Key Bill Approved as House Finishes Legal Reform Push : Legislation: Limits on punitive damages in personal injury suits advance to Senate. Sweeping measure easily overcomes opposition from lawyers, consumer groups.

Easily overcoming opposition by trial lawyers and consumer groups, the House on Friday approved a landmark legal reform bill that sets the first national rules for personal injury cases and promises to give businesses significant relief from costly litigation.

By a 265-161 vote, the House endorsed the third and final element of the legal reforms proposed in the GOP “contract with America” legislative agenda. The measure now goes to the Senate, where many--but not all--of its provisions are likely to win approval.

The personal injury measure is the most sweeping bill in the package, and House Speaker Newt Gingrich (R-Ga.) had predicted that it would encounter the fiercest opposition of any measure that the Republicans intend to debate during the first 100 days of the 1994 session.

If enacted, the bill would limit punitive damage awards to $250,000, or three times a victim’s monetary losses, whichever is greater. Plaintiffs injured by a doctor’s negligence or by an unsafe drug or medical device would be allowed to recover no more than $250,000 for their pain and suffering.

Advocates said that the limits are needed to address an escalating caseload of personal injury suits that are clogging the nation’s civil courts and, in some cases, forcing businesses and professionals to pay damages far in excess of the tangible losses incurred by plaintiffs.

President Clinton has not yet said whether he would veto the bill in its current form. But Clinton’s legal advisers characterized it as an “unfair” measure that “tilts the legal playing field dramatically to the disadvantage of consumers and middle-class citizens.”

The bill could have far-reaching effects in Orange County, home to a thriving biomedical industry and base of such drug makers as ICN Pharmaceuticals Inc. in Costa Mesa.

Consumer advocates and trial lawyers have contended that ordinary Americans will be adversely affected by the legislation if they are gravely injured by a product but find themselves unable to win adequate compensation in court.

“The overall attempt to reform the court system is out of proportion to reality,” said Irvine lawyer James T. Capretz, who represents patients implanted with faulty Shiley Inc. heart valves. “There are very few punitive damage awards of any significant amount that are upheld through the appeal process.”

Friday’s vote culminated a decade-long drive by business advocates to rein in the excesses of the nation’s civil litigation system. From manufacturers to retailers, from accountants to insurers, similar horror stories are repeated time and again. Reform advocates said that a flood of personal injury suits--and the specter of huge damage verdicts--have been driving up the cost of doing business and forcing the adoption of defensive strategies that are not necessarily in the best interest of customers or clients.

New products, from contraceptives to heart valves, have been kept off the market because of potentially bankrupting damage verdicts, the bill’s supporters said, while some older products, such as small airplanes, are no longer even produced in the United States because of high litigation costs.

Since there are no national statistics tracking civil verdicts and settlements, it is difficult to say just how much of an effect the “litigation explosion” has had on the private sector. What is clear is that the complaints of business advocates fell on mostly deaf ears while Democrats were in the majority in Congress. Before Republicans assumed control of both houses this year, key committees refused even to hear testimony about proposals to limit lawsuits.

Now, the new Republican majority and the broad business coalition that supports it is moving with extraordinary speed to make far-reaching changes in the law, sometimes without bothering to conduct hearings on their proposals.

For example, Rep. Christopher Cox (R-Newport Beach) won passage Thursday night of an amendment placing a $250,000 limit on the amount of “non-economic” damages that can be recovered by victims of medical malpractice or defective drugs or medical devices. There were no hearings on the far-reaching change. In fact, Cox had not even proposed it until the day before the floor vote.

Several Orange County biomedical companies had no immediate comment on the bill. They wanted time to study it first.

“We do not comment on legislation but applaud any event that enhances innovation in health care,” said Jay Steffenhagen, a vice president at medical device manufacturer Beckman Instruments Inc. in Fullerton.

In the wake of the bill’s passage, consumer advocates said they intend to focus their attack on the medical malpractice provision.

“Suppose you have a child who has been brain-damaged or disfigured for life because of an unsafe drug. For that child and her parents, $250,000 for pain and suffering doesn’t go a long way,” said Mary Griffin, insurance counsel for the Consumers Union.

Capretz said the law could hurt remaining cases involving patients who have faulty heart valves made by Shiley between 1979 and 1986. At least 250 people died when tiny struts that held their valves together snapped, and many others live in constant fear that their artificial valves are faulty.

“Should this legislation pass and should it be approved by the President, it may interfere with these claimants,” Capretz said. “This would be unfortunate. They were put in the circumstances they have by negligence.”

A Shiley representative could not be reached for comment.

House Judiciary Committee Chairman Henry J. Hyde (R-Ill.) stood on the floor and ticked off examples of dozens of laws enacted by Congress since the 1930s to impose federal regulations on the private sector, from minimum wages and anti-discrimination laws to workplace safety rules and consumer product safety laws.

“The only facet of our economy that has not been subjected to federal regulation is the multibillion-dollar litigation industry,” Hyde said.

That will change dramatically, if the House bill becomes law. Its key provisions:

* The size of punitive damage awards would be strictly limited. In most non-medical cases, injured persons still would be permitted to receive the full amount needed to cover actual losses, such as medical costs and missed wages and the more subjective “non-economic” damages, such as an amount for pain and suffering or emotional distress.

Punitive damages give jurors the power to punish wrongdoing.

* Makers of drugs and medical devices would be shielded entirely from punitive damages if their products were tested and approved by the Food and Drug Administration. Proponents said that this change would encourage the development of new and better health care products. Critics said that it could encourage the marketing of dangerous drugs.

* Doctors, hospitals and other health care providers would have to pay injured persons no more than $250,000 for pain and suffering. This proposal is modeled after California law.

* Retailers and distributors would be shielded from most damage suits involving products unless they handled an item negligently.

* Manufacturers could not be sued if a product malfunctions after it has been in use for more than 15 years. This is an important change for makers of everything from airplanes to elevators.

* Settlements of lawsuits would be encouraged by requiring “losers” to pay the legal costs of the winners if they had turned down an earlier and better offer before the trial.

* Companies or individuals would have to pay only their share of the liability. This change also follows the law in California. In many states, however, all those who are found to be liable are responsible for seeing to it that a victim is fully compensated, even when the main wrongdoer goes bankrupt.

* Companies could not be sued for a drop in their stock prices unless disappointed investors could show that officials deceived them about the company’s condition or its prospects.

Times staff writer Chris Woodyard in Costa Mesa contributed to this report.