Copyright 1999 Federal Document Clearing House, Inc.
Federal Document Clearing House Congressional Testimony
September 29, 1999
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 3800 words
HEADLINE:
TESTIMONY September 29, 1999 ROGER GEIGER STATE DIRECTOR OHIO CHAPTER OF THE
NATIONAL FEDERATION OF INDEPENDENT BUSINESS HOUSE JUDICIARY
PROTECTING SMALL BUSINESS
BODY:
SUMMARY Mr.
Chairman and distinguished members of the Judiciary Committee, I am Roger
Geiger, state director for the Ohio Chapter of the National Federation of
Independent Business (NFIB/Ohio). Thank you for this opportunity to come before
you today as a proponent of HR 2366, the Small Business Liability Reform Act.
With more than 34,000 members, NFIB/Ohio is the state's largest association
dedicated exclusively to the interests of small and independent business owners.
The businesses of our members are truly diverse in scope, ranging from
construction to manufacturing, retail to transportation and professional
services to agriculture. Our typical member has fewer than ten employees and
records annual gross sales of less than $250,000. In 1996, the State of Ohio
agreed that its citizens needed some relief from the current legal system. The
Legislature passed and Governor Voinvich signed a law that addressed many of the
problems facing small businesses. However, just one month ago, the Ohio State
Supreme Court ruled the law unconstitutional and struck it from the state books.
That is why the reforms embodied in HR 2366 are so important. They provide
relief for the smallest of small businesses across the nation, ensuring that the
law treats defendants fairly and reasonably. While some opponents of this bill
may argue that HR 2366 preempts actions of the states, I believe that ninety
overturned state statutes make the argument for tort reform at
the federal level. That is why NFIB supports HR 2366. Among other reforms, the
bill places limits on punitive damage awards and abolishes joint and several
liability. Above all else, these are the two reforms our members have demanded
for years. HR 2366 caps punitive damages at the lesser of three times
compensatory damages or $250,000 for small businesses with fewer than 25
employees. In our criminal and regulatory systems of punishment, an attempt is
always made to link the severity of the wrong to a reasonable level of
restitution. In our civil justice system, there is often no rhyme or reason to
the amounts awarded, and they swing dramatically from court jurisdiction to
court jurisdiction. Nearly 89 percent of Ohio members and 93% of members
nationwide support placing limits on punitive awards. HR 2366 also abolishes
joint and several liability, which ensures that a "guilty" party's financial
liability is proportionate to their degree of fault. This fairness doctrine will
provide sensible protection to those who may be as little as one percent at
fault but, because they have the "deep pockets," find themselves paying 100
percent of the award. I appreciate this opportunity to appear before this
committee in support of HR 2366 and would be happy to answer any questions you
may have. Mr. Chairman and distinguished members of the Judiciary Committee, I
am Roger Geiger, state director for the Ohio Chapter of the National Federation
of Independent Business (NFIB/Ohio). Thank you for this opportunity to come
before you today as a proponent of HR 2366, the Small Business Liability Reform
Act. With more than 34,000 members, NFIB/Ohio is the state's largest association
dedicated exclusively to the interests of small and independent business owners.
The businesses of our members are truly diverse in scope, ranging from
construction to manufacturing, retail to transportation and professional
services to agriculture. Our typical member has fewer than ten employees and
records annual gross sales of less than $250,000. I have been the NFIB/Ohio
state director for more than 10 years, during which I have seen firsthand how
the current legal system can hurt small businesses. While civil litigation was
once a last resort remedy to settle limited disputes and quarrels, recent years
have brought a litigation frenzy. Lawsuit filings have tripled in the last 30
years. In state courts, where most civil litigation occurs, more than 18 million
lawsuits are currently pending, up over 30 percent from just six years ago. In
Ohio, 31,229 civil liability cases were filed in state courts in one year -- an
average of 86 cases for every day of the year, or one every 17 minutes! Our
members tell us that being sued is one of the most terrifying experiences a
small business owner can have. It is even more frightening for the smallest of
the small businesses who fear being put out of business for good with one
lawsuit. One of my members, a small Athens county restaurant owner, told me that
he settles an average of 10 - 12 claims a year from people who accidentally
"trip" in his parking lot. The average cost per settlement is $5,000 -- that
cost represents a lot of hamburgers he has to sell. I recently talked to the
owner of a small Columbus based manufacturer who had to spend $56,000 to prove
to a jury that he did not even manufacture the product that resulted in a
personal injury lawsuit. Yet another of our Ohio small business owners has been
sued 59 times. Only once did a jury decide that the businessman should pay an
award, but he has had to spend more than $2 million defending himself and his
business. Today, you will hear from David Harker, whose story, like these, will
certainly highlight the need for the reforms embodied in HR 2366. After hearing
about the difficulties our members were having with the legal system, NFIB/Ohio
joined with the Ohio Chamber of Commerce to conduct a poll of more than 1,200 of
our members to determine the effects of lawsuits on Ohio's small employers. The
results clearly show that enacting reform of the civil justice system is a
priority for small business. More than 86 percent of those surveyed said that
legal liability concerns affect their business. More than half of Ohio's small
businesses have had to raise the cost of products and services because of
liability concerns -- a cost we as consumers have to pay. One of the most
alarming responses from the survey showed that in the past five years, 35
percent, or one in three, small businesses have been sued; nearly half of those
have been sued more than two times. In addition, the survey showed that more
than half (56.8 percent) of the small businesses in Ohio have been threatened
with a lawsuit in the last five years, and more than 57 percent of those have
been threatened with a lawsuit more than two times. I simply refuse to accept
that we have that many "bad actors" in the Ohio small business community. The
only other conclusion that can be drawn is that we have too many lawsuits being
threatened and filed against small business owners. Your typical main street
business operates every day in fear of a lawsuit that could potentially cause
them to shut their doors. That makes sense, considering that a $250,000 law-suit
against a small business owner would force 59.1 percent of Ohio's small
employers to go out of business. The message is simple: small businesses do not
have the deep pockets to bear such a burden. In 1996, the State of Ohio agreed
that its citizens needed some relief from the current legal system. The
Legislature passed and Governor Voinvich signed a law that addressed many of the
problems facing small businesses. However, just one month ago, the Ohio State
Supreme Court ruled the law unconstitutional and struck it from the state books.
As devastating as that was to the small businesses of Ohio, it was not the first
time that a state tort reform statute had been struck down by
its Supreme Court - it was the 90th time. Ninety laws passed to provide relief;
ninety laws struck down, leaving businesses to struggle with current law. That
is why the reforms embodied in HR 2366 are so important. They provide relief for
the smallest of small businesses across the nation, ensuring that the law treats
defendants fairly and reasonably. While some opponents of this bill may argue
that HR 2366 preempts actions of the states, I believe that ninety overturned
state statutes make the argument for tort reform at the federal
level. That is why NFIB supports HR 2366. Among other reforms, the bill places
limits on punitive damage awards and abolishes joint and several liability.
Above all else, these are the two reforms our members have demanded for years.
HR 2366 caps punitive damages at the lesser of three times compensatory damages
or $250,000 for small businesses with fewer than 25 employees. In our criminal
and regulatory systems of punishment, an attempt is always made to link the
severity of the wrong to a reasonable level of restitution. In our civil justice
system, there is often no rhyme or reason to the amounts awarded, and they swing
dramatically from court jurisdiction to court jurisdiction. Nearly 89 percent of
Ohio NFIB members and 93% of members nationwide support placing limits on
punitive awards. In a free enterprise economic system, predictability and
stability in the costs associated with manufacturing a product or providing a
service are critical elements in order to remain competitive. A restaurant
simply cannot absorb the potential of a multi-million dollar punitive damage
award in the 65 cents it sells a cup of coffee for. Caps on punitive damages
provide some certainty for small business owners by protecting them against
lottery-sized damage awards. The average cost of civil litigation in Ohio is
$50,000 per case. Because most small business owners are unable to afford a
defense, many will settle even the most frivolous claims simply because they
can't afford not to. Even if they CAN afford to go to court, many don't because
they fear being hit with a huge punitive damage award. Limiting punitive damage
awards ensures that small businesses will not be preyed on for easy settlements.
HR 2366 also abolishes joint and several liability, which ensures that a
"guilty" party's financial liability is proportionate to their degree of fault.
This fairness doctrine will provide sensible protection to those who may be as
little as one percent at fault but, because they have the "deep pockets," find
themselves paying 100 percent of the award. Small business owners are often
dragged into lawsuits for which they had little or nothing to do with, simply
because they are an easily identifiable target. Personal injury lawyers consider
small businesses, with liability insurance, as the means through which to get at
the "deep pockets" insurance company. Under the provisions of this legislation,
you would be returning us to a civil justice system that is fault based, that
is, being liable for only the percentage of fault, not for the amount of
available funds. More than 81 percent of NFIB's 600,000 small business owner
members agree that the law should be reformed to establish a proportionate
standard of liability. What I am hearing from our members in Ohio is no
different than what my colleagues are hearing in other states. We have a legal
system that must be reformed - at the federal level - for the benefit of small
business owners nationwide. The system must be made more fair by limiting
punitive damages and abolishing joint and several liability. And we should do it
now. I appreciate this opportunity to appear before this committee in support of
HR 2366 and would be happy to answer any questions you may have. Thank you.
LOAD-DATE: September 30, 1999
