Capitol View V O L U M E 2 , N U M B E R 3 A U G U S T 2 0 0 3 - - PDF document

Capitol View

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Update on Tort Reform

During the First Session of the 108th Congress, three major pieces of tort reform legislation have been under consideration by the Senate and the House. Democrats generally oppose the class action and medical malpractice reform bills but have been working to modify the asbestos litigation reform bill in the Senate Judiciary Committee so that they could ultimately support it on the Senate floor. While each of these bills face serious obstacles, particularly in the Senate, Republican control of both Houses of Congress gives them a better chance of enactment than they have had in past years. Asbestos Litigation Reform On the night of July 10, 2003, after a grueling 12-hour markup session, the Senate Judiciary Committee approved an amended version of the Fairness in Asbestos Injury Resolution Act (S.1125) by a vote of 10-8. All Republicans, with the exception of Senator Jon Kyl (R-AZ) who voted present, supported the bill. Chairman Hatch (R-UT) had been working hard to attract some Democratic support for the bill on the Committee so that it could be viewed as bipartisan legislation and he was somewhat successful in the effort as Senator Feinstein (D-CA) voted for the bill. However, she was the only Democrat on the Committee who voted for the bill on final passage. S.1125 is designed to address the serious problem with the growing volume of cases in the court system involving asbestos related injuries. Currently there are already some 600,000 claims pending nationwide with new asbestos cases being filed at a rate of 50,000 per year. On March 10, 2003 the United States Supreme Court in its opinion in Norfolk & Western v. Ayers urged Congress to enact legislation to handle the asbestos litigation crisis characterizing it as an "elephantine mass" of cases in state courts which the traditional judicial system is unable to properly administer. S.1125 would remove these asbestos cases from the judicial system and establish a no fault Federal administrative procedure which would pay asbestos claimants from an Asbestos Injury Claims Resolution Fund (Fund). Monies for the Fund would be provided by companies which manufactured or used asbestos and insurance companies. Consideration of the asbestos legislation by the Senate Judiciary Committee has been extremely contentious. In addition to the 12 hour markup session on July 10, there was a 13 hour session on June 26, along with two shorter Committee meetings all devoted to consideration of S.1125. Republicans generally support the enactment of asbestos legislation as long as it does not impose too great a burden on the corporations and insurance companies that will have to fund it. Democrats also voiced general support for an asbestos bill but complained that the original version of S.1125 did not cover enough people who suffered from asbestos related illnesses and did not award adequate monetary claims for those claimants it did cover. These partisan differences manifested themselves in three specific controversial issues concerning the asbestos bill; the proper medical criteria as to who should be covered as a claimant under the bill, sufficient money for the Fund to insure its solvency to cover all potential claimants, and the size of the awards the Fund would provide to victims. The medical criteria issue was resolved by a bipartisan agreement between Chairman Hatch and the Ranking Democrat, Patrick Leahy

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(D-VT), which expanded the criteria for claimants. A bipartisan compromise between Chairman Hatch and Senators Feinstein and Kohl (D-WI) provided additional "back up" money for the Fund. Finally during the markup on July 10, Senators Feinstein and Graham (R-SC) proposed an amendment which would adjust the claim award level by decreasing the levels for those suffering from mild cases of asbestos-related disease and increasing awards for those suffering from more serious forms of the disease. This amendment was supported by Chairman Hatch, most Committee Republicans, and even several Democrats including Senators Leahy and Durbin (D-IL). However, unlike the medical criteria and Fund solvency agreements, Senator Leahy emphasized he was supporting the amendment for purposes of reporting the bill from the Committee and he still considered the awards established by the Feinstein-Graham-Hatch amendment to be insufficient. Clearly, the Judiciary Committee approval of the Act was a major accomplishment by Chairman Hatch. However, the difficulty in securing its approval, encompassing four full Committee markup sessions, including two 10-12 hour meetings, and in the end attracting only one Democratic vote is an indication of the problems likely to be encountered on the Senate Floor should it even be brought up on the Floor by the Leadership. This is particularly the case if opponents threaten to filibuster the bill and thereby require supporters to produce 60 votes to invoke cloture and thereby end any filibuster. Organized labor, and some Judiciary Committee Democrats, continue to oppose the bill on the grounds that the award values are too low. Trial lawyers generally oppose any legislation limiting tort claims and now some insurance companies that had earlier supported an asbestos reform bill are concluding that this particular vehicle has become too expensive. Compounding the problem more are some Republicans, such as Senator Specter (R-PA), who voted for reporting the bill

• ut of Committee, but who expressed "grave reservations" about the bill.

It appears that those supporting asbestos reform legislation will have to continue to negotiate on various issues. It is only through reaching at least a general consensus on these issues that a filibuster on the Floor can be avoided. However, there is a limit as to how much is realistically negotiable. Some Democrats are insisting that more money be put into the bill while some Republicans complain that it already has become too expensive. Medical Malpractice Reform In March of this year the House passed the Help Efficient, Accessible, Low Cost, Timely Healthcare Act of 2003 (H.R.5) by a vote of 229-196. This bill would reform the nation's medical liability system by establishing a three year statute of limitations, permitting evidence of collateral source benefits and limiting non-economic damages to $250,000. While this bill passed the House by a comfortable margin, the prospect for passage of it in the Senate is more problematic. On July 9 the Senate voted on a cloture petition to limit debate on a Motion to Proceed to consider the Patient First Act of 2003 (S.11), a medical malpractice reform bill very similar to that adopted by the House. The vote failed 49-48, far short

• f the 60 votes needed. Perhaps even more disturbing to proponents of medical malpractice reform in the Senate than

the 11 vote deficit to invoke cloture was the fact that not one Democrat supported limiting the debate. Two Republicans, Senator Richard Shelby (R-AL) and Senator Lindsey Graham (R-SC), joined the Democrats in voting against cloture. On July 8, Senators Richard Durbin (D-IL) and Lindsey Graham introduced the Better Health Act of 2003 (S.1374). This bill was characterized by the Democratic Leader, Tom Daschle, as an alternative to the Republican Patient First Act. It would enact limits on frivolous medical malpractice suits and amend the McCarren-Ferguson Act, which excludes the insurance industry from Federal jurisdiction, to prohibit commercial insurers from engaging in any form of "price fixing, bid rigging or market allocation in connection with the conduct of the business of providing medical malpractice insurance."

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The unanimous opposition of congressional Democrats, supported by trial lawyers and some consumer groups, indicates little chance for enactment of the House passed medical malpractice bill. However, the Senate Republican Leadership, backed by the American Medical Association (AMA) and the American Hospital Association, indicated they would continue their efforts to enact a strong medical malpractice reform bill. Earlier in this process, Senator Dianne Feinstein (D-CA) had proposed a compromise under which the $250,000 limit in the House bill would be raised to $500,000. However, in March Senator Feinstein announced she was abandoning her efforts at reaching a compromise because of

• pposition to the higher caps by the AMA and the California Medical Association. During the debate on the Senate Floor
• n July 8, Senator Feinstein indicated that, while she opposed the House passed bill, she believed her compromise was a

reasonable alternative and hoped that at some point it would be accepted by the Senate. Class Action Reform On June 12, 2003 the House passed H.R.1115 by a vote of 253-170. The Class Action Fairness Act of 2003, introduced by Representative Bob Goodlatte (R-VA), would amend the Federal diversity of citizenship jurisdiction statute to make it easier for defendants in large multi-state class actions to remove these suits from State to Federal Courts. The current diversity statute provides for federal jurisdiction in cases where all plaintiffs are citizens of states different from all defendants. It also requires that a claim for monetary damages equal a specified minimal amount. The federal circuits are almost evenly split on the issue of whether each class member must have $75,000 in controversy or whether the claims of the class members can be aggregated to reach that amount. The Class Action Fairness Act would provide federal court jurisdiction in cases where any member of the proposed class is a citizen of a state different from any defendant and the overall amount in controversy exceeds $5 million for the entire class. The bill also establishes certain requirements designed to protect consumers against "abusive settlement practices." Class action settlement notices and explanations would have to meet a clear and simple language standard; unjustified reward payments to class action representatives would be prohibited; and, courts would be provided with enhanced

• versight over approvals of "coupon settlements" or any proposed settlement that would result in a net monetary loss to

plaintiff. The Senate version of the Class Action Fairness Act (S.274) is sponsored by Senator Charles Grassley (R-IA). It was approved by the Senate Judiciary Committee on April 11, 2003 by a vote of 12-7. However, as with the Medical Malpractice bill, the Class Action legislation has generated opposition from some consumer groups as well as trial lawyers, and is opposed by most Senate Democrats. The Democrats have threatened to filibuster the bill and have thereby required its supporters to muster 60 votes to obtain cloture on the debate. It is generally believed that supporters

• f S.274 remain 2 to 3 votes short of that goal.

Majority Leader Frist (R-TN) held a news conference on August 1, the day the Senate left for its August recess. He announced that he would like to see the Senate take up all three of these tort reform bills when the Senate returns in

• September. However; since the Senate is also scheduled to consider a number of appropriations bills that month, the tort

reform bills may have to be put off to later in the Fall. Kevin Faley is the Editor of Capitol View and a partner in Venable’s Legislative Group. Mr. Faley can be reached at 202.513.4706 or at kofaley@venable.com

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Fair Credit Reporting Act

On July 24, 2003 the House Financial Services Committee approved a bill that would amend the Fair Credit Reporting Act in an effort to prevent identity theft, improve resolution of consumer disputes, improve the accuracy of consumer records, and make improvements in the use of and access to credit information. After half a dozen subcommittee hearings on a range of consumer credit issues, the bill passed the full committee with considerable bipartisan support. The bill would make permanent an expiring section of the1996 Fair Credit Reporting Act that blocks states from interfering with federal standards governing how businesses use consumers’ credit data. The Bush administration and financial institutions support the continuous form of the preemption provisions of the Act that will ensure banks, credit card companies, and credit bureaus can continue using consumers’ personal financial data without being subject to new state

• regulations. Consumer groups generally oppose the bill, stating that states should be free to impose tougher rules than

those imposed by the federal government. Under the identity theft provisions of the bill, consumers would be notified if an additional credit card had been requested

• n an account for which the address had recently been changed. In addition, credit card companies would be prohibited

from printing credit or debit expiration dates or account numbers on electronically printed customer receipts. The bill would also lead to cooperation between the credit reporting agencies and the Federal Trade Commission in an effort to develop procedures for handling and investigating consumer complaints of identity fraud and disputed information in consumer credit files. Another key aspect of the measure would allow consumers to request one free credit report per year. Currently, free credit reports are generally available only if a consumer is denied credit. In addition to the free credit report, for a reasonable fee, consumers would be afforded access to their consumer credit scores, as well as a summary of how the scores were derived and how the consumer could improve the scores. While strong support has helped the bill push its way through the House, a bumpier road lies ahead in the Senate. Banking, Housing, and Urban Affairs Chairman Richard Shelby (R-AL) has recently vowed not to support extending the federal pre-emption of privacy rules regarding the use and sharing of credit information unless the extension is coupled with new privacy safeguards. Senator Shelby has also hinted that, contrary to the wishes of the financial services industry, he may be inclined to merely extend, rather than make permanent, the preemption provisions of the FCRA. Although the full House of Representatives will likely vote on and pass the bill fairly soon after August recess, it is unclear at what point the Senate Banking Committee will move forward on the legislation. The current bill is set to expire January 1, 2004. Eric Huey is of counsel to Venable's Legislative Practice Group. Mr. Huey can be reached at 202-513-4655 or at evhuey@venable.com

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Venable in the News

• Heidi Stirrup and Anne Keys are quoted regarding their decision to move to a law firm instead of a lobbying firm in the

article "Talent Wars" in the June 14, 2003 edition of The National Journal.

• Ron Jacobs published the article "The Telemarketing Sales Rule and Associations" in the March 2003 of Source, a

publication of the Florida Society of Association Executives.

• Legislation has been passed and signed into law renaming the historic federal building in Indianapolis, Indiana after
• ur partner former Senator Birch Bayh. The federal building will be renamed the “Birch Bayh Federal Building and

United States Courthouse” in honor of Senator Bayh’s service to the citizens of Indiana and the United States. The renaming ceremony is scheduled for October 24, 2003, in Indianapolis. Capitol View is published by the Legislative Practice Group of the law firm of Venable, LLP, 1201 New York Avenue, N.W., Suite 1000, Washington, DC 20005. Internet address: http://www.venable.com. It is not intended to provide legal advice or opinion. Such advice may only be given when related to specific fact situations. Editor: Kevin O. Faley Associate Editor: Kyle Miller Questions and Comments concerning materials in the newsletter should be directed to Kevin O. Faley @ kofaley@venable.com. Please direct address changes to Kyle Miller @ kpmiller@venable.com.