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The Administration strongly opposes H.R. 2366. If the bill were presented
to the President, his senior advisors would recommend that he veto it.
Despite the narrow scope that its title suggests, H.R. 2366 is a sweeping
tort reform measure that amends State liability rules as they apply to
businesses both large and small. Title I, "Small Business Lawsuit Abuse
Protection," would raise the bar for awarding punitive damages, cap such
damages at a maximum of $250,000, and prohibit joint and several liability
for plaintiffs seeking to recover for their pain, suffering, and other
non-economic harm. These new, Federally-imposed tort rules would apply in
nearly any civil action involving a business with fewer than 25 employees,
even if the "small business" is doing millions of dollars in business every
year. As a result of the bill's incredibly broad scope, H.R. 2366 is
likely to strand a large number of injured plaintiffs - individuals and
businesses alike - with a less-than-full recovery because of the limits on
collecting from other culpable defendants. Even more troubling is that the
impact of this bill, and its limitation of joint and several liability for
non-economic harm in particular, is likely to fall most harshly on the
poor, the elderly, and children - those persons likely to suffer less
economic harm and more non-economic harm from the wrongful conduct of
others. The limitation on joint and several liability could also severely
restrict the government's ability to restore destroyed or injured natural
resources under numerous environmental statutes.
The limits placed on the award and amount of punitive damages by H.R. 2366
are equally broad, and may substantially eviscerate Federal and State civil
enforcement actions. Title I explicitly applies to actions by government
agencies, but only excepts actions under the False Claims Act. Because
H.R. 2366 does not define "punitive damages," its limits on such damages
could reasonably be read to cap the government's ability to impose civil
penalties, civil fines, or treble damages - all of which are punitive in
purpose. For example, these limits could affect actions for money
laundering, as well as for violations of banking laws, civil racketeering
laws, economic sanction laws against terrorist nations, and nearly all
environmental statutes. By imposing a uniform standard on the imposition
of punitive damages, Title I may also wipe away the strict liability
standards under many environmental laws. Both inside and outside the
government enforcement context, Title I may encourage the small businesses
protected by the bill to engage in reckless or egregious behavior, as long
as they factor in the $250,000 price tag of doing so.
Title II of H.R. 2366, "Product Seller Fair Treatment," preempts State
products liability law that governs lawsuits by injured consumers against
retailers. Unlike Title I, Title II applies to all retailers, not
just small business retailers. The sweeping preemption of State law
effectuated by H.R. 2366 is unjustified, unnecessary, and, in the
Administration's view, unwise.
As the Administration has noted time and again, sweeping Federal intrusion
into areas of law traditionally entrusted to the States is warranted only
when it is necessary to address a specific and well-documented problem and
the proposed Federal response is measured and balanced. H.R. 2366 fails on
both accounts, and the Administration accordingly strongly opposes this
bill.
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