It
is one thing to have aberrational verdicts when a person might
have to pay some money out of his pocket. It is another to have
aberrational verdicts when it comes down to putting somebody in
jail for 15 years.
Would you agree?
Absolutely. That is at the core of my
testimony. You don't want to import the tort casino over to
criminal law. The risks of being wrong are too great. Somebody
is going to prison, or even an indictment where there is no
real good basis for it.
I mean, Mr. Panish knows, and we all know who practice that
if there were an indictment against a particular product, that
company would probably not be around very long because it would
be followed by product liability suits because of the publicity
that would be on television. People watch, oh, ``x'' company is
being indicted for selling a product. I wouldn't want to have
to defend a case, frankly, on behalf of a company after that
flashed over all three networks.
So it is not even the conviction. It is the weapon, and the
weapon has many effects. And as you have said--I am restating--
tort law in a way has a right to be wrong. The Vioxx cases
still are playing out, but that is not unusual to have a case
won, a case lost, a case won, a case lost. And sometimes they
go away and sometimes they don't, but it takes years to sort
out whether or not the product really was defective. And in
part that is because people at a higher level than I am--Bill
Prosser thought he knew what ``defect'' was. Dean Wade thought
that it was less likely that he knew, and as the low person on
the totem pole I find it even vaguer than they did.
Well, that would be a concern to me, Mr.
Chairman, whether we would be carrying over into the criminal
justice system an area that is awfully disputable about whether
an indictment should ever be brought, whether a verdict should
be rendered, whether a person should be sent to jail. The more
you get into these complex areas, the more potential for abuse
I think we can see.
Thank you very much, Senator Sessions.
Your introductory comments about being as precise as we can on
tightening the language, I think, is very, very valid. That is
something that at markup we really work that over, and we have
a lot of experienced people. Senator Sessions was a U.S.
Attorney and an attorney general, and Senator Leahy was a
district attorney in Vermont and I was district attorney in
One of the grave, difficult problems in evaluating this
issue is to what extent this is a prevalent problem, to what
extent it exists, how much of it there is. I am going to ask
Governor Engler and Mr.
Panish and others on the panel, but I
will start with Governor Engler and Mr. Panish on this issue as
to whether cases we have examined are anecdotal, just random
occurrences, or whether there is really a prevalent problem in
the commercial world.
There have been a number of references made to the
Firestone-Ford situation. There were some 271 deaths and more
than 700 injuries on the defective tires that were put on the
Ford from Firestone, and concealed. Finally, we legislated on
it and it was my amendment which imposed criminal liability
there, so that we do have precedent for criminal liability
where there are defects which were known to both the
manufacturer and the automobile company which put the tires on
We have a situation with Zylon bullet-proof vests where the
company knew as early as 1997 that the material had failed to
comply with quality tests and deteriorated. And the company
made a decision, and these are documented in internal
memoranda, that they would continue to operate as though
nothing was wrong until one of their customers was killed or
some agency disclosed the defect publicly, but the company
decided not to. Then in June of 2003, a police officer was shot
to death wearing one of these so-called bullet-proof vests
which had, in fact, deteriorated.
There are the famous cases involving Oraflex anti-arthritis
drug where Eli Lilly failed to tell the FDA that it knew of
over 25 deaths in different countries that were linked to the
drug. Then there were the Playtex and Tambrands cases where
there was a substance known as polyacrylate which caused toxic
shock syndrome. And here again it was well-known to the company
and more than one hundred women died from the exposure there.
Then we had the Ford Mustang case, where again it was a
design defect and it was a cost/benefit analysis. And it wasn't
really brought to light or it wasn't emphasized until there was
a taped conversation between President Nixon and the president
of Ford which disclosed that Ford had saved almost $20 million
over 3 years by delaying the safety modifications to the
Governor Engler, you are the head of the National
Association of Manufacturers, and I would say a very effective
president in articulating the views, and it is a judgment call.
You don't know what goes on in all the corporate board rooms,
all the research and development, so it is a matter of an
Are we dealing here with an issue which comes up now and
then, or do we have a problem which really is serious enough to
call for Congressional action?
Mr. Chairman, I think it is a very good
question. You know, being here under oath, the obvious answer
is I don't know. The speculation is a little bit like with
Sarbanes-Oxley. I mean, we had a few companies that through
their behavior resulted in a sweeping law being passed which
many would say, particularly the smaller and medium-sized
manufacturers, has been overkill.
When it comes to defective products or allegations of
defects in products, you have got the collision of innovation
trying to bring especially in the pharmaceutical example some
of the supplies that we would like to see into commerce. I
mean, I think you push the envelope to try to bring those out,
and you try to understand what it takes to make them better.
The examples you use, I think, are small in number, but any
time there is a single death that one can point to, one can
say, well, was that avoidable? It is impossible, I think, to
de-risk our society. There are in all of these cases, I think,
pretty heavy penalties that have been paid by these companies.
Some of these companies that were involved have changed
dramatically. In some cases, management has lost their jobs and
their careers. In other cases, the publicity has led to
But, again, the question here is, you know, given all of
what may have happened in the past, do we have a cure? Would
anything be different in the future? I think there is some
question about is this the solution. I think that we probably
as a Nation spend more on safety and more on prevention and
trying to get it right than anyplace in the world. I think we
do a pretty good job of that.
Would this bill in some way help us do a better job? Would
it focus the attention of an executive, or in this case all the
way down the line, because I assume a middle management
employee touching a product who is part of that production
might herself or himself have to ask do I let this go forward?
So the ambiguity is very difficult to deal with. There are
certainly challenges, and you will hear a different perspective
in just a moment, but I think that by and large the record of
safety is commendable in this country and that what is a focus
on every company's mind today is how do we make the products we
make better and can we afford to take new ideas to the market
with whatever risk that might present to consumers.
Well, thank you for that answer. What we
are looking toward is the situation where there is solid proof
and the kinds of cases we have cited here where there are
internal documents which show a cost analysis that it would
cost $8 to make a change in the location of the gas tank, as
opposed to $2.40, where they calculate the payment on tort
A criminal penalty requires proof beyond a reasonable
doubt, so there would have to be very specific proof that the
corporate executive knew what was going on and had made the
decision, participated in the decision, to reach that standard.
I think you are right. There are enormous efforts at
product safety, but we do have these cases come up where they
have known about it for a long time, documented, and not
disclosed in the interest of corporate profits, and many
injuries and many deaths.
Mr. Panish, how would you evaluate the question as to
whether this is anecdotal, happens from time to time, or a
real, major problem in our stream of commerce?
Well, Mr. Chairman, once again I would say that
the problem does exist. It is the civil justice system that
allows the attorneys that are able to uncover these memos and
documents and knowledge of the corporate executives.
Well, is that sufficient, a lot of able
lawyers like you who are doing the job? You are motivated.
Sometimes, you even get a good fee.
Well, we are motivated about helping our
clients, No. 1, and our clients have been seriously injured by
these defective products.
I am not suggesting that it was a
mercenary motive. It is a part of your work.
I understand, but the problem does exist.
Safety is paramount in this country and all manufacturers know
that. These situations of putting profits over safety do occur.
It is not an isolated incident. You have just brought up five
or more examples of specifics, from your bullet-proof vests to
the Ford Pinto, all the way down the line.
And in a way, personal accountability and having somebody
on the line knowing that when they are making these decisions
that they could be held personally accountable--they are going
to think twice before they try to up the bottom line. That can
act in and of itself as a deterrent. Both yourself and Senator
Sessions being prosecutors know if you are prosecuting a case
like this, you are not going to be filing every case. You are
going to want to have a solid evidentiary case, you are going
to want to have witnesses, and you are going to know the higher
standard of proof that you have to meet to convict somebody in
a criminal case.
I don't think the courts are going to be flooded with cases
like this, but it is important for personal accountability for
people to know that if they make the wrong choice, not to try
to put out a more creative product or innovative product, but
if they know that there is a problem and they do put profits
over safety that they can be personally held accountable. I
believe that that would act as a deterrent effect to corporate
executives who, as the professor said, move from company to
company and by the time this surfaces they are no longer with
It also penalizes the companies that are doing the right
thing, that are spending the extra money for safety. And to
allow these other companies that aren't doing that to profit by
that would be unfair to the companies that are actually doing
the right thing.
Well, you are correct about the challenge
and responsibility of corporations to make their products safe,
and there is no doubt about that.
We are willing to take some risk in civil actions to get
justice based on a preponderance of the evidence.
I am thinking
of the example of brakes, Professor Schwartz. Let's say
somewhere in the development of a new form of brakes for a
vehicle an engineer does a memo that under certain
circumstances there might be a problem and he sends that
through the system. And the brakes go fine for 5 years, and
they are even maybe better than other brakes in most instances.
But this very thing occurs and something happens and somebody
gets killed. Then this document appears. Ah-hah, you knew this
could happen; you go to jail 15 years.
How does that strike you? You have been studying these
cases and all the complexities of proof and defect that are so
critical to American tort law. How would you evaluate it?
Well, your question goes to the two sides of
the coin here. If that executive knew that he might be subject
to a criminal penalty, he might not have written the memo and
we wouldn't have it. That is why this is not an easy area.
In the TREAD Act which the Chairman referred to, in the
beginning for a while there was a provision about defective
products and there was debate about that. But ultimately when
the bill passed, they eliminated that and they went to making
false or misleading statements. Well, I can understand what
that is, but as you go into this area one little change is like
a child's kaleidoscope. It may change the picture, but I don't
think anybody on the panel under oath can swear to what that
new picture would be.
And again we take that employee who has now the courage to
write the memo, but if he says, boy, if I write something like
this I could get in trouble--or he could write more memos if he
knew about it. It is just not that easy in the context of the
real world, it isn't.
On the question of recklessness, which is
not in the statute but is only in the preamble or the heading,
I do believe that most States have a standard for reckless
disregard. The classic case is driving through a neighborhood
where children are playing at high rates of speed in reckless
disregard of the consequences. A person can be held criminally
liable for that. I don't see any prosecutors at the table here.
Could not a person who introduces a product into the
highway of life not be held to that reckless disregard
standard? Would that standard not be available in criminal
court for products liability cases? Does anybody want to
comment on that?
I mean, what normally happens is that they are sued and if
they are actually in reckless disregard, then you are entitled
to punitive damages, aren't you, Mr. Panish?
In our State, California, there is a higher
burden of proof for punitive damages. California requires a
clear and convincing standard to be proved. It is conscious
disregard for the rights and safety of others, and it is pretty
Clear and convincing evidence, but it is
a conscious disregard?
A conscious disregard for the rights and safety
of others. And there are other provisions; there are three
different prongs under which it can be awarded.
So I guess my concern would be, or my
point would be that there are ways now to prosecute criminally
under the reckless disregard standard that we have classically
had in criminal law for really egregious actions that were
knowingly and deliberately done or done with reckless
If you knowingly and deliberately drive into a crowd of
people, then you are going to be held liable for first-degree
murder, whether you actually intended anybody to be murdered or
not. If you do it with reckless disregard, it may be second-
degree murder, depending on the State law. But there are ways
to do that under current law.
I am concerned about the standards here and that we create
now a Federal criminal action based on more vague standards
that look more like civil lawsuit standards.
It does look like civil standards. That is
the line between tort and crime, and law schools package this
stuff separately. You know, you go to torts class and then you
go over to criminal class, and they never have the two people
together. I used to try. I used to bring the criminal law
professor in and we would discuss the very things that are
being discussed in this Committee today about the difference
between tort and crime, the difference between standards.
And there are criminal standards, just like what happened
ultimately with the TREAD Act where a criminal standard which
was easy to understand was incorporated. And there are criminal
statutes about reckless disregard for life. Whether that is
going to be used in the context of product liability, I don't
know. If the Chairman would ask me has it ever been used, I do
think that they tried in Indiana, as the Chairman averted to,
in the Pinto case, but the case fell apart. The article I
submitted tells why. But there is a difference in drawing lines
and how you express things in criminal law versus tort law, and
there are good reasons for the differences.
Professor Steinbuch, on your
advertisement there, I am concerned about these advertisements.
Some of them look like newspaper articles, No. 1. I don't like
that. No. 2, they make statements that I know are not true. So
you could do that through giving some regulatory agency
administrative authority to gain an injunction to shut down the
advertisement, which I think we have done pretty aggressively,
sue for damages, and/or you could put the person in jail. I am
not against either one. I mean, I think all three are
appropriate, depending on the clarity of the proof and the
clarity of the standard.
Would you agree that in a product production thing, whether
the head man at Merck--did they do Vioxx, did you say,
Merck knew everything there was in every
report that ever existed about--he might have been hired
because of his financial expertise, and whoever gets held
liable for something is in a more uncertain area.
Well, I think, Senator, you raise an
interesting point and a good point, and that is that on
criminal law we must be confident of who we are prosecuting.
But I think we may be paying too much attention to the marginal
cases and are less concerned about the clear cases that you
have heard about on this panel.
It reminds me of a parable that my father once taught me,
which was we can tell the difference between night and day
easily even though the exact point that one changes to other is
often not clear. Everybody knows that 11 p.m., is night.
Everybody knows that 11 a.m. is daytime. 5:48 a.m.--I don't
know if that is day or night; I don't know exactly. But, we can
still easily tell the difference between night and day.
And so, yes, there will be marginal cases, but with limited
resources and good prosecutors such as yourself and such as
Chairman Specter, I am confident that a properly tailored
statute would achieve the goals that the Chairman has sought.
Yes. I would like to try to put some of the
questions and comments into context, if I could, and responding
back to the Chairman's question of anecdotal and Professor
Schwartz's comment in regard to the Pinto prosecution.
The Pinto prosecution failed because it was underfunded.
This was a county D.A. He had $20,000 for the whole year. He
spent $20,000 of his own money, so $40,000 total. When you read
the book, and it is an excellent book on the Pinto case, it
shows that Ford just blew him out of the water.
Mr. Schwartz commented that the product liability system is
over-heated. I think that is short of the problem. If it was
over-heated, we wouldn't be here today. If it was over-heated,
we wouldn't have Guidant having the interest, the ability to do
and say what they did. Punitive damages are thrown around
You can be tougher than ``interest'' and
``ability,'' Professor Vandall, when you talk about Guidant. It
is pretty blatant and it is pretty current.
No, wait a minute. You haven't been tough
Do you want to advise him of the libel
rules of the Senate?
Don't lead the witness, Senator Sessions.
Go ahead, Professor Vandall.
No. I mean in the sense that we can say
it and not be sued. I don't know about you. I was going to ask
I didn't want to interrupt you unduly,
but when you talk about Guidant, you can be a little tougher
Thank you. I will keep that in mind.
In regard to punitives, the word has been thrown around.
Professor Schwartz implies that we have a lively system of
punitive damages. And as you all know, there have been several
recent Supreme Court cases that have gutted the concept of
punitive damages, and it is entirely unclear where punitive
damages are going to go for personal injury.
If these cases were superseded by the Senate, I don't think
we would be having the discussion today; that is, the
corporations are all about profit, are all about making money,
which is what they should be. I am not challenging that, but we
know how to get their attention and that is with substantial,
aggressive and appropriate punitive damages.
Just to get back to Professor Schwartz's comment and
something that we have been talking about all day, and that is
corporations deal with risk in everything they do. They deal
with it in terms of marketing, they deal with it in regard to
products. Products have a degree of risk for just about every
product. Let's talk about motorcycles at one end of the
spectrum and white flour at the other end. We know motorcycles
are dangerous. We all know someone who has been killed on a
motorcycle. That doesn't make them defective. Let's put cars
and drugs in the middle of the spectrum. Those are tough cases.
So what are corporations about? They are about figuring out
what the niche is, figuring out the cost of the product. The
reason the Pinto was poorly designed was because it had to come
in at $2,000. Honda had just introduced its wonderful car, the
Civic. The Vega, the worst car ever designed by GM, was there
at about $2,300. So Ford said we have got to make it priced in
the showroom at not a penny over $2,000. That is why it was a
Now, we are talking about Federal prosecution. Let's
remember who the father of the Pinto was. The father of the
Pinto was Lee Iacocca. How do you feel about going after him
and locking him up? I think the Governor from Michigan might
have something to say about that because Lee Iacocca single-
handedly became president of Chrysler and appealed to Congress
and brought Chrysler out of the depths that they were in with
their unfortunate automobile line. So I do not think we want to
talk about Lee Iacocca as the kind of person that we should be
thinking about locking up. He was responsible; he signed off on
Professor Vandall, we impeach presidents
of larger entities than motor companies. No one is immune, no
one is exempt.
I agree with that. In the course of these
things, there oftentimes have to be many documents and
statements filed. That is what we did on Sarbanes-Oxley, I
guess, was say when you file a document, you have got to take
some effort to make sure it is correct. You can't just say,
well, I didn't have time to look at it.
There are some legitimate problems out here. I thank the
Chairman for raising them and I just think we need to be
cautious and not over-reach.
I do find intriguing something that Professor
Vandall said. Thank you for mentioning my name a few times;
that is always good--but you suggested that the application of
the Constitution of the United States gutted punitive damages.
The application of the Constitution to criminal law occurred in
Miranda. Did that gut criminal law? In punitive damages, they
applied the Due Process Clause. It was more than a majority.
The mixture of the Justices, Mr. Chairman, were not your usual
conservative versus liberal. There was overkill in the punitive
system under the Constitution of the United States, and the
application of punitive damages has continued to ferret out
Could I respond to that?
Of course, Professor Vandall.
Justice Scalia wrote a dissent in that case
and he said there is no constitutional issue. So I think it is
a debatable question as to whether the restricting of punitive
damages rests on constitutional principles.
Well, that is a complex issue which we
won't be able to really explore here today.
We are going to leave the record open for 1 week, which is
our custom, and we very much appreciate your coming in. We have
had a fair amount of response. One caller representing a big
company said we have caught the attention of the American
Are you nodding in the affirmative, Mr. Schwartz?
Yes. You did catch their attention.
I have caught their attention.
The final question I have, but we are running a little late
as it is, would be whether having a hearing, whether
introducing a bill--the readership of the Congressional Record
is not too heavy. Not too many people read the Congressional
Record, so you put a bill in. There is a question whether
anybody notices it. You have a hearing and you get a little
more attention. I don't know that anybody watches C-SPAN except
for me when I get home. Our Judiciary Committee hearings have a
favorite spot at about 3 a.m. We have a tremendous following
among insomniacs in America.
Do you think a hearing like this helps to catch attention
and might have some deterrent effect, Mr. Schwartz? Last
question, yes or no.
Yes, I do.
Thank you all very much.