The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. I'm Jim Lehrer in Washington.

MR. MAC NEIL: And I'm Robert MacNeil in Denver. Tonight we focus on Republican efforts to reform liability laws, a step Colorado took nine years ago to protect a major industry, skiing, from thousands of personal injury claims. Also tonight, Treasury Sec. Robert Rubin discusses the $20 billion Mexico rescue plan, and we close with a Rosenblatt essay about the homeless. NEWS SUMMARY

MR. LEHRER: The deal to help Mexico through its economic crisis was signed today in Washington. Treasury Sec. Robert Rubin and the Mexican finance minister did the same. Their agreement includes $20 billion in loans and loan guarantees to Mexico. Those loans will be backed up by Mexican oil profit. Sec. Rubin had this to say.

ROBERT RUBIN, Secretary of Treasury: We begin today the critical work of helping Mexico restore its economy. It will not happen overnight, nor will it be easy. But in the final analysis, Mexico has courageously shown the right course, and so have we. This agreement protects America's national interests, and it protects the funds we are making available while providing Mexico the support Mexico needs at this crucial time in its history.

MR. LEHRER: After the announcement, the Mexican stock market plunged 76 points, to its lowest level since July 1993. The peso closed down 4 cents against the dollar. We'll get more on the agreement in a Newsmaker interview with Sec. Rubin right after this News Summary. President Clinton today named Laura Tyson to head the National Economic Council which coordinates the administration's economic policy. She has been chairman of the President's Council of Economic Advisers. She replaced Rubin, who held that job before becoming Treasury Secretary. The President today asked federal agency heads to search out obsolete regulations and report back to him about them by June 1st. He said he intends to eliminate the outmoded rule or ask Congress to do so. The House of Representatives will vote Friday on a Republican plan to freeze all new government regulations. At a White House ceremony this afternoon Mr. Clinton said that plan went too far.

PRESIDENT CLINTON: Some would use the need for reform as a pretext to gut vital consumer, worker environmental protections, even things that protect business itself. They don't want reform. They really want rigor mortis. Some in Congress are pushing a collection of proposals that, taken together, would bring federal protection of public health and safety to a halt. I agree with the Republicans in Congress on many things. We do need to change this system. We have been working for two years to change it, and believe you me, I know we've got a long way to go, but there is a right way to do it and a wrong way to do it.

MR. LEHRER: House Speaker Gingrich accused President Clinton of standing in the way of Republican reform. He said today the President is doing everything he can, for instance, to defeat the balanced budget amendment. Tomorrow marks the halfway point of the first 100 days of the new Congress. Gingrich said the 50 days have been productive but the second 50 will be tough.

REP. NEWT GINGRICH, Speaker of the House: Now we go into what I think is frankly the harder period. I think when you look at welfare reform, which will be very contentious, very much desired by the American people but still legitimately debated on the details, you look at regulatory reform, you look at litigation reform, where I think the trial lawyers will go all out to be it, term limits, which is very controversial, and then the entire package which pays for the tax cuts and the tax cuts, clearly you have coming down the road more contentious issues in the second 50 days than you had in the first.

MR. LEHRER: The state of Florida sued the country's largest tobacco companies today. The suit wants $1.4 billion for treating welfare recipients with smoking-related illnesses. It was filed under a new state law which makes third party liability cases easier to win and allows for triple damage awards. The tobacco industry is challenging the constitutionality of the law in State Supreme Court. Both sides held news conferences today.

DEXTER DOUGLASS, Counsel to Governor of Florida: [Tallahassee, Florida] As you know, the tobacco companies can't hide from the facts. Smoking kills, and it costs the taxpayers hundreds of millions of dollars each year in Medicaid expenses in Florida. That's money that could go to our classrooms to educate our children, go to our law enforcement officers to better protect our citizens.

JON SCHEBEL, Florida Industry Spokesman: The issue we're looking at here is the lawsuit is being filed for $1.4 billion, and the state of Florida, if they're successful, will only get $214 million of that. Where does the rest of that money go? Well, $429 million of it would go to the lawyers in fees and expenses, and that's what we think this is all about.

MR. LEHRER: We'll have a focus segment on product liability law reform in Congress later in the program. Britain's cabinet formally approved a peace plan for Northern Ireland today. It sets up a framework for talks between all parties involved. Details will be released tomorrow. Russian forces launched a new offensive throughout Chechnya today. The heaviest fighting was around Grozny. A report prepared for Russia's human rights commissioner said more than 24,000 civilians were killed in Grozny in the first two months of the war. Many were children under fifteen years old. President Clinton will visit Russia later this year. That word came today not from Washington but from Russian President Yeltsin during a trip to the former Soviet republic of Belarus. Yeltsin said he and President Clinton would discuss a major new nuclear arms treaty to be known as START III. And that's it for the News Summary tonight. Now it's on to the Mexico deal, the Washington and Colorado debate over liability reform, and a Roger Rosenblatt essay. NEWSMAKER

MR. LEHRER: We go first tonight to a Newsmaker interview with Treasury Sec. Robert Rubin. He and Mexican finance minister Guillermo Ortiz finished work this afternoon on a $20 billion package to support the failing Mexican economy. I spoke with Sec. Rubin earlier this evening. Mr. Secretary, welcome.

ROBERT RUBIN, Secretary of the Treasury: Nice to be with you tonight.

MR. LEHRER: All right. Let's go through the agreement you signed a while ago with Mexico. What is it that the United States has agreed to do?

SEC. RUBIN: What we have agreed to do, and we did so because the President made the judgment that it was critically in the interest of the United States to do so, economically in terms of our security interests, and with respect to illegal immigration. And I think that's a very important point, Jim. This whole effort has been driven by judgments that were made about what was in our interest or what is in the interest of the United States. The agreement, pursuant to that interest, is to provide $20 billion or up to $20 billion of assistance to the Mexicos -- to the Mexicans, as they put in place a stringent financial program that will enable them to get through the current crisis and get back onto the long- term path of economic health that they had been on for quite some number of years before this.

MR. LEHRER: Now, the $20 billion, how does it come, in what form, and over what period of time?

SEC. RUBIN: The $20 billion will be provided in what are called traunches, that is to say in steps. And before each piece of the $20 billion is provided, the Mexicans will have to have satisfied officials at Treasury and at the Federal Reserve that they have satisfied the conditions that are contained in the agreement. The conditions that are contained in the agreement relate to issues like tight money, maintaining a fiscal surplus, transparency, which means that the numbers are available on a regular basis so that we can judge what's going on, continued privatization, and other matters that in the views of the Mexicans and ourselves, as we consulted, are important with getting Mexico back on the right track.

MR. LEHRER: Now the first payment is $7 billion, is that right?

SEC. RUBIN: No.

MR. LEHRER: No?

SEC. RUBIN: The IMF, the International Monetary Fund, put up $7.8 billion on February 1st.

MR. LEHRER: Right.

SEC. RUBIN: Our first payment will be $3 billion, and that will take effect almost immediately.

MR. LEHRER: And what do they do almost immediately in order to get the $3 billion?

SEC. RUBIN: What they have begun doing already, and I think a very important facet of this, Jim, is that it's really the Mexicans who are going to have to save the Mexicans in the final analysis, and they have begun already on a program of tight money, a reduction of the real money supply, a fiscal surplus, transparency, efforts that are directed at dealing with the banks that are in trouble, and there are some smaller and medium-sized banks in Mexico that do need help, they have begun embarking on a program that will re-establish the fundamentals of Mexico, which are strong, enable Mexico to get back on a healthy path, which is in their interest and our interest.

MR. LEHRER: Now, tight money, what do you mean? What does tight money mean in this Mexican economic crisis sense?

SEC. RUBIN: What tight money in this context means is basically interest rates that are high enough so that those interest rates will represent a shrinkage, a reduction of the real money supply, that is to say the money supply of the country adjusted for the rate of inflation will actually begin to go down. That, in turn, will result in high interest rates, and the high interest rates will re-establish confidence in the international financial markets and begin to re-attract private capital to Mexico.

MR. LEHRER: Because they can make more money? In other words, an outside investor, an international investor would, hopefully, if this works, will be tempted to put money back into Mexico, because they can make more money because the interest rate is high, is that right?

SEC. RUBIN: That's exactly right. What Mexico needs to do, and I believe they are well on their way to doing with the decisions that they have made, is to re-establish confidence in the international financial markets and by re-establishing markets' confidence attract private capital to their markets. Part of that is a tight money program, a fiscal surplus, transparency, and the higher interest rates that are a consequence of the tight money policy, and as I said, I think that they not only have understood what needs to be done and committed themselves to doing what needs to be done, but I believe they have made a very good start by raising interest rates yesterday in the direction that they need to move.

MR. LEHRER: Interest rates that are close to 50 percent, is that right?

SEC. RUBIN: Yes. Now, those are nominal interest rates. That is to say those are interest rates not adjusted for inflation. When you count inflation, then you have what is called the real interest rate, that is to say the interest rates less the rate of inflation. That, obviously, is a lot lower, but it is still a very high interest rate. They are going to have to go through a period, Jim, and this is the judgment that they made themselves, they will have to go through a period of considerable difficulty in order to re- establish themselves and once again be on a healthy path, the path toward the kind of strong economy that their fundamentals should allow them to have. But the alternative, the alternative, which would be not to undertake such a stringent program, would have [a] created far worse conditions in the short-term, and [b] made it far more difficult, maybe impossible, to get back on the healthy track for the long-term.

MR. LEHRER: Mr. Secretary, explain to us non-financial types why a 50 percent interest rate is healthy for anybody's economy.

SEC. RUBIN: Because it isn't a 50 percent interest rate to start with, Jim.

MR. LEHRER: Okay.

SEC. RUBIN: It's 50 percent less whatever the rate of inflation turns out to be. If the rate of inflation for the moment is 3 or 40 percent, and that's the kinds of estimates that you see in the paper, it means -- in the press -- it means that you have an interest rate, a real interest rate of 10 or 15 percent, still a very high interest rate. Now, in the long run, that is not a healthy condition. In the short run, that is a function of having the kind of tight money policy that will re-attract international money to the Mexican markets and re-establish confidence in the fiscal and monetary stability and soundness of Mexican policy.

MR. LEHRER: Mr. Secretary, is this based on guesswork, or do you have any indication that what happened today -- in other words, you're signing this, the initial $3 billion, the agreement to raise interest rates, tight money and all of that, is, in fact, going to re-establish confidence, or it's just a hope?

SEC. RUBIN: Jim, it is -- it is a set of judgments made by a group of people from different institutions that are highly experienced in dealing with these kinds of problems. The consultations that led to this program included the Treasury, the Federal Reserve Board, the Federal Reserve Bank of New York, the World Bank, the IMF, and obviously, and in many respects, most importantly, the Mexican government. We all work together on developing this program, and when you take all of those institutions together, you have a very large number of people who've been involved in dealing with these kinds of problems in many countries around the world. I think it's a very well constructed program designed to deal with a very difficult problem that is of critical interest to this country. It is imperative, Jim, that we do everything possible to get this solved in our interest.

MR. LEHRER: But what I was really getting at -- I didn't ask it well -- was, did you all consult with these people whose confidence is so important to you? In other words, did you say, or did somebody say, look, if we do [a], [b], [c], and [d] is that enough, will you put your money back into Mexico?

SEC. RUBIN: Jim, having been in the private sector for 26 years, and having seen these kinds of problems from, if you will, the other side of the fence, I can tell you that there is no way of, in effect, negotiating that kind of an arrangement with the private sector. I think what you need to do is to get people who are experienced in these kinds of matters who worked with the private sector and the public sector on many such matters before and then make the best possible judgment you can. That's exactly what we did.

MR. LEHRER: Now, the United States has asked that this -- these loans that are coming from the United States be guaranteed with Mexican oil revenues, is that correct?

SEC. RUBIN: Well, there were two basic things that we felt we needed to accomplish here. No. 1, to create a program that would enable Mexico to re-establish its fiscal health in the short run, fiscal and financial health in the short run and thereby work its way through the short run period so that it could, again, be healthy in the long-term economically, very much in our interest. Secondly, we wanted to make sure that it was financially prudent for the United States to engage in this program. The financial prudence was based, No. 1, on our belief in the fundamentals of the Mexican economy, No. 2, on the decision the Mexicans made to undertake a very stringent program in the short-term to get themselves back on a sound footing, and No. 3, on the remote but, nevertheless, possible chance that all of this won't work, and I believe it will work, but on the remote chance that it doesn't work, security for our loans so that in the final analysis we will get our money back. That security consists of claims that we will have on the revenues from oil exports from Mexico, and for that matter, the exports of other petroleum products.

MR. LEHRER: So, essentially, this is a collateralized loan, no?

SEC. RUBIN: It is technically not collateral. In fact, in many respects, it's stronger than collateral, because what will happen is that the proceeds of the oil exports from Mexico will go from the purchaser back to the Federal Reserve Bank of New York, and, as you know, oil is a dollar-denominated commodity, so that means dollars will be flowing into the Federal Reserve Bank of New York. As long as Mexico is paying on the loans that we have extended to them, then the money will -- the dollars will go back to Mexico. If there is a default, which I think is a very low probability, then automatically, automatically those dollar reserves in the Federal Reserve Bank of New York will apply to our account to repay the defaulted loans.

MR. LEHRER: So assuming that Mexico doesn't run out of oil, in other words, there's still going to be oil in the ground in Mexico that can be sold, are you -- is it fair to say then that the United States has taken absolutely no financial risk in this deal?

SEC. RUBIN: Jim, I don't think there's anything in life that doesn't have risk.

MR. LEHRER: Right.

SEC. RUBIN: And there certainly is nothing in the financial world that doesn't have risk, but I think we have constructed a program of great financial prudence, and I think the probability of our losing money on this is exceedingly low. I might add that I think the risk of doing nothing to this country, the risk to this country of doing nothing, given all of the consequences that could have occurred with the Mexican default and the spillover effects on emerging and developing countries around the world, the risk of doing nothing vastly exceeded the risks, which I think are very small, of undertaking the program that we undertook.

MR. LEHRER: Now, Mr. Secretary, have you and your colleagues in the government, the U.S. government, begun looking back -- my goodness, how in the world did we miss this freight train coming?

SEC. RUBIN: I don't think that I would characterize -- I don't think I'd frame the question that way, Jim. People in the private and the public sector knew last year that Mexico had a large current account deficit, that is to say they were importing a lot more than they were exporting. And they also knew that they were trying to maintain a fixed exchange rate. That was not a situation that could continue indefinitely. But a lot of countries have been in that situation, and the question is: What would ultimately happen? In almost all instances, what happens is either the country goes into a very tight money policy, in which case the current account deficit shrinks, or it allows the currency to devalue, as happened in Europe in the early 90s with England and a number of other countries. The markets re-coalesced around the new levels, and you do not have the kinds of distress that we are now experiencing in Mexico. The thing that I think people did not foresee was the very low probability event that instead of having some relatively orderly transition from the conditions they were in, you would have this enormous distress that we now have. And I don't think, Jim, I was in the private sector for 26 years. I dealt with a lot of these kinds of situations in one way or another. That was a very low probability event and not something I think very likely to have been predicted.

MR. LEHRER: What is your prediction about this deal that you signed today?

SEC. RUBIN: My prediction about this deal is that Mexico will go through a difficult period for quite some time.

MR. LEHRER: How long?

SEC. RUBIN: Well, I'd rather stick with quite some time, because I think it's hard to know, but quite some time.

MR. LEHRER: Okay. A matter of months, years?

SEC. RUBIN: A matter certainly of months.

MR. LEHRER: Okay.

SEC. RUBIN: And maybe many, many months.

MR. LEHRER: Okay.

SEC. RUBIN: But as they go through this difficult period, they will re-establish a sound structure, a sound financial structure. Their short-term dollar-denominated debt both in the public sector and in the banking sector will be brought down and stretched out, so they'll once again have a sound financial structure based on attracting capital from the private sector. They'll have sound fiscal policy, sound monetary policy, and they'll position themselves so the fundamentals can once again reassert themselves. That is enormously in our interest, our economic interest, our security interest, and our interest with respect to immigration. If we had not engaged in this program and had not provided the support to help them do that, then I think they would have been in dire circumstances right now, we would have suffered all the consequences, and the probability of restoring health in a matter - - even over many, many years, would have been very low.

MR. LEHRER: On a scale of one to ten, what are the -- how would you rate the chances of this thing actually working?

SEC. RUBIN: I think the chances of this actually working, Jim, are very good. I believe it's going to be a difficult period, as I said a moment ago, but I think in the final analysis, the chances are very good. Beyond that, even if it doesn't work, and I think the chances are very good it will work, but even if it doesn't work, the chances of our getting all our money back I think are excellent, not certain but excellent.

MR. LEHRER: All right. Mr. Secretary, thank you very much.

SEC. RUBIN: You're more than welcome. It's nice being with you. FOCUS - HALFWAY MARK

MR. LEHRER: Now, we continue our midway assessment of the first 100 days of the 104th Congress. Tonight, we look at that part of the Republicans' Contract With America which calls for re-writing the nation's liabilities laws. Robert MacNeil is in charge from Denver, where he's gone this week to measure the impacts and reactions to what is happening here in Washington. Robin.

MR. MAC NEIL: Legal reform is actually an old story here in Colorado. Nine years ago, confronting the need to protect the skiing industry in particular from thousands of personal injury claims, the state passed its own version of tort reform. Betty Ann Bowser has our report.

BETTY ANN BOWSER: From the moment skiers in Colorado board the lift, they're warned to ski responsibly because in this state it's almost impossible to recover damages for an injury that results from the inherent dangers of skiing. And the liability questions extend beyond the slopes. If a skier breaks a leg and the doctor doesn't set the bones correctly, that skier may find it isn't worth the time or money to take the doctor to court. There's a cap here of $250,000 for pain and suffering in malpractice suits. These are just a few of the legal reforms initiated in Colorado as part of the state's ongoing battle against what legislators and business owners term "lawsuit abuse." The debate came to a head in the 1980s, when the problem was so acute that insurance companies like Aetna took out full-page ads to complain about jury awards they said were out of control. Lobbyist Patrick Boyle says things were so bad that whole towns and cities found themselves uninsurable.

PATRICK BOYLE, Lobbyist: Commercial liability insurance was almost unavailable in Colorado, and to certain businesses was unavailable. To those that could purchase insurance at all, the affordability was getting out of reach, and insurers base their decisions -- they like to sell insurance -- that's how they make money, and if they're not willing to sell insurance, things are out of control.

MS. BOWSER: The Colorado legislature stepped in. A series of laws was passed reforming everything from medical malpractice suits to court procedures, but the most controversial reforms came in the area of personal injury lawsuits. The state became one of the first in the country to place a $250,000 cap on awards for pain and suffering. The state also eliminated a legal concept commonplace in other states called "joint and several liability." It said, when two or more defendants are guilty, plaintiffs can go after whoever has the deepest pockets to recover the full extent of their punitive damages. But now in Colorado, an injured party can only recover money according to the percentage of guilt determined by the jury. That means if the most guilty party in a personal injury suit has no money, or is bankrupt, the injured person is out of luck. That became the fate of several people who were inside the Crested Butte State Bank on March 6, 1995. A poorly repaired propane gas line exploded nearby. Three people were killed; fourteen others were injured. In this tiny resort town, those who were buried beneath the rubble had their lives changed not only by the explosion but by the reforms in the legal system. Bank teller Roxie Lypps was trapped in a crawlspace for nearly two hours, suffering from flash burns over 40 percent of her body.

ROXIE LYPPS: My face was damaged. My hair was totally burned. It was just like a brillo pad. I had my face cracked and peeled probably ten or twelve times during the recovery period. This particular hand I lost all the skin, top and bottom.

MS. BOWSER: It was two years before Lypps was able to walk normally, and for the rest of her life she will be permanently scarred. Although Lypps can now walk again -- she even went on a rigorous ski trip recently -- she wanted compensation for her injuries and pain and suffering, so she went to court. The jury awarded her $1 1/2 million, but Colorado law forced a dramatic reduction in that amount, and by the time she exhausts all legal avenues, Lypps will probably wind up with less than a quarter of what the jury gave her. Wayne Swift is Lypps' attorney.

WAYNE SWIFT, Lawyer: The only thing we have is monetary damages, to try to compensate 'em, and when you limit that damage, then what you do is you build a false environment of saying that it's okay to hurt somebody, you don't even have to carry insurance, because you know your exposure is $250,000.

MS. BOWSER: Cliff Goss was another victim of the bank explosion. He fell two floors, seriously injuring his back and right shoulder. He is angry because he has recovered less than $100,000 of the $600,00 the jury awarded him.

CLIFF GOSS: I went through six weeks of trial. The jury thought they did what was right, and they did. They gave us a "guilty" verdict. They gave us some awards. They thought we would receive every nickel of the award.

MS. BOWSER: But Goss only got part of the punitive damages awarded by the jury because two of the guilty parties declared bankruptcy. And in Colorado, Goss could not go after the other negligent companies with the deepest pockets to recover the rest of the money the jury gave him. Colorado Congressman Joel Hefley recognizes the problem but stands by his former role as a state senator instrumental in legal reform. He says society must look at the greater good.

REP. JOEL HEFLEY, [R] Colorado: If you're injured in some kind of an accident and it's no fault of your own, and you're going to have to limp around or be in a wheelchair or whatever the rest of your life, there's no way really to make up for that. And giving you a lot of dollars isn't going to make up for it. And I'm sorry about that. But I'm not -- there is a limit to how much responsibility society should have for that. We live in a world that does have certain risk.

MS. BOWSER: Roxie Lypps doesn't see it that way.

ROXIE LYPPS: I will always live with scars on my back, on my arms, on my legs. I will always have to be very careful of being in the sun. I'm more prone to skin cancer. I have problems with my skin because of it. The things that happened to me will always be in my mind and in my spirit.

REP. JOEL HEFLEY: There ought to be some compensation for that, and there probably ought to be some punitive damages if the companies were negligent, but at the same time, you don't want to make her rich. Whatever level she lived at before, we ought to make sure she can continue to live at that level, but we shouldn't make it so that she can move from Crested Butte to Aspen and live in one of the fancy movie star's homes all of a sudden because she got this fabulous award because of a lawsuit.

MS. BOWSER: Legal reform in Colorado has been a mixed blessing. People like Lypps have suffered, but commercial liability insurance is once again available, and at least in the ski industry, the number of persona injury lawsuits has been cut in half.

MR. MAC NEIL: Colorado's legal reforms are among the most sweeping in the country but 40 other states have also implemented changes in their tort systems. Today in Washington, members of the House were taking up the Republicans' call for a sweeping overhaul on the federal level. Kwame Holman reports.

KWAME HOLMAN: House Republicans included legal reform as part of their Contract With America, and now two House Committees are trying to work out the details of legislation.

REP. HENRY HYDE, Chairman, House Judiciary Committee: Many believe this patchwork of over 50 separate state product liability laws is simply costing America too much. It discourages capital investment, dampens job creation, and denies consumers new, safer, and less expensive products.

MR. HOLMAN: As originally proposed, the Common Sense Legal Reform Act would supersede state laws in its attempt to discourage lawsuits by making the loser in product liability cases pay all legal costs. As in Colorado, the bill in Congress would limit joint liability by letting the courts decide the percentage of damages each defendant would have to pay. Currently, the richest defendant can end up paying nearly all the damages, and the bill would cap punitive damages, money a jury can award to punish a defendant. Most Republicans support the caps.

REP. ED BRYANT, [R] Tennessee: We all understand that punitive damages are intended to punish wrongdoing, but they are not and should not be used to compensate victims and should not be used as redistribution of wealth.

MR. HOLMAN: But many Democrats oppose limits on punitive damage awards.

REP. JOHN CONYERS, [D] Michigan: Our legal system must remain an accessible one, offering justice to all of our systems on a full and equal basis.

MR. HOLMAN: The House Commerce Committee also is considering adding specific legal protection for medical suppliers and drug companies. The provision would ban lawsuits against the manufacturer if its product has been approved by the Food & Drug Administration. But Hawaii Congresswoman Patsy Mink objects to that provision. At a Commerce Committee hearing today, Mink testified that early in her life and without her knowledge, she was given DES, an experimental drug thought to prevent miscarriages but later found to cause cancer.

REP. PATSY MINK, [D] Hawaii: Ten million men and women are DES mothers, daughters, or sons. Many have died; many are in the threat of death; many live in constant fear the next examination will show that they too have cancer. The bills that are pending before you would severely limit the ability of DES mothers and children to recover damages for harm inflicted upon them.

MR. HOLMAN: But fellow Democrat Billy Tauzin of Louisiana said the proposed bill would not protect a company from willful wrongdoing.

REP. BILLY TAUZIN, [D] Louisiana: In other words, if the company that made DES did, in fact, withhold information from the Food & Drug Administration that it was not a good drug to prevent miscarriages or that it had a detrimental effect upon women who might later contract some cancerous condition as a result of it, you could still sue them.

MR. HOLMAN: Other provisions of the legal reform bill would limit the liability of dealers of a product for damage caused by the product's manufacturer and would try to limit lawsuits by investors against companies by making it harder for investors to prove they were defrauded. One thing House Republicans and Democrats can agree on is that the proposed legislation gives federal jurisdiction to an area traditionally regulated by the states.

REP. CARLOS MOORHEAD, [R] California: I believe that we're probably all very concerned about states' rights, at least most of us are, but when you find that many products are manufactured in one state, sold in another state, the claimant for damages are in a third state, you really have a federal issue.

REP. BARNEY FRANK, [D] Massachusetts: People who are going to vote for this legislation should acknowledge that they will be voting for the greatest single transfer of power from the states to the federal government in terms of an aspect of American life that has ever been done at one fell swoop in America history.

MR. MAC NEIL: We turn now to four views on the Republican legal reform initiative. Here in Denver, we're joined by Thomas Gibson, who is executive vice president of the Gates Corporation, a Denver- based automotive parts manufacturer, and Douglas Bragg, a senior partner at a Denver law firm. He worked on the Dalkon Shield lawsuit and is a former president of the Colorado Trial Lawyers Association. From Washington, we have Congressman Chris Cox, a Republican from California, who supports his party's legal reform efforts, and Democratic Congressman John Conyers from Michigan who opposes them. I'm going to start with you, Congressman Cox. I know you two were just out voting a minute ago, and you missed the beginning of the piece we ran, but two of the plaintiffs that were shown there I think stick so much in our minds I'd like to ask you about them. One was a woman who was injured in an accident but under the Colorado reform law, the damages she could claim for, for pain and suffering are capped at $250,000. Under your law, are the pain and suffering damages capped, and how would such a person be treated?

REP. CHRISTOPHER COX, [R] California: Well, we don't know yet. The judiciary is going to begin marking up this bill tomorrow. That means they will start the process of actually writing the legislation and amendments to it, but we know that one of the things that we are interested in doing, at least in the products area, the manufacture of products and products liability, is limiting punitive damages to three times the actual damages. What we can say about the woman in Colorado is that before we even get to the issue of pain and suffering, or of non-economic damages, we know that all of her so-called compensatory damages have been paid, all her medical bills have been paid, all her out-of-pockets, all of her future lost wages, all of those things, that's a given. Then we're talking about more money on top of that, and limiting that in some realistic way to three times the actual damages, which is what we're talking about in this reform bill, probably doesn't go quite as far as they did in Colorado but will help establish a system across the country that is uniform and provides some protection for people in their jobs. That is a sensible reform that I strongly support.

MR. MAC NEIL: Congressman Conyers, how do you see the reform affecting a woman who -- it isn't a case of product liability -- this was an explosion, and a couple of companies were found negligent, and she was a bank teller injured in the collapse of a building.

REP. JOHN CONYERS, [D] Michigan: It's a perfect case of the kind of discrimination that would be visited if we were to have the kind of law that the new majority wants in terms of recovering damages. Suppose she's seriously disfigured, which is --

MR. MAC NEIL: You didn't see her but she was.

REP. CONYERS: I didn't. Yes. Well, she's going to be limited arbitrarily by a rule from Washington, D.C., when the states, many of them, including Colorado, the example that was shown, are already taking as many steps to reform these civil damages cases in many different ways. What we see happening here essentially, Robin, is that this is going to be a way of protecting malfeasance on the part of big businesses, and it's going to operate as a very -- when you combine the provisions of all these laws, loser pay, and limitations on pain and suffering, punitive damages, it's all tilted against the victims, and I keep asking myself, why are we doing this, when the rest of the Republican Contract is built on sending power back to the states and local governments?

MR. MAC NEIL: I'm going to come back to that question, but I'd like to go back to Congressman Cox for a minute. The other person in this example was a man whose damages were limited because Colorado law has, like the proposed Republican law, eliminated the joint and several negligence thing, and two of the companies found negligent had gone bankrupt, and, therefore, the award the jury gave him, $600,000, has been cut back to $100,000. Now would that be the effect of your bill if you're also eliminating the joint and several negligence liability?

REP. COX: Well, if I understand your example fairly, it is that the people who are actually responsible, who are guilty, turned out to be bankrupt or had no money.

MR. MAC NEIL: Right.

REP. COX: As a consequence, this man stood in the same relation to that bankrupt as did all of the bankrupt's creditors. There are probably lots of small businesses, suppliers, vendors, individual people, who got stiffed by this bankrupt. That's one of the things that happens when someone declares bankruptcy. It is not an adequate response to that to say well, this man's been injured, let's take the money away from someone who isn't responsible who didn't do it. What we are trying to do is apportion fault on the basis of who's guilty and who is not. There isn't, I don't think, in America -- or shouldn't be at least -- a right to have somebody pay because you've been injured -- even if that person isn't guilty. I saw Patsy Mink earlier in the broadcast talking about her experience. I had an experience, myself, in Patsy's state, in Hawaii. After I graduated from law school, I was working briefly in Hawaii. I rented a jeep on the island of Molokai. I was up in the rain forest and driving on my own. I drove over a log and very slowly this large, four-wheel drive vehicle turned over, pinned me underneath, and broke my back. I was paralyzed from the waist down. And I had terrific injuries that still bother me significantly today. I did not sue Jeep. There were a whole lot of people who did. It turns out that jeeps have a high center of gravity and just for filing a lawsuit, you could get a rather substantial settlement. I didn't do it because I didn't think the people who made that machine were responsible for my significant injuries. People in America need to take some responsibility for what happens to them. Not every accident deserves some person who isn't at fault to get robbed; that just commits another injury.

MR. MAC NEIL: Congressman, what's your comment on that?

REP. CONYERS: I don't have an injury to report that I've been nursing all these years, but it would seem to me that if we're going to now limit joint and several liability that has been traditional in American law, where the insurance company, for example, pays and then goes after someone else, we're, again, discriminating against the victim, which is exactly the opposite of what my colleague on judiciary was doing when we were taking care of victims of crime. We had them compensated. Now we have victims of civil injuries, and he's saying, look, even the states aren't doing enough, let's bring in the federal law to help exacerbate this problem. It seems to me it's in the wrong direction.

MR. MAC NEIL: Let me bring in our guest here in Denver, Thomas Gibson of the Gates Corporation. What do you think about this aspect of eliminating the joint and several negligence concept?

THOMAS GIBSON, Gates Corporation: Well, since I represent a company that is not going bankrupt and does not run away from its responsibilities, I certainly would agree with the position that why should we pay for someone else's responsibility. Weoften find ourselves in a lawsuit as a defendant simply because we have the money, and the causal connection is very weak at best.

MR. MAC NEIL: Give us an example of the kind of suit you have in mind.

MR. GIBSON: Well, let's take, for example, the -- you remember the chicken parts plant in North Carolina that caught fire recently, and a number of people were killed or injured -- the real cause of their injuries was that the owners had locked the doors, the fire escapes, and they were trapped in the building. But since they had declared bankruptcy, the plaintiffs' lawyers are now trying to find the manufacturers of products that were in that plant, even if they had nothing to do with the fire and certainly nothing to do with the locked doors and say, well, but you had products in that plant, and those products burned, and the vapors from that burning created a toxic soup, that's a new doctrine from the trial lawyers, a toxic soup which asphyxiated these people, and, therefore, you're liable. Well, I don't believe we are just because we had a product in that plant. I think the people who are liable for those terrible injuries and deaths down there are the people who locked the exits.

MR. MAC NEIL: As a trial lawyer, yourself, Mr. Bragg, how do you feel about this, the lawsuit, the joint and several?

DOUGLAS BRAGG, Trial Lawyer: It's the single most devastating thing that's happened to citizens who've been injured in Colorado under this legislation. And the reason is the English common law and the states, courts, until very recently, all had the doctrine of joint liability, and what that means, if there is one wrongdoer and another wrongdoer, and the injury doesn't happen unless both of them participate, you take away one it doesn't happen, you take away the other it doesn't happen, then fairness tell you that each should be responsible for the entire injury to that citizen. But if that is taken away, as it was in Roxie Lypps' case, as it was in Cliff Goss's case, what happened is exactly that point, without all of those people who were in that lawsuit, the wrongdoers, it wouldn't have happened, but because half of them were bankrupt or couldn't be collected from, they only got half what the jury awarded.

MR. MAC NEIL: Okay. Now we can't go through and pursue -- we'll get your points of view on these -- there are many aspects to this, and we can't pursue all of them to the very end, but I'd like to go back, Congressman Cox, to the point Congressman Conyers made a moment ago. If the federal law simply wipes out or supersedes all these laws, like the Colorado one we've been discussing, how does that square with giving power back to the states, which is so much part of the Republican creed these first 100 days?

REP. COX: Well, first of all, I want to emphasize that at least my creed as a conservative is to give freedom and liberty back to individuals. The state is a weigh station as we devolve power away from Washington, D.C., and to the individuals. Now what we have done is given the power of the state, if you will, of government, to lawyers to exploit individuals and to take away their freedom, so that very unfairly, people can find themselves the victims of lawsuits. In 1990, the most recent year for which we have figures, there were 100 million lawsuits filed in state court alone. Now, there's only 260 million people in America. That means that every adult in America can have his or her own lawsuit. There's two parties, a plaintiff and a defendant, in every one of those things. That's 200 million people at least involved in litigation in any given year. Obviously, some people are doing this more than once and repeatedly. We just have too much litigation in America. In the Federalist Papers, which obviously provided the basis of intellectual substance for our Constitution, we find in Federalist 11 and Federalist 42 that Hamilton and Madison were telling us that the one area where the Articles of the Confederation broke down, where we really do need federal rule, is interstate commerce, and as Chairman Moorhead or Carlos Moorhead pointed out in the earlier part of your broadcast, if a product is made in one state, it's sold in a second state, purchased in a third state, you've already got a federal system. Right now, if you operate your service business, let's say, in Washington State, the trial lawyers don't come after you in Washington State because they don't have punitive damages, they pick the forum somewhere else. We have a national system for the plaintiffs. We just have a state system for defendants. It's very unfair.

REP. CONYERS: Could I point out that this explosion in litigation that I've heard referred to, we began examining carefully in Judiciary Committee. We find out that 10 percent of the cases are tort cases, wrongful injury. The rest of them are either domestic relations cases or companies suing companies. And the explosion and the kind of cases that have been referred to us is non-existent. Further, punitive damages cases from 1965 to 1990, to 1995, a 30- year period, we had 350 recorded punitive damages cases. So I contend that the explosion that we're dealing with is not about the kinds of cases that we're using tonight to study, but it's about other areas. And that is a very important consideration to be taken.

MR. MAC NEIL: Okay. Let's take up another aspect of this, starting here in Colorado. Mr. Bragg, as a trial lawyer, what about another Republican aim which is to make the loser in such suits pay the costs if they're unsuccessful in this suit, what is the response of people in your profession to that?

MR. BRAGG: Effectively, that destroys the ability of the middle class to make claims, no matter how serious the wrongdoing, no matter how seriously they are injured. A poor person could go ahead, if they can hire a lawyer on a contingent fee, where the lawyer doesn't get paid unless they win, and the other side, as they do run up tens of thousands, even hundreds of thousand dollars of attorney fees, because those people don't work cheap, they're very good.

MR. MAC NEIL: Those people, those people are you.

MR. BRAGG: No. They're the people in my opposite number. They get paid by the hour by the Gates Rubber Companies of the world. The poor person doesn't have anything to lose anyway. The rich person maybe can take the risk, but the middle class, if they come in to me, and they say, will you guarantee me winning, I can't. What are the chances? I don't know -- wait till we get into the suit. Well, what happens if I lose? You lose your house; you lose your car; you lose your savings; you can't send your kid to college. What do you want to do? They're not going to do anything.

MR. MAC NEIL: This denies access to the middle class, Mr. Gibson?

MR. GIBSON: I think there is merit in the argument that loser pays will keep meritorious suits out of the courts to some degree, I must concede, but I believe that there ought to be something on the other side which is perhaps a limitation on contingent fees, because right now what we have is a lottery. The trial lawyers can say, I will taken 10 cases on contingent fee and lose them all, but if I get that home run on No. 11, if I get that big winner, then I've paid for all of my efforts, and I'm ready to go ahead again. I would like to see some system whereby there is an opportunity for the truly meritorious claim to be brought without a loser pays hanging over their head, but in cases where there is parity or equality between the parties, loser pays is a very good way to avoid non-meritorious lawsuits.

MR. MAC NEIL: This is a -- a lottery for lawyers?

MR. BRAGG: No, not at all. It's well established that contingent fee screens out bad cases. If somebody comes to me with a case that I don't think I can win, even if they're very seriously injured, I don't take it. And there's a recent example of someone in the Colorado state legislature who had a son who was killed on a snowmobile. Six lawyers refused it, so they're going to try to change the law. I can't take a case unless I look at it and think there's a reasonable probability that I can recover for those people. If I lose 10 contingent fee cases in a row, I'm out of business. The costs are just too great.

MR. MAC NEIL: Congressman Cox, what do you say about the claim that this is just going to cut the middle class out of, out of suing for injury, whether from products or accidents or whatever?

REP. COX: Well, it's an interesting concept because what we're talking about doing here is giving plaintiffs full recovery. Right now, we have a winner loses rule. In the current system, after you win your case, you've had to pay your lawyer all along the way in the middle class example that was just given to us, you get 25 percent, 30 percent deducted for the costs of your lawyer. Well, obviously, those costs were occasioned by the person that did you injury, and that person should be made to pay. It's why 85 percent of Americans in the U.S. News & World Report survey published just a few weeks ago said that if I sue someone and I win, they should pay my legal fees. Half the people virtually were willing to do it the way around. It's a sensible system. It's a system in place virtually all around the world. It's the "everywhere but America" rule that the winner wins and the loser loses. Second, a factor that's been missed here that I think is vitally important is that the plaintiff controls whether or not this rule applies. We are not federalizing or nationalizing a loser pays rule. It applies only in so-called diversity cases where state law is being applied in federal court. Since the plaintiff decides whether to go to federal court or not, the plaintiff can elect whether to have a loser pays rule or not. At the same time, the plaintiff doesn't get this loser pays rule unless there's a final judgment. So at any time throughout discovery, depositions, document requests and so on, all the way up till you get to court, sometimes that's five, six, seven years, the plaintiff can avoid the loser pays rule, settle early, withdraw the case if it doesn't look good. There is very little risk for the plaintiff as compared to the defendant.

MR. MAC NEIL: What's your position on that one, Congressman Conyers?

REP. CONYERS: Well, you know, all the emphasis on the lawyers, whether it's convenient or benefits, what about the victims? The victims are, are going to be restricted in the places that they can file these cases. We've got a loser pay rule coming in. We have federalizing going on as the states are also reforming. We have a Rule 11 that prevents or that punishes attorneys who bring frivolous or non-meritorious cases, so you know, we're fixing something that isn't broke, and I think it's going to be the harm of the civil procedure in America. It's a revolutionary concept that has been in place that we allow the laws of the states to control civil proceedings for 200 years, and now in a 100-day contract, in the 52nd day tomorrow, we're going to overturn this in a steamroller type fashion, where all the votes are really all piled up in advance of a reasoned debate.

MR. MAC NEIL: Mr. Gibson, are we trying to fix something? Are they trying to fix something that isn't broke?

MR. GIBSON: Well, would you talk about history. In the early days of the country, products were made, sold, and used all in one jurisdiction, or maybe even in one town, but certainly one state.

MR. MAC NEIL: I meant from the point -- excuse me interrupting but our time is coming down -- I meant from the point of a company like yours being affected by having your efficiency as a company affected by nuisance or negligence suits, or suits that have no merit to them.

MR. GIBSON: Oh, I'm sorry. I thought you were addressing Rep. Conyers' point. We certainly have not only our efficiency reduced but our profits reduced dramatically by nuisance lawsuits. Rep. Conyers talks about victims. Unfortunately, a lot of plaintiffs are not really victims, or, if they are, they are victims of their own negligence and their own improper use of a product. Certainly when we have to deal with those lawsuits, when we have to settle them without merit because the costs of defending them are so high, it affects efficiency, it affects profits, it affects our ability to sell our products competitively.

MR. MAC NEIL: And what's your view, Mr. Bragg?

MR. BRAGG: Well, of the 100,000 cases that Congressman Cox talked about, fully half, 50,000, are businesses suing businesses. Less than 5 percent are the injury cases, and a fraction of that are product liability cases. And if you want to really go look at the problem and deal with the problem, you've got to deal with businesses suing businesses. That's where they're spending so much money. That's where the courts are being clogged up.

MR. MAC NEIL: Is that true?

MR. GIBSON: Not in our case.

MR. MAC NEIL: That is the -- those are the figures from the Association of State Courts.

MR. BRAGG: Yes. National Center for State --

MR. MAC NEIL: National Center for State Courts.

MR. GIBSON: There's no question that businesses suing businesses is a large part of the problem. The other part is that product liability suits and personal injury suits invariably 80 to 90 percent of them settle before they get to trial, so we're not seeing those records in the reported cases. But the point is in our company's case, for example, we have about a $3 1/2 million budget per year to defend against and for settlements of product liability lawsuits. We're not spending anywhere near that kind of money suing other companies or being sued by other companies.

MR. MAC NEIL: Right. Well, gentlemen, we have to leave it there. Congressman Conyers, Congressman Cox, thank you. Mr. Gibson, Mr. Bragg, thank you. RECAP

MR. LEHRER: That discussion on tort reform ran a little longer than we anticipated, and that means we'll bring you Roger Rosenblatt's essay on the homeless some other time. Again, the major story of this Tuesday was the signing in Washington of the $20 billion economic aid package for Mexico, it involves loans and loan guarantees that are backed by future Mexican oil profits. Treasury Sec. Rubin said on the NewsHour tonight, Mexico faces months of economic hardship before its economy will improve. And we'll see you tomorrow night. I'm Jim Lehrer. Thank you, and good night.