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HR 2366 -- 02/14/2000

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February 14, 2000

H.R. 2366 - Small Business Liability Reform Act of 2000
(Rogan (R) CA and 31 cosponsors)

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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