Products Liability Update: Legislative Update: A Return to Modest Proposals

Legislative Update - A Return to Modest Proposals
Following the defeat of attempts at sweeping reforms earlier this year (such as the death in the Senate of the Product Liability Reform Act of 1997), the second half of 1998 saw a retreat to more modest reform proposals directed at particular issues of concern, such as two federal bills to alleviate the asbestos litigation crisis, a bill to limit punitive damages in only certain types of cases, and bills suggesting uniform food labeling requirements and codifying bulk supplier defenses. Meanwhile, state courts were busy addressing constitutional challenges to tort reform measures adopted in recent years.

Federal Tort Reform
Bulk Supplier Defense: On August 13, 1998, President Clinton signed into law the Biomaterials Access Assurance Act of 1998, Pub. L. No. 105-230, 112 Stat. 1519 (1998) (to be codified at 21 U.S.C. ' 1601), which immunizes suppliers of raw materials and component parts for medical devices from most product liability suits and provides such companies with a method for obtaining early dismissal from cases. The law, which was enacted in response to a reported nationwide shortage of raw materials used in the manufacture of medical devices such as heart valves, specifically does not apply to litigation over silicone gel breast implants.

Punitive Damages: On July 29, 1998, the Senate Judiciary Committee heard testimony on the Fairness in Punitive Damages Awards Act, S. 1554, 105th Cong. (1997), a bill which would limit punitive damage awards in most state and federal actions except those alleging wrongful death or serious and permanent personal injuries. For defendant businesses with 25 or more employees or a net worth over $500,000, punitive damages would be capped at $250,000 or three times the amount of the compensatory award (whichever is greater). The bill is aimed primarily at pecuniary losses, but it does appear to reach most personal injury cases as well.

Warnings: Bills were introduced in the House of Representatives and the Senate on August 3, 1998 to establish uniformity in food labeling requirements. The National Uniformity for Food Act of 1998, H.R. 4383, 105th Cong. (1998), S. 2356 105th Cong. (1998), would make the Food and Drug Administration the sole authority that could require the placement of a warning label on product packaging or advertisements, and would further specify guidelines by which the FDA and state governments may set tolerance levels for chemicals or additives in food. The bills have been seen as a preemptive strike by the food industry against potentially more stringent state requirements, such as California's Proposition 65. See Cal. Health & Safety Code ' 25249.5 (West 1998).

Environmental Cleanup
On August 3, 1998, Massachusetts Acting Governor Paul Celluci signed a bill designed to accelerate the cleanup and reuse of contaminated industrial sites across the state of Massachusetts. See H. 5776, 182nd Gen. Court, Reg. Sess. (Mass 1998). The bill, known as a "brownfields law," protects innocent purchasers from liability and provides financial incentives through tax breaks, loans, and grants for cleanup activities. The Massachusetts law is similar to the Brownfield and Contaminated Site Remediation Act passed and signed into law in New Jersey earlier this year. See N.J. Stat. Ann. ' 58:10B-1.1 (West 1998).

In other environmental news, a split in the federal circuits has developed regarding whether the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. ' 6901 (1998), permits jurisdiction in state as well as federal courts. Contrary to other courts, the Sixth Circuit recently ruled that state courts can hear RCRA claims because the statute does not explicitly say otherwise. See Davis v. Sun Oil Co., 148 F.3d 606 (6th Cir. 1998).

Asbestos Litigation
Reforms addressing the docket crisis posed by continuing asbestos litigation have been introduced at both state and national levels. Texas recently took a big step toward reducing its asbestos docket when it enacted a forum non conveniens law to prohibit asbestos claims by nonresidents. Previously, Texas law had exempted claims related to air travel, railroads and asbestos from the state's forum non conveniens laws. A May 1997 tort reform measure removed this exemption, providing that all cases filed by nonresidents after January 1, 1997 would be dismissed, and cases filed between August 1, 1995 and January 1, 1997 would either be dismissed or allowed to be litigated in Texas courts but subject to Texas's statutory cap on punitive damages. See Tex. Civ. Prac. & Rem. Code ' 71.051 (West 1998). On September 9, 1998, the Texas Supreme Court heard arguments on the constitutionality of this new law as applied in asbestos cases. In DeFord v. Owens Corning Fiberglas Corp., No. 97-05359 (98th Jud. Dist., Travis County Nov. 4, 1997), a lower court ruled that the law's restrictions on suits filed by nonresidents violate the Privileges and Immunities Clause of the U.S. Constitution. Because the case raised a federal constitutional question, Texas procedure provided for immediate review in the Texas Supreme Court, which has not yet issued a decision.

At the federal level, bills have been introduced in the House of Representatives and Senate proposing a mandatory resolution procedure for compensating asbestos claimants. On October 5, 1998, Senator Orrin Hatch (R-Utah) introduced the Fairness in Asbestos Compensation Act of 1998, S. 2546, 105th Cong. (1998), which is similar to the House bill, H.R. 3905, 105th Cong. (1998), introduced earlier this year. The Senate bill bars claims for punitive damages, emotional distress, increased risk of cancer or other disease, and certain medical monitoring costs. Although the bill would abolish timeliness defenses in most cases, it would impose additional obstacles to traditional resolution of asbestos cases by prohibiting class actions, consolidations, or any other aggregation of claims, without the consent of all defendants. The bill would establish a corporation to oversee mediation and arbitration procedures provided for in the Act as an alternative to litigation, and this corporation would be advised on appropriate medical criteria for evaluating claims by an appointed independent medical board. Under the proposed system, attorneys' fees would be capped at 25% of any recovery (subject to criminal enforcement), and the federal courts would have exclusive appellate jurisdiction over all cases.

Ohio Tort Reform
Appellate courts in Ohio are beginning to sort out the reach of the state's Tort Reform Act of 1996, which became effective January 27, 1997. Addressing Ohio Revised Code ' 2307.31(B)(2) (Banks-Baldwin 1998), which abolishes joint and several liability in tort cases where no defendant is more than 50% liable, the court in Kempthorn, Inc. v. Wallace, No. 98CA00087, 1998 WL 667655, at *3 (Ohio App. 5th Dist. Sept. 14, 1998) found that the Ohio Legislature intended the statute to be applied retrospectively but that retroactive application would violate the Ohio Constitution. Recently, another Ohio court agreed with this assessment. In Crowe v. Owens Corning Fiberglass, No. 73206, 1998 WL 767622 (Ohio App. 8th Dist. Oct. 29, 1998), the court found that Ohio Revised Code ' 2315.21(D)(3) (Banks-Baldwin 1998), a provision of the Tort Reform Act that caps punitive damages in tort cases, cannot be applied retroactively. More importantly, the Crowe court further held that this statute's limitation on punitive damages violates due process, equal protection, and the rights to a jury trial and an open court under the Ohio Constitution. See id. at *7.

International Developments
Beginning December 1, 1998, the United States and the European Union (EU) will implement the Mutual Recognition Agreement, an international agreement which eliminates the need for duplicative testing and certification of trans-Atlantic trade products ranging from pharmaceuticals to telecommunications equipment. The Agreement calls upon the United States and the EU to formulate a common set of standards for reviewing good manufacturing practices for pharmaceuticals, but in the meantime each side will use its own standards to determine whether drugs can be sold abroad. Implementation of the Agreement will be phased in over the next two to three years.