article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Small Business Lawsuit Abuse Protection Act of 1997''. SEC. 2. FINDINGS. Congress finds that-- (1) the United States civil justice system is inefficient, unpredictable, unfair, costly, and impedes competitiveness in the marketplace for goods, services, business, and employees; (2) the defects in the civil justice system have a direct and undesirable effect on interstate commerce by decreasing the availability of goods and services in commerce; (3) there is a need to restore rationality, certainty, and fairness to the legal system; (4) the spiralling costs of litigation and the magnitude and unpredictability of punitive damage awards and noneconomic damage awards have continued unabated for at least the past 30 years; (5) the Supreme Court of the United States has recognized that a punitive damage award can be unconstitutional if the award is grossly excessive in relation to the legitimate interest of the government in the punishment and deterrence of unlawful conduct; (6) just as punitive damage awards can be grossly excessive, so can it be grossly excessive in some circumstances for a party to be held responsible under the doctrine of joint and several liability for damages that party did not cause; (7) as a result of joint and several liability, entities including small businesses are often brought into litigation despite the fact that their conduct may have little or nothing to do with the accident or transaction giving rise to the lawsuit, and may therefore face increased and unjust costs due to the possibility or result of unfair and disproportionate damage awards; (8) the costs imposed by the civil justice system on small businesses are particularly acute, since small businesses often lack the resources to bear those costs and to challenge unwarranted lawsuits; (9) due to high liability costs and unwarranted litigation costs, small businesses face higher costs in purchasing insurance through interstate insurance markets to cover their activities; (10) liability reform for small businesses will promote the free flow of goods and services, lessen burdens on interstate commerce, and decrease litigiousness; and (11) legislation to address these concerns is an appropriate exercise of Congress' powers under Article I, section 8, clauses 3, 9, and 18 of the Constitution, and the fourteenth amendment to the Constitution. SEC. 3. DEFINITIONS. In this Act: (1) Act of international terrorism.--The term ``act of international terrorism'' has the same meaning as in section 2331 of title 18, United States Code). (2) Crime of violence.--The term ``crime of violence'' has the same meaning as in section 16 of title 18, United States Code. (3) Drug.--The term ``drug'' means any controlled substance (as that term is defined in section 102 of the Controlled Substances Act (21 U.S.C. 802(b)) that was not legally prescribed for use by the defendant or that was taken by the defendant other than in accordance with the terms of a lawfully issued prescription. (4) Economic loss.--The term ``economic loss'' means any pecuniary loss resulting from harm (including the loss of earnings or other benefits related to employment, medical expense loss, replacement services loss, loss due to death, burial costs, and loss of business or employment opportunities) to the extent recovery for such loss is allowed under applicable State law. (5) Harm.--The term ``harm'' includes physical, nonphysical, economic, and noneconomic losses. (6) Hate crime.--The term ``hate crime'' means a crime described in section 1(b) of the Hate Crime Statistics Act (28 U.S.C. 534 note)). (7) Noneconomic losses.--The term ``noneconomic losses'' means losses for physical and emotional pain, suffering, inconvenience, physical impairment, mental anguish, disfigurement, loss of enjoyment of life, loss of society and companionship, loss of consortium (other than loss of domestic service), injury to reputation, and all other nonpecuniary losses of any kind or nature. (8) Small business.-- (A) In general.--The term ``small business'' means any unincorporated business, or any partnership, corporation, association, unit of local government, or organization that has less than 25 full-time employees. (B) Calculation of number of employees.--For purposes of subparagraph (A), the number of employees of a subsidiary of a wholly-owned corporation includes the employees of-- (i) a parent corporation; and (ii) any other subsidiary corporation of that parent corporation. (10) State.--The term ``State'' means each of the several States, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, the Northern Mariana Islands, any other territory or possession of the United States, or any political subdivision of any such State, territory, or possession. SEC. 4. LIMITATION ON PUNITIVE DAMAGES FOR SMALL BUSINESSES. (a) General Rule.--Except as provided in section 6, in any civil action against a small business, punitive damages may, to the extent permitted by applicable State law, be awarded against the small business only if the claimant establishes by clear and convincing evidence that conduct carried out by that defendant through willful misconduct or with a conscious, flagrant indifference to the rights or safety of others was the proximate cause of the harm that is the subject of the action. (b) Limitation on Amount.--In any civil action against a small business, punitive damages shall not exceed the lesser of-- (1) two times the total amount awarded to the claimant for economic and noneconomic losses; or (2) $250,000. (c) Application by Court.--This section shall be applied by the court and shall not be disclosed to the jury. SEC. 5. LIMITATION ON SEVERAL LIABILITY FOR NONECONOMIC LOSS FOR SMALL BUSINESSES. (a) General Rule.--Except as provided in section 6, in any civil action against a small business, the liability of each defendant that is a small business, or the agent of a small business, for noneconomic loss shall be determined in accordance with subsection (b). (b) Amount of Liability.-- (1) In general.--In any civil action described in subsection (a)-- (A) each defendant described in that subsection shall be liable only for the amount of noneconomic loss allocated to that defendant in direct proportion to the percentage of responsibility of that defendant (determined in accordance with paragraph (2)) for the harm to the claimant with respect to which the defendant is liable; and (B) the court shall render a separate judgment against each defendant described in that subsection in an amount determined pursuant to subparagraph (A). (2) Percentage of responsibility.--For purposes of determining the amount of noneconomic loss allocated to a defendant under this section, the trier of fact shall determine the percentage of responsibility of each person responsible for the harm to the claimant, regardless of whether or not the person is a party to the action. SEC. 6. EXCEPTIONS TO LIMITATIONS ON LIABILITY. The limitations on liability under sections 4 and 5 do not apply to any misconduct of a defendant-- (1) that constitutes-- (A) a crime of violence; (B) an act of international terrorism; or (C) a hate crime; (2) that involves-- (A) a sexual offense, as defined by applicable State law; or (B) a violation of a Federal or State civil rights law; or (3) if the defendant was under the influence (as determined pursuant to applicable State law) of intoxicating alcohol or a drug at the time of the misconduct, and the fact that the defendant was under the influence was the cause of any harm alleged by the plaintiff in the subject action. SEC. 7. PREEMPTION AND ELECTION OF STATE NONAPPLICABILITY. (a) Preemption.--Subject to subsection (b), this Act preempts the laws of any State to the extent that State laws are inconsistent with this Act, except that this Act shall not preempt any State law that provides additional protections from liability for small businesses. (b) Election of State Regarding Nonapplicability.--This Act does not apply to any action in a State court against a small business in which all parties are citizens of the State, if the State enacts a statute-- (1) citing the authority of this subsection; (2) declaring the election of such State that this Act does not apply as of a date certain to such actions in the State; and (3) containing no other provision. SEC. 8. EFFECTIVE DATE. (a) In General.--This Act shall take effect 90 days after the date of enactment of this Act. (b) Application.--This Act applies to any claim for harm caused by an act or omission of a small business, if the claim is filed on or after the effective date of this Act, without regard to whether the harm that is the subject of the claim or the conduct that caused the harm occurred before such effective date.
summary: Small Business Lawsuit Abuse Protection Act of 1997 - Provides that, in any civil action against a small business (fewer than 25 full-time employees), punitive damages may be awarded against such business only if the claimant establishes by clear and convincing evidence that conduct carried out by the defendant through willful misconduct or with a conscious, flagrant indifference to the rights or safety of others was the proximate cause of the harm that is the subject of the action. Prohibits, in any action against a small business, punitive damages from exceeding the lesser of: (1) twice the amount awarded for economic and noneconomic losses; or (2) $250,000. Provides that, in such an action, the liability of each defendant small business shall be limited to the amount of noneconomic loss allocated to that defendant in direct proportion to its percentage of responsibility for the harm that is the subject of the action. Requires the court to render a separate judgment against each such defendant. Provides as exceptions to the small business liability limitations under this Act any misconduct: (1) that constitutes a crime of violence, international terrorism, or a hate crime; (2) that involves a sexual offense or a violation of a Federal or State civil rights law; or (3) if the defendant was under the influence of intoxicating alcohol or a drug at the time of the misconduct and that fact causes any of the harm alleged.