Class Action Fairness Act of 2005

Mr. President, what is the parliamentary state of affairs?

Have no amendments been presented?

I ask the distinguished Senator from Massachusetts if he is prepared to submit an amendment. If he is, I would be happy to yield to him instead of making my comments.

Mr. President, I listened carefully to my friend and colleague from Massachusetts, and I do think he has a few things wrong. For instance, if the vast majority of the people bringing the suit are Massachusetts citizens, under this bill they have a right to bring it in State court, if they want to, although most civil rights cases are brought in Federal court because these are 14th amendment cases.

I remember years ago arguing on this floor on these issues, and, of course, the distinguished Senator from Massachusetts and others wanted these cases brought to the Federal courts because they were so afraid some of the State courts would not do justice in civil rights cases. They were right. They wanted them in Federal court. I do not blame them.

The Federal courts are made up of judges who are nominated and confirmed for life. Because of that, they should not have any political forces that would take them away from doing justice. In all honesty, nothing in this bill would stop Massachusetts classes made up wholly of Massachusetts citizens or even a majority of Massachusetts citizens from bringing these cases in State court, if they want.

One reason the Federal courts are so clogged is because of a wide variety of cases that are now being brought in Federal court, partly caused by people on both sides of the aisle. But there is no question Federal courts are not only good courts, by and large they are basically fair courts. And by and large they are basically very sophisticated courts. And by and large they apply, in these particular cases, the laws of the States in which the suits are brought--I might add, unless there are reasons from the Federal standpoint in applying otherwise.

Now, there is nothing in this bill that stops legitimate cases from proceeding. There is nothing in this bill that takes consumer rights away. There is nothing in this bill that will not give consumers or those who are injured a day in court. There is a lot in this bill to prevent some of the phony approaches that are taken by some in the legal profession who should be ashamed of themselves. This bill corrects those kinds of injustices, those kinds of excesses, those kinds of problems.

I urge my colleagues to vote against this carve-out amendment offered by my distinguished friend from Massachusetts, Senator Kennedy.

This amendment excludes from the bill's existing jurisdictional provisions those class actions involving civil rights violations and class actions involving wage-hour disputes. But before I address the imprudence of carving out these types of cases, I would like to make it perfectly clear, as I think I have up to now, that S. 5 in no way impairs the substantive rights of litigants to bring, among other claims, civil rights and wage-hour claims. Some opponents of this bill seem ready to conveniently gloss over this critical fact in their efforts to pass bad information about what this bill does.

S. 5 is procedural in nature and simply moves larger interstate class actions to the appropriate forum where they belong in the first place: in Federal court. These class actions often involve the most money, parties from different States, and issues that transcend State lines. Yet by the same token, the bill preserves States rights to adjudicate truly local disputes on behalf of their citizens.

Now, those are facts. This bill does not take any rights away from anybody. But what we are trying to do is stop the forum shopping; in other words, finding jurisdictions that will render outrageous verdicts that basically benefit the attorneys, the lawyers, not the people for whom they are suing.

Well, let me say, first, an affirmative exclusion of civil rights cases from Federal jurisdiction runs counter to the bedrock principles of encouraging our Federal courts to adjudicate civil rights disputes. I remember, in days gone by, there was a demand that these cases be in Federal court because they are courts of primary jurisdiction under the Constitution and because, as a general rule, more justice was done.

I think this principle speaks for itself when you look at the plethora of Federal civil rights statutes extending protections against employment, housing, race, and gender discrimination. That is just to name a few. Indeed, the Federal courts' involvement with civil rights is so pervasive that Federal courts routinely hear claims brought under State civil rights laws. This is not unusual.

The Federal judiciary's extensive involvement in civil rights matters has also led to favorable results for civil rights litigants. Honest litigants are not going to lose in Federal court. It is just that simple. And they are probably more greatly protected because there is naturally less politics in Federal court.

Federal courts have a long record of certifying discrimination class actions and approving generous settlements in most of these cases.

Take, for instance, the recent Home Depot gender discrimination settlement which paid class members somewhere in the neighborhood of $65 million or the $192 million Coca-Cola race discrimination settlement in which each class member was guaranteed a recovery of at least $38,000 in cold hard cash. And, of course, there is the recent Federal court certification of the largest civil rights class action in U.S. history involving 1.6 million former and current female employees of Wal-Mart.

These are successful, proven results that belie any claim that Federal courts are somehow hostile to civil rights actions. In fact, it is laughable to now say that we have to have these in State courts when all these years we have been working hard to get these cases to Federal court so they would be adjudicated more fairly.

Some of those who support a civil rights carve-out also contend the Federal courts are overworked and incapable of handling such matters, that the State courts are better equipped. Give me a break. We have heard this concern raised repeatedly from opponents of this bill who apparently believe that if they say it enough times, the proposition may somehow turn out to be true and, at the very least, to minimize the significant deficiencies in our State courts. These critics claim that it takes 5 years to get a class action to trial in Federal courts. But do they have the raw data to back these claims? Of course, they don't.

In reality, the median time for final disposition of a civil claim filed in Federal court is 9.3 months, and the median time to trial in a civil matter in Federal court is 22.5 months. Moreover, what some of the critics hide is the fact that the State courts have experienced a much more rapid growth in civil filings than have the Federal courts. Civil filings in State trial courts of general jurisdiction have increased 21 percent since 1984, and there are delays in many State courts on civil actions that are longer than they are in Federal court.

As for filings in some of the more notable magnet State court jurisdictions, let's look at some of the figures. Just look at this chart. The number of class actions filed in State courts have skyrocketed in State courts under current law. Take Palm Beach County, FL. It has gone up 35 percent between 1998 and 2000. In Jefferson County, TX, a notorious jackpot jurisdiction, it has gone up 82 percent. In Madison County, IL, another notorious jackpot jurisdiction--in other words, a jurisdiction where defendants don't have a chance because of politics and moneys donated to judges from the trial lawyers in that particular jurisdiction, primarily--over 5,000 percent between 1998 and 2003. Why? Because it is a county that is out of whack. If the plaintiffs' attorneys can get cases in Madison County, they are going to get big verdicts, outrageous verdicts for people who aren't even sick, people who don't even have problems in some cases.

The overall increase in State courts is 1,315 percent. So don't use that argument. If you add the fact that State courts are almost always courts of general jurisdiction where they hear matters ranging from traffic violations to domestic disputes, I think you get a pretty clear picture of what our State courts are faced with in terms of workload.

As a final point, I would like to note that the Judiciary Committee soundly defeated this very amendment of the distinguished Senator from Massachusetts during markup last Congress. We reported the bill in a bipartisan 13-to-5 vote in this Congress. The committee voted against the civil rights carve-out on a solid bipartisan basis and understood the inherent problems with this amendment. This amendment lost footing in committee and should not gain traction here.

The second carve-out excludes wage and hour or timesharing claims from the bill. These are actions brought by employees against their employers for violating wage and hour restrictions imposed under applicable labor laws. While these actions are certainly important for working Americans, there is no principled basis to exclude them from this bill, not one principled reason.

Again, let me be clear about S. 5. This bill in no way affects the substantive rights of these workers to seek redress for these wage and hour claims. In other words, employees who bring wage and hour claims against their employers will still have the exact same rights they do now if this bill is enacted. The only way the bill could possibly affect these cases is by moving them to Federal court. But what the proponents of this amendment overlook is that if a wage and hour case meets the interstate criteria of the bill, then there is absolutely no reason to exclude them from Federal court. It makes no difference if the case involves a defective product, a false advertising claim, or a breach of warranty. If the class action lawsuit involves parties from different States and involves a large amount in controversy, regardless of whether the claims are predicated on State law, then the case should be heard in Federal court. This is why we have diversity jurisdiction in the first place, and it is certainly what the Founding Fathers had in mind when they drafted our Constitution.

I urge my colleagues to vote against this amendment. It establishes bad policy and is nothing more than yet another attempt to weaken the bill. This amendment, including all other carve-outs, for that matter, also flies in the face of the bipartisan compromise that is now embodied in S. 5. I intend to honor this compromise and encourage my colleagues to do the same.

Let me just say, it is unseemly to claim that the Federal courts are not as good as the State courts. And it is even worse to claim that the Federal courts should not have jurisdiction in these matters. The fact is, we have provided through the Feinstein amendment language that permits certain cases to be in State courts. But when they get to the size of the 100 or more in a class and over $5 million, these cases have to be brought in Federal court. And the reason is because of these jackpot jurisdictions that I have been pointing out that really do not do justice and are not fair.

Earlier, the distinguished Senator from Illinois was talking about how few cases are filed in Madison County, IL. What he doesn't tell you is that the minute the lawyers start talking about a class action and they send a demand letter, the companies know they are dead if the case is brought in Madison County, IL. No matter how right they may be, they are dead because the judges in that particular jurisdiction are in the pockets of the local lawyers with whom the out-of-State lawyers who have these class actions align themselves in order to go in there and get these outrageous verdicts that would not be obtained in any fair court of law.

So what do the companies do? They have no choice. They will settle for what they estimate the defense costs to be because why should they take a chance on jackpot justice? And it then becomes, in the eyes of many, a broken system of extortion, extortion by attorneys, extortion by the judges over companies that probably have little or nothing to do with Madison County, IL, but because of the current system, wind up there, either getting staggered with unjust judgments or doing what prudence tells them they have to do, and that is paying whatever they estimate the defense costs to be to get rid of the lawyers. It comes as close to legal extortion as anything I have seen.

That is what we are trying to solve here. It doesn't take away anybody's rights. It just means they will have to prove their case in Federal courts. And Federal courts are very competent courts. Judges are appointed for life. They are less political, although every

once in a while you see some politicization of Federal court, but nothing like these jackpot justice jurisdictions that are constantly used by some of these unscrupulous lawyers to get outrageous verdicts so they can collect great big fees.

Yesterday, we talked about coupon settlements--the lawyers get huge fees and the person winds up with a $5 coupon that is meaningless. That doesn't mean that some of these cases are not valid, but they could just as easily be won in Federal court, if they are valid, as they can in State courts, but not as easily as in these jackpot justice jurisdictions where justice is denied. We can throw around big corporations all we want, but businesses in this country are not all big and, even if they are, they deserve to be treated justly.

That is what our court system should be doing. It should not discriminate against them because they are large corporations. If they are fair and right, they should be treated just as fairly and rightly as anybody else.

We have come close on this bill now a number of times, very close. In November of 2003, we struck a deal that gave the Class Action Fairness Act the requisite number of votes to pass even if the bill was filibustered. We got the votes, guaranteed up to 62. It was a bipartisan compromise that allowed us to reach this commonsense agreement. Believe me, this compromise does not satisfy everybody or, for that matter, doesn't satisfy anybody.

The fact is, it is what it is--a bipartisan compromise. If I would be permitted to write the bill the way I think it should be done, I think it would be perfect, and others in this body would feel the same way. But we have worked out this bipartisan compromise and we need to stick with it.

Senator Cornyn explained this morning why he believes the bill should go further in correcting abuses in the current system, and he explained how he would fix some of these problems legally. He is not wrong, by the way. He also said he would not advance these amendments at this time because he understands the complex dynamics in arriving at the compromise bill. We have been at this for the last 6 years. That is how long we have tried to get this bill through. This bill is not perfect, by any stretch of the imagination. No bill is around here, because we have to work with 535 Members of Congress. Depending on your perspective, this bill either gave away too much or not enough.

The fact is, this bill is just about right and it is time to get it done. We know we should get it done. A supermajority of those in this body should get it done. But nearly a year and a half after we struck a deal to get it done, a series of amendments are still being offered that would scuttle this bill and, unfortunately, the amendment by the Senator from Massachusetts happens to be one of them. Let us get down to the brass tacks. It is rug-cutting time. If any amendments upset the essential compromises that have been negotiated over a long period of time, this bill will not become law. The purpose of these amendments is not to improve the bill but to destroy it. The House of Representatives will not agree--they have made it super clear--to a bill that includes amendments that gut this bill's modest and reasonable reforms. I have to say I don't blame them. They have seen this process for the last 6 years. The American people have waited for this reform for far too long. I should remind my colleagues that if we fail our constituents at this time, the memory of the American people is a long one.

I will speak today about a number of amendments that will likely be offered. In my opinion, and in the opinion of those most familiar with the bill, these amendments are poison pills, and everybody knows it. These amendments were not part of our discussions with Senators Schumer, Dodd, and Landrieu that resulted in the current bipartisan legislation. I don't mean to limit it to them. There were a whole raft of Senators on both sides of the aisle.

I will repeat that for emphasis. We had a deal. None of these amendments were part of this deal. What happened to the days when a deal was a deal? These amendments are quite literally being offered at the eleventh hour and I think for a purpose other than to improve the bill.

Let's be honest about it. Consumers, plaintiffs, and others who have rights are not going to be foreclosed from vindicating their right in a court of law. It is just that they are not going to be able to take these cases--and certainly outrageous cases--to these jackpot justice jurisdictions where justice is denied any longer--except under some loophole exceptions in this bill. But the vast majority of the problems should be solved by this bill. There are a lot of people out there who have been very badly mistreated because of the current broken tort process, who are praying we will be able to get this bill through.

Let me make this clear. If we add one of these amendments, I think the bill is dead again, even though it has had 62 prime sponsors-- people who will automatically vote for this bill and who understand the game here is to get a bill out that will do some justice in this country and stop some of the jackpot justice that has been going on.

I don't mean to denigrate anybody's amendment, but let's be fair and make it clear that this bill does not take away rights. This bill enhances rights for both sides, and not just for plaintiffs but also for defendants. So fairness in the tort system will be brought back to the forefront. In the case of civil rights and wage-and-hour disputes, look, for years we have argued they should be in Federal court. Now, all of a sudden, they don't want them in Federal court. All you can do is surmise: why is that? I think everybody knows why.

I yield the floor.

Mr. President, I notice the distinguished Senator from Wisconsin is in the Chamber, but I would like to make a few more remarks if he does not feel too badly about it.

I support this bill. I have been working on it for 6 years. It is a grand compromise. We have Democrats and Republicans. It is bipartisan. It is not perfect, but it is as good as we can do and it will do an awful lot of good.

The evidence is clear and undeniable; the well-documented abuse of the class action litigation device too often ends up victimizing plaintiffs, the very people that class actions are supposed to benefit.

These abuses cheat millions of consumers who unwittingly have their legal rights adjudicated in local courts thousands of miles away. They deny the due process rights of defendants who are relentlessly hauled into a handful of small county courts where the playing field is unfairly tilted in favor of the personal injury bar, the plaintiffs' bar.

If that were not enough, class action abuses are eroding public confidence in our civil justice system. When abuses do occur in the class action system, the public can ultimately pay dearly through spiraling prices, lost jobs, and even bankrupt companies.

I have been listening to arguments from the other side, but to give the class action problem some perspective, I want to consider just the effect of this litigation in one locale, Madison County, IL. There we find a case study in rampant misconduct within the class action system, its corrupting effect on the courts, and the desperate need for reform.

This small county in the southwestern part of that State provides all the evidence necessary to convince anyone that the legal system is currently being exploited by shameless and self-seeking plaintiffs' lawyers. Madison County, IL is a rural county. I imagine it is the type of county where maybe Abraham Lincoln first got his start as a young lawyer and an advocate for justice.

In some notes perhaps taken in preparation for a law lecture around 1850, Lincoln set the ideal for his profession, a profession practiced by many in this Chamber, including myself.

No. 1, ``Discourage litigation . . . Point out how . . . the nominal winner is often a real loser--in fees, expenses, and waste of time.''

No. 2, ``Never stir up litigation. A worse man can scarcely be found than one who does this. Who can be more

nearly a fiend than he who habitually overhauls the register of deeds in search of defective titles, whereon to stir up strife, and put money in his pocket? A moral tone ought to be infused into the profession which should drive such men out of it.''

And No. 3, ``An exorbitant fee should never be claimed.''

These words were uttered during a time when being a lawyer automatically carried with it a title of honor, integrity, and trust.

Unfortunately, Lincoln's words no longer carry much meaning for some of the lawyers who have descended on Madison County. In the land of Lincoln, the rule of law has too often been corrupted almost beyond recognition by self-interested plaintiffs' lawyers and seemingly pliant public officials. Some unscrupulous personal injury attorneys go forum shopping to find friendly jurisdictions. Certainly Madison County, IL is one of them.

Then some judges in those jurisdictions, some of whom are compromised by campaign contributions from the very same law firms arguing in their courtrooms, sometimes certify these cases with the proverbial rubber stamp, even though they are not worthy of being certified.

Finally, sympathetic local juries trying out-of-State corporations have sometimes bestowed unjustified and sometimes outrageous awards. This pattern of behavior is not only an affront to the due process rights of defendants, but it breeds disrespect for the rule of law itself.

I have heard colleagues on the other side of the aisle say, `Well, these are big corporations.' First, they aren't all big corporations, and second, even if they were, they still deserve fair treatment, due process, and an impartial justice system.

And make no mistake about it. These suits are not free. We all pay for them. The American consumer pays for the costs of these class actions.

The courthouse in Madison County, IL is what scholars now describe as a magnet court. Always on the lookout to find suitable venues for enriching themselves, entrepreneurial plaintiffs' attorneys--many of whom practice in the field of personal injury--are sucked into its orbit. The numbers alone tell the story. Over the last 5 years the number of class actions filed in the county has increased by 5,000 percent.

Let me repeat that so that astronomical figure can sink in. A 5,000- percent increase. It almost defies logic that so many national class actions are being brought in this small rural county.

In 1998, there were only two class actions filed in this county. In 2000, that number rose to 39. In 2001, there were 43 new class actions. One year later, the bridges leading to the riches of Madison County were clogged with carpetbagging lawyers as word hit the street that the local court there was giving away money as though it was Christmas morning. Enterprising plaintiffs' lawyers looking to make a quick buck knew Madison County was the place for business.

In 2004, 77 class action suits were filed. In 2003, there were another 106. Between 1998 and 2003, the number of class actions in the county rose from 2 to 106 per year. In the last 4 years, the lawyers who flocked to Madison County succeeded in having the following cases certified.

All Sprint customers in the entire Nation who have ever been disconnected on a cell phone call. That is a class action in Madison County.

Every Roto-Rooter customer in the country whose drains might have been repaired by a nonlicensed plumber.

All consumers who purchased limited edition Barbie dolls that were later allegedly offered for a lower price elsewhere.

These are just three examples of the abuses that are going on.

I know my friend from Illinois, the minority whip, Senator Durbin, is understandably protective about the state of affairs in Madison County. He points out that while many class actions are filed in Madison County, few are certified. It does not take a lot of cases like the ones I talked about to create an environment that encourages cases that are marginal at best. Through their increased filings, class action attorneys tell us a great deal of what we need to know about Madison County. That many of these cases are settled upon filing or even before they are filed tells us a lot. A demand letter from a class action attorney with a Madison County address is a dreaded piece of correspondence for any company or any defendant. If these types of cases were not such a drain on our economy, it would almost be easy to laugh at some of these cases.

We question the efficiency and fairness of a small county courthouse in Illinois adjudicating cases against national companies involving various State and Federal regulations and involving millions, if not billions, of dollars in settlements where neither the majority of plaintiffs nor the defendants are typically residents of the county. These locally elected judges, with the close assistance of interested plaintiffs' attorneys, in effect set policy for the entire Nation, defying the principles of self-government on which our Federal system is based.

This situation is a colossal mess, and a few plaintiffs' lawyers are exploiting it to the hilt, and giving all of us who love the practice of law a bad name.

The same five firms appeared as counsel in 45 of all cases filed between 1999 and 2000. Of the 66 firms appearing in these cases, 56 of them--85 percent--had office addresses outside of Madison County.

In this small county, with a population of only 259,000, there are somehow more mesothelioma claims from asbestos exposure than in all of New York City with its population of better than 8 million. One nine- member firm with an office in Madison County claims to handle more mesothelioma cases than any firm in the country.

Who benefits from all of this litigation? One Madison County judge approved a $350 million settlement against AT&T and Lucent for allegedly billing customers who leased telephones at an unfair rate. What did the lawyers get? Forty-four lawyers from four firms will split $80 million for legal fees and $4 million for expenses. And the customers? They actually lost money. After their legal fees, the average class member got hit for $6.49.

Think about that.

Lincoln's principles are a distant memory in Madison County. The Washington Post succinctly described the situation. ``Having invented a client, the lawyers also get to choose a court. Under the current absurd rules, national class actions can be filed in just about any court in the country.''

And those lawyers often pick Madison County. They are picking it because it is what some call a magic jurisdiction.

Let me refer to this chart, called ``Magic Jurisdictions.'' This is Dickie Scruggs, one of the best plaintiffs' lawyers in the country, a man I have great respect for. But in a luncheon talk on the asbestos situation at a panel discussion at the Prudential Securities Financial Research and Regulatory Conference on May 9, 2002, he had this to say. This is Dickie Scruggs. You can believe him. This man understands the litigation field. He is a billionaire from practicing law. He said:

What I call the ``Magic Jurisdictions'' is where the

judiciary is elected with verdict money. The trial lawyers

have established relationships with the judges that are

elected. They are State court judges. They are populists.

They have large populations of voters who are in on the deal.

They are getting their piece, in many cases. And so it's a

political force in their jurisdiction and it's almost

impossible to get a fair trial if you are a defendant in some

of these places. The plaintiff lawyer walks in there and

writes the number on the blackboard, and the first juror

meets the last one coming out the door with that amount of

money. The cases are not won in the courtroom. They're won

on the back roads long before the case goes to trial. Any

lawyer fresh out of law school can walk in there and win

the case, so it doesn't matter what the evidence or the

law is.

That is one of the leading plaintiffs' lawyers in the country. He was honest enough to call it the way it is in Madison County. Madison County is not the only jackpot jurisdiction, but I am concentrating on it since the distinguished Senator from Illinois has focused his remarks on our criticism of this jurisdiction.

Dickie Scruggs is a fine lawyer. I have said that. I worked with him on the tobacco settlement. He and Mississippi Attorney General Mike Moore did a good job for their clients and the American public. I am very familiar with what they did. I am familiar with the Castano Group as well, which

risked millions of dollars to bring the tobacco suits. They had an entire multifloor building filled with documents they accumulated at the cost of millions of dollars to make their case in the tobacco suits.

Dickie Scruggs is a fine lawyer. So is Mike Moore. So are the Castano Group lawyers.

Having said that, there is a reason the Super Bowl is held at a neutral site. It is clear that Madison County is not a neutral site. When it comes to class action defendants trying a class action case in Madison County, it is like shooting fish in a barrel.

Dickie Scruggs is simply too good of a lawyer to need any unfair advantage and that goes for the vast majority of plaintiffs' attorneys in our country. But there are a minority of lawyers who are causing the vast majority of our problems.

What makes for a magical jurisdiction? In a magic jurisdiction, the supposedly objective judges and jury, all stand to gain from a settlement. Madison County, as the Chicago Tribune notes, is a jackpot jurisdiction where local newspapers ``sport advertisements looking for the local plaintiff that can provide a convenient excuse to file.''

Some have concluded that this choice of venue might have something to do with the fact that in recent years the elected judges of the circuit court of Madison County have received at least three-quarters of their campaign funding from the lawyers who appear before them in these class action suits. In a simpler time, the State court would only certify a class if there was a substantial local connection. Some of the judges in Madison County have created an environment where a lifelong resident of Washington State, who worked in Washington, was allegedly exposed to asbestos in Washington, never received medical treatment in Illinois, and had no witnesses in Illinois to testify in his behalf, actually thought it was worth a shot to bring suit in a strange town halfway across the country. What was his connection to Madison County? He vacationed in Illinois for 10 days with his family nearly 50 years ago.

In this case, the court did the right thing and refused to certify this man's claim. But that a lawyer would even consider bringing it shows how far gone Madison County is. So far, the Illinois Supreme Court has taken the extraordinary step of rebuking it. As legal ethics professor Susan Koniak of Boston University School of Law explains:

Madison County judges are infamous for approving anything

put before them, however unfair to the class or suggestive of

collusion that is.

This is not justice. This is a travesty. The St. Louis Post-Dispatch, one of this Nation's great newspapers, has followed this epidemic of litigation closely. They describe the run on the Madison County courthouse as resembling ``gleeful shoppers mobbing a going out of business sale.''

Due process itself is corrupted by this circus. What is going on in Madison County too closely resembles legalized extortion in the eyes of many observers. The deck is stacked against these companies hauled to Illinois to answer these charges. The cases are sometimes heard on an expedited basis. Under these pressures they are typically given an offer they cannot refuse. Once the class is certified, they feel compelled to settle, regardless of the merits of the case. The risk of loss is simply too high. They do not even have to wait until the class is certified. They know that in most cases the class will be certified by the judges of Madison County. A simple demand causes many companies to say, `let's buy out of this for the lowest price we can, even though we do not owe them a dime. We will just settle for the attorney's fees.' These settlements are to the detriment of legitimate claims.

The class never has to be certified. No self-respecting lawyer will want to try a case in a county where the deck is totally stacked against his client. And so they settle.

Let us be clear, these are not truly local disputes.

S. 5 does nothing to remove local disputes from local courts. The suits we are talking about in Madison County and other jackpot jurisdictions are on behalf of nationwide classes of clients against corporations that do business in every State. Madison County is not chosen as the venue because of its quaint scenery. It is chosen because defendants in these class actions often do not get a fair shake in Madison County.

This is not a triumph of federalism and local decisionmaking. It is the evisceration of federalism and fairness. A bedrock principle of our federal system is that states are largely free to regulate their own particular affairs. To allow one State, in effect, to legislate for another is to violate an important principle of self-government that this country is built upon. Madison County has been flooded with class action claims and now the Nation is drowning in them. This is a classic case for Federal intervention. In fact, this is a case study for the type of intervention in Federal affairs the Constitution was meant to allow.

What happens in Madison County affects the whole country. The overwhelming majority of class actions filed in Madison County are nationwide lawsuits in which 99 percent of the class members live outside the county. As a result, decisions reached in Madison County courts affect consumers all over the country and the county's elected judges effectively set national policies on important commercial issues.

There is a place for personal injury law in the American justice system. I understand that. I am an attorney. I have tried many cases. I know that there is a legitimate and honest place for personal injury suits in our civil justice system. Americans have a sacred right to take their case to court when they are harmed by a person or product. Yet this right is seriously undermined by a seriously compromised class action regime. To help rescue it, we need to enact this reform. Today's lawyers do not take cases that come to them. They invent cases. They behave more like entrepreneurs than counsel, trying to find an issue and income stream before they find a plaintiff. They act like businessmen--the CEOs of Trial Lawyers, Incorporated.

The problem is that their business plan makes hash out of our system of impartial justice. It simply defies belief that county courts are the proper venue for multijurisdictional litigation. Some of the plaintiffs' bar have put a ``pay the lawyer first'' business model in motion in Madison County. First, find sympathetic judges. Then bankroll their campaigns. And to seal the deal, move the case through the system so fast that the defendants do not always get a fair opportunity to fully investigate the claim. Justice does demand fairness, but our system of decentralized class action litigation is fundamentally unfair to defendants, plaintiffs, and the average American who ends up footing the bill for the unjustified billion-dollar settlements.

If this were a board game, it would be ``Class Action Monopoly.'' Start at `Go', and come up with an idea for a lawsuit. Find a named plaintiff to pay off. Make allegations, no proof needed. Get out of rule 23, the Federal rule 23, free. Convince your magnet State court judge to certify the ``class.'' File copycat lawsuits in State courts all over the country. Sue as many companies in as many States possible even if they have no connection to the State.

Who gets the money? In the Columbia House case, $5 million for lawyers, discount coupons for plaintiffs. In the Blockbuster case, $9.25 million for lawyers, free movie coupons for plaintiffs. In the Bank of Boston case, $8.5 million for lawyers; some claimants even had to pay themselves.

But ``What happens to me?'' Your employer takes a hit, maybe lays you off. Your health and car insurance premiums go up. And we are all familiar with that. The lawyers win, you lose. This game gets pretty old, pretty quick. But this is this jackpot monopoly system we have in Madison County, and a whole bunch of jackpot jurisdictions in this country.

Now, the Class Action Fairness Act is an important but modest reform. It does not deprive substantive legal rights to any American. All it does is make it easier to put these national cases where they belong, and that is in our Federal courts.

According to one study, 98 of the 113 class actions filed in Madison County from 1998 to early 2002 could have been moved to Federal court under this legislation. Justice demands that we act. We cannot play around with this any more. Those who are injured will get

their day in court, but it will be Federal court, with sophisticated judges who are appointed for life, who have no reason to be unfair. By voting for S. 5, we will help make sure they get it in a court where justice can be dispensed.

I yield the floor to the distinguished Senator from Wisconsin.

Mr. President, I rise today to introduce with my colleagues, Senators Feinstein, Grassley, Kyl, and Cornyn, a comprehensive bipartisan bill to increase gang prosecution and prevention efforts. The bill I introduce today is identical to S. 1735 that was favorably reported by the Senate Judiciary Committee in the 108th Congress.

This legislation, ``The Gang Prevention and Effective Deterrence Act of 2005,'' authorizes approximately $650 million over the next five years to support law enforcement and efforts to prevent youngsters from joining gangs. Of that, $450 million would be used to support Federal, State and local law enforcement efforts against violent gangs, and $200 million would be used for intervention and prevention programs for at- risk youth. The bill increases funding for the Federal prosecutors and Federal Bureau of Investigation (FBI) agents needed to conduct coordinated enforcement efforts against violent gangs.

This bill also creates new criminal gang prosecution offenses, enhances existing gang and violent crime penalties to deter and punish illegal street gangs, enacts violent crime reforms needed to prosecute effectively gang members, and implements a limited reform of the juvenile justice system to facilitate Federal prosecution of 16- and 17-year-old gang members who commit serious violent felonies.

The problem of gang violence in America is not a new one, nor is it a problem that is limited to major urban areas. Once thought to be only a problem in our Nation's largest cities, gangs have invaded smaller communities. Gangs in Salt Lake County result in significant measure from the influence of gangs existing in Los Angeles and Chicago, but with local mutations.

Constituents frequently mention to me their extreme concern about gang violence in Utah. According to the Salt Lake Area Gang Project, a multi-jurisdictional task force created in 1989 to fight gang crime in the Salt Lake area, there are at least 250 identified gangs in Utah with over 3,500 members. In Utah, there are street gangs that are ethnically oriented, such as Hispanic gangs, as well as those affiliated with gangs from other cities, such as the Crips and Bloods, Folks and People, motorcycle gangs, Straight Edge gangs, Animal Liberation Front, Skinheads, Varrio Loco Town, Oquirrh Shadow Boys, Salt Lake Posse, and the list goes on. Some of these gangs are racist; some are extremist.

And what I find particularly troubling is that over one-third of the total gang membership is made up of juveniles. Thus, these crimes have a particular impact on youths.

Gangs now resemble organized crime syndicates which readily engage in gun violence, illegal gun trafficking, illegal drug trafficking and other serious crimes. All too often we read in the headlines about gruesome and tragic stories of rival gang members gunned down, innocent bystanders--adults, teenagers and children--caught in the cross fire of gangland shootings, and family members crying out in grief as they lose loved ones to the gang wars plaguing our communities.

Recent studies confirm that gang violence is an increasing problem in all of our communities. Based on the latest available National Youth Gang Survey, it is now estimated that there are more than 25,000 gangs, and over 750,000 gang members who are active in more than 3,000 jurisdictions across the United States. The most current reports indicate that in 2002 alone, after five years of decline, gang membership has spiked nationwide.

I have been--and remain--committed to supporting Federal, State and local task forces as a model for effective gang enforcement strategies. Working together, these task forces have demonstrated that they can make a difference in the community. In Salt Lake City, the Metro Gang Multi-Jurisdiction Task Force stands out as a critical player in fighting gang violence in Salt Lake City. We need to reassure outstanding organizations like this that there will be adequate resources available to expand and fund these critical task force operations to fight gang violence.

In my study of this problem, it has become clear that the government needs to work with communities to meet this problem head-on and defeat it. If we really want to reduce gang violence, we must ensure that law enforcement has adequate resources and legal tools, and that our communities have the ability to implement proven intervention and prevention strategies, so that gang members who are removed from the community are not simply replaced by the next generation of new gang members.

In closing, I want to commend my colleagues--Senators Feinstein, Grassley, Kyl and Cornyn. They have worked very closely with me as we considered these issues last Congress and I look forward to working with them and others as we proceed this year. I urge my colleagues to join with us in promptly passing this important legislation.

Mr. President, I rise today to introduce the Family Entertainment and Copyright Act of 2005. This important legislation consists of a package of smaller intellectual property bills that the House and Senate have been working to enact since last Congress. This legislation passed the Senate not once, but twice, during the waning days of the last Congress. Unfortunately, though, it was doomed by a non-germane amendment unrelated to intellectual property law. My hope is that we can work together this Congress to avoid this type of pitfall, and I commit to work with other members to do so.

Before beginning my substantive discussion of the bill, I would like to thank my colleagues Senators Leahy, Cornyn, and Feinstein for their ongoing efforts on this legislation. Just as it was last year, this legislation is a group effort, and I want to take care to recognize the contributions and their excellent work along with that of Representatives Sensenbrenner, Smith, Berman, and Conyers in the House.

Before going into a title-by-title discussion of the bill, I would like to express my particular support for the Family Movie Act, which has been included in this legislation. Chairman Lamar Smith and I worked on this bill last Congress. It's important legislation both to parents who want the ability to use new technologies to help shield their families from inappropriate content as well as the technology companies, such as ClearPlay in my home State of Utah, that are working to develop these technologies. The Family Movie Act will give parents more say over what their children see, without limiting the creative control of directors and movie studios.

Title I of this Act, the Artists' Rights and Theft Prevention Act of 2005, (the ART Act), contains a slightly modified version of S. 1932, authored by Senators Cornyn and Feinstein in the 108th Congress. This bill will close two significant gaps in our copyright laws that are feeding some of the piracy now rampant on the Internet.

First, it criminalizes attempts to record movies off of theater screens. These camcorded copies of new movies now appear on filesharing networks almost contemporaneously with the theatrical release of a film. Several States have already taken steps to criminalize this activity, but providing a uniform Federal law--instead of a patchwork of State criminal statutes--will assist law enforcement officials in combating the theft and redistribution of valuable intellectual property embodied in newly-released motion pictures.

Second, the bill will create a pre-registration system that will permit criminal penalties and statutory-damage awards. This will also provide a tool for law enforcement officials combating the growing problem of music and movies being distributed on filesharing networks and circulating on the Internet before they are even released. Obviously, the increasingly frequent situation of copyrighted works

being distributed illegally via the Internet before they are even made available for sale to the public severely undercuts the ability of copyright holders to receive fair and adequate compensation for their works.

Title II of this Act, the Family Movie Act of 2005 (the FMA), resolves some ongoing disputes about the legality of so-called ``jump- and-skip'' technologies that companies like Clearplay in my home State of Utah have developed to permit family-friendly viewing of films that may contain objectionable content. The FMA creates a narrowly defined safe-harbor clarifying that distributors of such technologies will not face liability for copyright or trademark infringement, provided that they comply with the requirements of the Act. I have been working with my colleagues in the Senate and several leaders in the House-- including, most importantly Chairmen Smith and Sensenbrenner--for the past couple of years to resolve this issue. The FMA will help to end aggressive litigation threatening the viability of small companies like Clearplay which are busy creating innovative technologies for consumers that allow them to tailor their home viewing experience to their own individual or family preferences.

The Family Movie Act creates a new exemption in section 110(11) of the Copyright Act for skipping and muting audio and video content in motion pictures during performances of an authorized copy of the motion picture taking place in the course of a private viewing in a household. The version passed last year by the House explicitly excluded from the scope of the new copyright exemption so-called ``ad-skipping'' technologies that make changes, deletions, or additions to commercial advertisements or to network or station promotional announcements that would otherwise be displayed before, during, or after the performance of the motion picture. This provision was included on the House floor to address the concerns of some Members who were concerned that a court might misread the new section 110(11) exemption to apply to ``ad- skipping''' cases, such as in the recent litigation involving ReplayTV.

In the Senate, however, some expressed concern that the inclusion of such explicit language could create unwanted inferences with respect to the merits of the legal positions at the heart of recent ``ad- skipping'' litigation. Those issues remain unsettled in the courts, and it was never the intent of this legislation to resolve or affect those issues in any way. Indeed, the Copyright Act contains literally scores of similar exemptions, and none of those exemptions have been or should be construed to imply anything about the legality of conduct falling outside their scope. As a result, the Copyright Office has now confirmed that such an explicit exclusion is unnecessary to achieve the desired outcome, which is to avoid application of this new exemption in potential future cases involving ad-skipping devices. In order to avoid unnecessary controversy, the Senate bill omits the exclusionary language with the understanding that doing so does not in any way change the scope of the bill.

That this change in no way affects the scope of the exemption is clear when considering that the new section 110(11) exemption protects the ``making imperceptible . . . limited portions of audio or video content of a motion picture. . . .'' An advertisement, under the Copyright Act, is itself a ``motion picture,'' and thus a product or service that enables the skipping of an entire advertisement, in any media, would be beyond the scope of the exemption. Moreover, the phrase ``limited portions'' is intended to refer to portions that are both quantitatively and qualitatively insubstantial in relation to the work as a whole. Where any substantial part of a complete work, such as a commercial advertisement, is made imperceptible, the new section 110(11) exemption would not apply. The limited scope of this exemption does not, however, imply or show that such conduct or a technology that enables such conduct would be infringing. This legislation does not in any way deal with that issue. It means simply that such conduct and products enabling such conduct are not immunized from liability by this exemption.

This bill also differs from the version passed by the House last year in that it adds two ``savings clauses.'' The copyright savings clause makes clear that there should be no spillover effect from the passage of this law: that is, nothing shall be construed to have any effect on rights, defenses, or limitations on rights granted under title 17, other than those explicitly provided for in the new section 110(11) exemption. The trademark savings clause clarifies that no inference can be drawn that a person or company who fails to qualify for the exemption from trademark infringement found in this provision is therefore liable for trademark infringement.

Title III of this Act, the National Film Preservation Act of 2004, will reauthorize the National Film Preservation Board and the National Film Preservation Foundation. These entities have worked successfully to recognize and preserve historically or culturally significant films--often by providing the grants and expertise that enable local historical societies to protect and preserve historically significant films for the local communities for which they are most important. This fine work will ensure that the history of the 20th century will be preserved and available to future generations.

As a conservative Senator from a socially conservative state, I occasionally take a few swings at the movie industry for the quality and content of the motion pictures they are currently creating, but I will note for the record that I commend efforts to ensure that important artistic, cultural, and historically significant films are preserved for future generations. I commend my friend from Vermont for his perseverance in reauthorizing Federal funds to continue this important effort.

Title IV of this act, the ``Preservation of Orphan Works Act,'' also ensures the preservation of valuable historic records by correcting a technical error that unnecessarily narrows a limitation on the copyright law applicable to librarians and archivists. This will strengthen the ability of librarians and archivists to better meet the needs of both researchers and ordinary individuals and will result in greater accessibility of important works. I applaud my colleague in the House--Representative Howard Berman of California--for his efforts on this bill and am pleased to see it included in this Senate package.

Just to conclude, I will again thank Ranking Democratic Member Leahy, Senator Cornyn, Chairmen Sensenbrenner and Smith, as well as Mr. Conyers and Mr. Berman for their bicameral, bipartisan approach to these bills and to intellectual property issues generally.

I ask unanimous consent that the text of the bill be printed in the Record.

I would be happy to yield for a question from the distinguished Senator from Texas.

I thank my friend, the Senator from Texas, for that reminder. I would certainly have no objection to entering our previous colloquy into the Record again and ask unanimous consent that it appear after our remarks.

Mr. President, Section 102 of the ART Act establishes a new provision of Title 18 entitled, ``Unauthorized Recording of Motion Pictures in a Motion Picture Exhibition Facility.'' I ask Senator Cornyn, what is the purpose of this provision?

I have heard it said that this bill could be used against a salesperson or a customer at stores such as Best Buy or Circuit City if he or she were to point a video camera at a television screen showing a movie. Is this cause for concern?

Does the Senator from California agree with your colleague from Texas?

I have also heard some say that this statute could be used to prosecute someone for camcording a DVD at his home. Is this a fair concern?

Do the users of hearing aids, cell phones or similar devices have anything to fear from this statute?

It appears that there is no fair use exception to this provision. Is that correct?

Does the Senator from Texas agree?

My cosponsor, Senator Cornyn, raises an important point. While we removed the ``ad-skipping'' language from the statute to avoid this unnecessary controversy, you are absolutely correct that this does not in any way change the scope of the bill. The bill protects the ``making imperceptible . . . limited portions of audio or video content of a motion picture . . .'' An advertisement, under the Copyright Act, is itself a ``motion picture,'' and thus a product or service that enables the skipping of an entire advertisement, in any media, would be beyond the scope of the exemption. Moreover, the phrase ``limited portions'' is intended to refer to portions that are both quantitatively and qualitatively insubstantial in relation to the work as a whole. Where any substantial part of a complete work, such as a commercial advertisement, is made imperceptible, the new section 110(11) exemption would not apply.

The limited scope of this exemption does not, however, imply or show that

such a product would be infringing. This legislation does not in any way deal with that issue. It means simply that such a product is not immunized from liability by this exemption.

Certainly.

Yes it is. Let me ask that a copy of the section-by- section analysis of the Family Movie Act as amended by the Senate be included in the Record. This section-by-section analysis contains a more complete analysis of the bill as proposed today in the Senate, including the limited changes made by the bill Senators Leahy, Cornyn, Biden, and I offer today.

The analysis follows.

Section-by-Section Analysis of the Family Movie Act of 2004, Amended

and Passed by the Senate

overview

Title II of the Family Entertainment and Copyright Act of

2004 incorporates the House-passed provision of the Family

Movie Act of 2004, with limited changes as reflected in this

section-by-section analysis. As discussed herein, these

changes are not intended to and do not affect the scope,

effect or application of the bill.

The purpose of the Family Movie Act is to empower private

individuals to use technology to skip and mute material that

they find objectionable in movies, without impacting

established doctrines of copyright or trademark law or those

whose business models depend upon advertising. This amendment

to the law should be narrowly construed to effect its

intended purpose only. The sponsors of the legislation have

been careful to tailor narrowly the legislation to clearly

allow specific, consumer-directed activity and not to open or

decide collateral issues or to affect any other potential

or actual disputes in the law.

The bill as proposed in the Senate makes clear that, under

certain conditions, ``making imperceptible'' of limited

portions of audio or video content of a motion picture--that

is, skipping and muting limited portions of movies without

adding any content--as well as the creation or provision of a

computer program or other technology that enables such making

imperceptible, does not violate existing copyright or

trademark laws. That is true whether the movie is on

prerecorded media, like a DVD, or is transmitted to the home,

as through pay-per-view and ``video-on-demand'' services.

Subsection (a): Short Title

Subsection (a) sets forth the short title of the bill as

the Family Movie Act of 2004.

Subsection (b): Exemption from Copyright and Trademark

Infringement for Skipping of Audio or Video Content of

Motion Pictures

Subsection (b) is the Family Movie Act core provision and

creates a new exemption at section 110(11) of the Copyright

Act for the ``making imperceptible'' of limited portions of

audio or video content of a motion picture during a

performance in a private household. This new exemption sets

forth a number of conditions to ensure that it achieves its

intended effect while remaining carefully circumscribed and

avoiding any unintended consequences. The conditions that

allow an exemption, which are discussed in more detail below,

consist of the following:

The making imperceptible must be ``by or at the direction

of a member of a private household.'' This legislation

contemplates that any altered performances of the motion

picture would be made either directly by the viewer or at the

direction of a viewer where the viewer is exercising

substantial choice over the types of content they choose to

skip or mute.

The making imperceptible must occur ``during a performance

in or transmitted to the household for private home

viewing.'' Thus, this provision does not exempt an

unauthorized ``public performance'' of an altered version.

The making imperceptible must be ``from an authorized copy

of a motion picture.'' Thus, skipping and muting from an

unauthorized or ``bootleg'' copy of a motion picture would

not be exempt.

No ``fixed copy'' of the altered version of the motion

picture may be created by the computer program or other

technology that makes imperceptible portions of the audio or

video content of the motion picture. This provision makes

clear that services or technologies that make a fixed copy of

the altered version are not afforded the benefit of this

exemption.

The ``making imperceptible'' of limited portions of a

motion picture does not include the addition of audio or

video content over or in place of other content, such as

placing a modified image of a person, a product, or an

advertisement in place of another, or adding content of any

kind.

These limitations, and other operative provisions of this

new section 110(11) exemption, merit further elaboration as

to their purposes and effects.

The bill makes clear that the ``making imperceptible'' of

limited portions of audio or video content of a motion

picture must be done by or at the direction of a member of a

private household. While this limitation does not require

that the individual member of the private household exercise

ultimate decision-making over each and every scene or element

of dialog in the motion picture that is to be made

imperceptible, it does require that the making imperceptible

be made at the direction of that individual in response to

the individualized preferences expressed by that individual.

The test of ``at the direction of an individual'' would be

satisfied when an individual selects preferences from among

options that are offered by the technology.

An example is the C1earPlay model. C1earPlay provides so-

called `` filter files'' that allow a viewer to express his

or her preferences in a number of different categories,

including language, violence, drug content, sexual content,

and several others. The version of the movie that the viewer

sees depends upon the preferences expressed by that viewer.

Such a model would fall under the liability limitation of the

Family Movie Act.

This limitation, however, would not allow a program

distributor, such as a provider of video-on-demand services,

a cable or satellite channel, or a broadcaster, to make

imperceptible limited portions of a movie in order to provide

an altered version of that movie to all of its customers,

which could violate a number of the copyright owner's

exclusive rights, or to make a determination of scenes to be

skipped or dialog to be muted and to offer to its viewers no

more of a choice than to view an original or an altered

version of that film. Some element of individualized

preferences and control must be present such that the viewer

exercises substantial choice over the types of content they

choose to skip or mute.

It is also important to emphasize that the new section

110(11) exemption is targeted narrowly and specifically at

the act of ``making imperceptible'' limited portions of audio

or video content of a motion picture during a performance

that occurs in, or that is transmitted to, a private

household for private home viewing. This section would not

exempt from liability an otherwise infringing performance, or

a transmission of a performance, during which limited

portions of audio or video content of the motion picture are

made imperceptible. In other words, where a performance in a

household or a transmission of a performance to a household

is done lawfully, the making imperceptible limited portions

of audio or video content of the motion picture during that

performance, consistent with the requirements of this new

section, will not result in infringement liability.

Similarly, an infringing performance in a household, or an

infringing transmission of a performance to a household, are

not rendered non-infringing by section 110(11) by virtue of

the fact that limited portions of audio or video content of

the motion picture being performed are made imperceptible

during such performance or transmission in a manner

consistent with that section.

The bill also provides additional guidance, if not an exact

definition, of what the term ``making imperceptible'' means.

The bill provides specifically that the term ``making

imperceptible'' does not include the addition of audio or

video content that is performed or displayed over or in place

of existing content in a motion picture. This is intended to

make clear in the text of the statute what has been expressed

throughout the consideration of this legislation, which is

that the Family Movie Act does not enable the addition of

content of any kind, including the making imperceptible of

audio or video content by replacing it or by superimposing

other content over it. In other words, for purposes of

section 110(11), ``making imperceptible'' refers solely to

skipping scenes and portions of scenes or muting audio

content from the original, commercially available version of

the motion picture. No other modifications of the content are

addressed or immunized by this legislation.

The House sponsor of this legislation noted in his

explanation of his bill, and the Senate is also aware, that

some copy protection technologies rely on matter placed into

the audio or video signal. The phrase ``limited portions of

audio or video content of a motion picture'' means what it

would naturally seem to mean (i.e., the actual content of

the motion picture) and does not refer to any component of

a copy protection scheme or technology. This provision

does not allow the skipping of technologies or other copy-

protection-related matter for the purpose of defeating

copy protection. Rather, it is expected that skipping and

muting of content

in the actual motion picture will be skipped or muted at

the direction of the viewer based on that viewer's desire

to avoid seeing or hearing the action or sound in the

motion picture. Skipping or muting done for the purpose of

or having the effect of avoiding copy protection

technologies would be an abuse of the safe harbor outlined

in this legislation and may violate section 1201 of title

17.

Violating the Digital Millennium Copyright Act, and

particularly its anti-circumvention provisions, is not

necessary to enable technology of the kind contemplated under

the Family Movie Act. Although the amendment to section 110

provides that it is not an infringement of copyright to

engage in the conduct that is the subject of the Family Movie

Act, the Act does not provide any exemption from the anti-

circumvention provisions of section 1201 of title 17, or from

any other provision of chapter 12 of title 17. It would not

be a defense to a claim of violation of section 1201 that the

circumvention is for the purpose of engaging in the conduct

covered by this new exemption in section 110(11), just as it

is not a defense under section 1201 that the circumvention is

for the purpose of engaging in any other non-infringing

conduct.

There are a number of companies currently providing the

type of products and services covered by this Act. The Family

Movie Act is intended to facilitate the offering of such

products and services, and it certainly creates no impediment

to the technology employed by those companies. Indeed, it is

important to underscore the fact that the support for such

technology and consumer offerings that is reflected in this

legislation is driven in some measure by the desire for

copyright law to be respected and to ensure that technology

is deployed in a way that supports the continued creation and

protection of entertainment and information products that

rely on copyright protection. This legislation reflects the

firm expectation that those rights and the interests of

viewers in their homes can work together in the context

defined in this bill. Any suggestion that support for the

exercise of viewer choice in modifying their viewing

experience of copyrighted works requires violation of either

the copyright in the work or of the copy protection schemes

that provide protection for such work should be rejected as

counter to legislative intent or technological necessity.

The House-passed bill included an explicit exclusion to the

new section 110(11) exemption in cases involving the making

imperceptible of commercial advertisements or network or

station promotional announcements. This provision was added

on the House floor to respond to concerns expressed by

Members during the House Judiciary Committee markup that the

bill might be read somehow to exempt from copyright

infringement liability devices that allow for skipping of

advertisements in the playback of recorded television (so

called ``ad-skipping'' devices). Such a reading is not

consistent with the language of the bill or its intent.

The phrase ``limited portions of audio or video content of

a motion picture'' applies only to the skipping and muting of

scenes or dialog that are part of the motion picture itself,

and not to the skipping of commercial advertisements, which

are themselves considered motions pictures under the

Copyright Act. It also should be noted that the phrase

``limited portions'' is intended to refer to portions that

are both quantitatively and qualitatively insubstantial in

relation to the work as a whole. Where any substantial part

of a complete work (including a commercial advertisement) is

made imperceptible, the section 110(11) exemption would not

apply.

The House-passed bill adopted a ``belt and suspenders''

approach to this question by adding exclusionary language in

the statute itself. Ultimately that provision raised concerns

in the Senate that such exclusionary language would result in

an inference that the bill somehow expresses an opinion, or

even decides, the unresolved legal questions underlying

recent litigation related to these so-called ``ad-skipping''

devices. In the meantime, the Copyright Office also made

clear that such exclusionary language is not necessary. In

other words, the exclusionary language created unnecessary

controversy without adding any needed clarity to the statute.

Thus, the Senate amendment omits the exclusionary language

while leaving the scope and application of the bill exactly

as it was when it passed the House. The legislation does not

provide a defense in cases involving so-called ``ad-

skipping'' devices, and it also does not affect the legal

issues underlying such litigation, one way or another.

Consistent with the intent of the legislation to fix a narrow

and specific copyright issue, this bill seeks very clearly to

avoid unnecessarily interfering with current business models,

especially with respect to advertising, promotional

announcements, and the like. Simply put, the bill as amended

in the Senate is narrowly targeted to the use of technologies

and services that filter out content in movies that a viewer

finds objectionable, and it in no way relates to or affects

the legality of so-called ``ad-skipping'' technologies.

There are a variety of services currently in litigation

that distribute actual copies of altered movies. This type of

activity is not covered by the section 110(11) exemption

created by the Family Movie Act. There is a basic distinction

between a viewer choosing to alter what is visible or audible

when viewing a film, the focus of this legislation, and a

separate entity choosing to create and distribute a single,

altered version to members of the public. The section 110(11)

exemption only applies to viewer directed changes to the

viewing experience, and not the making or distribution of

actual altered copies of the motion picture.

Related to this point, during consideration of this

legislation in the House there were conflicting expert

opinions on whether fixation is required to infringe the

derivative work right under the Copyright Act, as well as

whether evidence of Congressional intent in enacting the 1976

Copyright Act supports the notion that fixation should not be

a prerequisite for the preparation of an infringing

derivative work. This legislation should not be construed to

be predicated on or to take a position on whether fixation is

necessary to violate the derivative work right, or whether

the conduct that is immunized by this legislation would be

infringing in the absence of this legislation. Subsection (b)

also provides a savings clause to make clear that the newly-

created copyright exemption is not to be construed to have

any effect on rights, defenses, or limitations on rights

granted under title 17, other than those explicitly provided

for in the new section 110(11) exemption.

Subsection (c): Exemption from Trademark Infringement

Subsection (c) provides for a limited exemption from

trademark infringement for those engaged in the conduct

described in the new section 110(11) of the Copyright Act. In

short, this subsection makes clear that a person engaging in

the conduct described in section 110(11)--the ``making

imperceptible'' of portions of audio or video content of a

motion picture or the creation or provision of technology to

enable such making available--is not subject to trademark

infringement liability based on that conduct, provided that

person's conduct complies with the requirements of section

110(11). This section provides a similar exemption for a

manufacturer, licensee or licensor of technology that enables

such making imperceptible, but such manufacturer, licensee or

licensor is subject to the additional requirement that it

ensure that the technology provides a clear and conspicuous

notice at the beginning of each performance that the

performance of the motion picture is altered from the

performance intended by the director or the copyright holder.

Of course, nothing in this section would immunize someone

whose conduct, apart from the narrow conduct described by

110(11), rises to the level of a Lanham Act violation. For

example, someone who provides technology to enable the making

imperceptible limited portions of a motion picture consistent

with section 110(11) could not be held liable on account of

such conduct under the Trademark Act, but if in providing

such . . .

Mr. President, I appreciate my two colleagues and their remarks on this very important bill. I rise to express my strong support for S. 5, the Class Action Fairness Act of 2004. This bipartisan bill represents a carefully crafted legislative solution in response to the rampant abuses of the class action litigation device currently in our State courts.

The American public will benefit from a system that fairly compensates these injured people by those who are injured by unsafe or defective products. No one disputes this. We all want a system of compensation, but we must make sure the system is fair, reasonable, and equitable.

As well, this legislation helps protect against unfair recoveries because, in the end, the public pays when defendant companies are forced to pay excessive claims and sometimes must increase prices, decrease employment, or even become bankrupt or go out of business. We ought to all understand that we all pay for that, and that is why it is important we get the laws right and that we correct injustices and distortions of the law.

Before I begin discussing the legislation, I commend the distinguished majority leader, Dr. Frist, for bringing this bill up so early in the Congress. I also commend President Bush for recognizing the importance of this issue in his State of the Union Address. Senators Grassley, Kohl, and Carper also deserve recognition for all the time and effort they have devoted to this particular bill over the last several Congresses, and without their tireless work, we would not have the bipartisan compromise bill that we have in S. 5.

Finally, I must recognize Chairman Specter for placing this bill on the Judiciary Committee agenda and reporting this legislation last week.

Over the past decade, it has become painfully obvious that class action abuses have reached troublesome proportions in our civil justice system.

It has become equally clear that the true victims of this epidemic have been everyday consumers who represent the silent majority of unnamed class members. It has become too common an occurrence for plaintiff class members not to be adequately informed of their rights or of the terms and practical implications of a proposed class action settlement.

Making matters worse, judges too often approve settlements that primarily benefit class counsel, the personal injury lawyers, rather than the class members--in other words, the victims.

Efforts to reform our class action system are nothing new to the Senate. The Senate Judiciary Committee conducted hearings in the 105th, 106th, and 107th Congresses, reporting a similar bill from the committee in the 106th on a bipartisan basis. Since then, we continue to receive substantive evidence demonstrating the drastically increasing injustice caused by class action abuses.

After working extensively with numerous legislative proposals throughout the various Congresses, we are now on the verge of taking final action on a balanced bill that I would like to spend a little bit of time explaining further.

When I say a balanced bill, I refer specifically to the operation of the bill's grant of Federal jurisdiction over interstate class actions. This key provision is located in section 4 of the bill and corrects a flaw in the current application of the Federal diversity jurisdiction statute that now prevents most interstate class actions from being adjudicated in Federal courts.

Specifically, section 4 of the bill grants the Federal district courts original jurisdiction to hear interstate class actions if, one, any member of the proposed class is a citizen of a different

State from any defendant; two, the amount in controversy exceeds $5 million; and, three, the class action lawsuit involves a class of 100 or more members.

Although I believe the three conditions I have noted are more than sufficient to achieve the right balance between Federal and State interests, S. 5 goes a step further by incorporating two additional provisions to accommodate the States' interests in adjudicating local disputes.

First, pursuant to an amendment offered by Senator Feinstein during a markup last Congress, Federal jurisdiction would not extend to any case in which two-thirds or more of the proposed class members and the primary defendants are residents of the State where the action was filed.

This exception keeps in the State courts those class actions that are prosecuted by a locally dominated plaintiffs' class with grievances against local defendants. In other words, a locally dominated lawyer- judge set of relationships that seems to be continually resulting in unjust treatment in the courts.

Similarly, the Feinstein amendment also provides that Federal courts may, based on a number of carefully proscribed factors, decline to exercise jurisdiction in middle tier cases in which two-thirds of the proposed class members and the primary defendants are residents of the same State.

To be sure, as part of the recent compromise reached last November with Senators Schumer, Dodd, and Landrieu, we further modified the Feinstein amendment by adding an additional factor for the Federal courts to consider for the middle tier of cases specifically whether there is a substantial nexus between the claims and the court selected by the plaintiffs.

I will refer to the Feinstein chart. That chart makes it very clear, in my eyes, that tier I, two-thirds or more of the proposed class members, are in-State versus in-State primary defendants. That would stay in State court.

Tier II, between one-third and two-thirds of the proposed class members are in-State versus in-State primary defendants, and one can go to either State or Federal court, subject to the judge's discretion.

Tier III, where there is one-third or fewer of the proposed class members in-State versus in-State primary defendants, those cases go to Federal court.

Although I believe the three conditions I noted are more than sufficient to achieve the right balance between Federal and State interests, section 5 goes a step further by incorporating these additional principles to accommodate States' interests in adjudicating local disputes.

The second point I was making is that States' interests in adjudicating local disputes on behalf of their citizens are further preserved through a newly created exception to Federal jurisdiction for truly local controversies. This provision, which we negotiated on a bipartisan basis last November with the three new Democratic sponsors of this bill, keeps in the State courts those class action lawsuits that satisfy the following four criteria which I will discuss in greater detail so there is no confusion on this issue.

Criterion 1, the proposed class must be primarily local, where more than two-thirds of the class members are citizens of the State where the suit was filed. This formulation resembles the two-thirds test in the Feinstein amendment I just discussed and essentially requires a large majority of the injured claimants reside within the State.

Criterion 2, the class action must be brought against at least one real defendant. The local defendant cannot be peripheral. Rather, the lawsuit must be brought against at least one defendant with a significant basis of liability and from whom significant relief is sought. This provision essentially precludes personal injury lawyers from evading Federal jurisdiction by simply naming a local defendant such as Hilda Bankston, who was unmercifully dragged into scores of class action lawsuits simply because her small family-operated pharmacy sold the diet drug phen-phen. That was the only reason she was brought in, but the real reason was because she was a pigeon sitting in the State and they used her as a device to bring all of these suits by many people who had nothing to do with the State, nothing to do with her.

Criterion 3, the principal injuries must have occurred locally. In other words, the total extent of the injuries complained of must be concentrated within the forum State. By way of an example, a nationwide drug lawsuit involving injuries spread throughout the country would certainly not qualify for this criteria. On the other hand, this criteria would be satisfied by a class action lawsuit involving a factory explosion affecting a confined geographic area.

Criterion 4, no other similar class actions can have been filed during the preceding 3 years. This criterion is intended to ensure that the exception does not apply to those class actions that are likely to be filed in multiple States based on the same or similar factual allegations against any of the same defendants.

When applying all four criteria, the local controversy exception will enable State courts to hear local class actions alleging principal injuries confined to the forum State and where the lawsuit involved litigants who predominately reside within that State. I refer to the local controversy provision chart.

As my colleagues can see, that chart for these tier III people keeps truly local claims in State court. With regard to plaintiffs, if two- thirds or more of the proposed class members are in the State and with regard to the defendants at least one in-State defendant from whom significant relief is sought--not the Hilda Bankston who was ruined by these false suits--and alleged conduct forms a significant basis of claims, and the nature of the claim's principal injuries were incurred in the State as a result of the alleged significant conduct, then those cases can be heard in State court.

I was interested in the comments of the distinguished Senator from Vermont about justice and injustice. The injustices are all on the side of those who do not want this bill because they are protecting personal injury lawyers rather than the individual claimants.

The individual claimants will have a right to go to court. It just may be that they have to go to Federal court rather than State court.

Given the addition of Senator Feinstein's three-tiered jurisdictional test and agreed-upon local controversy exception, I find it puzzling that some have represented this bill will somehow move all class actions into Federal court. We just heard some comments like that. Nothing could be further from the truth.

I urge these colleagues to read section 4 of the bill. If they cannot find comfort in this language, I urge them to look at studies showing that the bill will do nothing of the sort. If they are still skeptical, I urge them to talk to the cosponsors of the bill, including our Democratic partners, for a completely candid assessment on whether the legislation will move all class actions into Federal court. It simply will not.

These actions will be able to be brought, but there will not be the same ability to forum shop into favorable jurisdictions that act outside the law and allow unjust verdicts such as we have today.

I think the answer is perfectly clear. This bill moves to Federal court larger interstate class actions while keeping in State court local matters that are more suited for the States. Although I have focused on two provisions in S. 5, I think it is important to note that this bill contains many other changes we included so that we could build a bipartisan consensus.

After we fell one vote shy of invoking cloture the year before last, three Democratic Senators who voted against proceeding on the bill presented us with a detailed list of issues they wanted resolved before they could support class action reform legislation. After extensive discussions in November of 2003, we responded to each and every concern raised by these Senators and made the appropriate changes that are now embodied in S. 5.

As my colleagues will see, the points we have made show each Democratic concern that was raised and how we addressed those concerns.

S. 5 is a modest bill that will help to put an end to class action abuses occurring in some of our State courts. Contrary to the arguments from the bill's opponents, S. 5 does not sweep

into Federal court every conceivable class action. The bill more than adequately accommodates the States' interests in adjudicating local disputes.

I might add that the argument we are going to deprive consumers from their day in court is pure bunk. The fact is, under certain circumstances, they will have a right to be in State court or have a right, through the judge, to be in State or Federal court, and under certain circumstances that are much more fair to all litigants concerned, they will have to go to Federal court.

There is nothing wrong with going to Federal court. In fact, when I practiced law we loved to have cases that went to Federal court because people thought they were more important cases. Frankly, in most cases they were. When these cases are important, they will be tried in Federal court as well.

One thing we are concerned about, we think we have a better chance of having real justice in these cases in Federal court than to have the Hilda Bankstons of this world put out of business under what are false pretenses and manipulation of the Federal judicial system.

This legislation has been crafted and drafted through close bipartisan cooperation with several Members on the other side of the aisle, and as a result now commands a simple majority of support of this body. Despite this support, we are still faced with the obstructive tactics from a small minority that will do anything to appease the powerful and well-funded personal injury trial bar. I find this unfortunate and hope these colleagues can look beyond these special interests and do what is right for the country's ailing civil justice system.

I have always belonged to the trial bar and I think most trial lawyers are people of dedication and decency who want to do what is right, but we have seen in recent years a real subversion of the law by some trial lawyers who are interested only in money. In many respects, they are not worried about clients but worried about their own compensation system. The fact is, we need to do what is right for our country's ailing civil justice system.

The Class Action Fairness Act addresses an abuse of the class action system that has grown substantially in the past few years. I am referring to the gaming of the judicial system by unscrupulous lawyers to evade Federal diversity jurisdiction. In some cases, the filing and settling of class action lawsuits has become a virtual wheel of fortune with every spin of the wheel potentially worth millions of dollars. However, class members do not benefit from these spins of the wheel. Rather, it is the class counsels who receive millions of dollars in attorneys' fees who are the real winners of this gaming situation and of the game.

It is the sad but true fact that the most class members can expect to receive, which is an ironic twist, is a coupon good for the future purchase of the very product that was the basis of their claim to begin with.

Again, under the current tort system, it is the class action lawyers who are the real beneficiaries. They are the ones who walk away from a class action with millions in their pockets while the class members walk away with little or nothing at all but these coupons. Before I turn to some specific examples of class action lawyers gaming the system to the detriment of their clients, let me explain just how this game works.

It starts with a few class action attorneys sitting around a table, thinking of an idea for a class action lawsuit. While this idea may come from any numbers of sources, it is usually formulated and solidified after an examination of the deepest pockets in the corporate world. Naturally, they want to make money.

Once an idea for a class action is formed, it is time to find a lead or named plaintiff. The named plaintiff will inevitably be someone who is a citizen of the same State as the defendant. Why? This keeps the case in State court.

Why is this essential to winning the game? Because if the suit is in State court, the class counsels can file multiple class actions, alleging similar claims against similar defendants in multiple districts. They do this in search of a judge willing to quickly certify the class.

And because the State courts do not have a method of consolidating identical claims like we have in the Federal system, all of those claims remain pending in the various State courts around the country. The filing of multiple class actions in multiple districts gives the class counsel tremendous leverage to play hard ball with the defendant companies. By bringing class action upon class action against a company, the company is left with no other option but to settle. The alternative is to be bled dry by legal fees and face the uncertainty that one of the many courts will destroy the company by delivering a jackpot award against it.

While I suppose the class counsel would like to think of it as a game of hardball, to companies it must feel a lot like execution; and it must feel a lot like what it really is: extortion.

The real kicker is this: in some cases, many believe the only interests served by these settlements are those of the class counsel. Again, they will walk away with hundreds of thousands and sometimes millions of dollars. And what do the class members recover? Perhaps a worthless coupon.

There you have it, a successful gaming of the State tort system by the class action lawyers.

This is an intolerable practice and one that the Class A Action Fairness Act will curb.

I used to be a plaintiff's attorney. I was a defense lawyer as well. I am in no way indicting the actions of all plaintiff attorneys or class action attorneys. In many cases, plaintiff attorneys play a vital role in protecting the legitimate interests of injured consumers.

For example, I supported the efforts of the Castano group of plaintiff attorneys in the class action case against cigarette companies.

Despite the fine efforts of many, many plaintiffs' lawyers, the actions of a powerful minority of plaintiffs' attorneys have created the situation we need to remedy with this situation.

To demonstrate how class action lawyers have manipulated the tort system to their benefit, let us take a spin at the wheel and see what we come up with.

Spin the wheel again and we come to the 2003 Cook County, Illinois court-approved settlement of Degradi v. KB Holdings, Inc.

This class action alleged that KB Toys, one of the largest toy retailers in the country, manipulated toy prices to lead customers to believe that they were paying discounted prices. Specifically, the suit alleged that certain products contained an inflated reference price that was marked through in red with a lower selling price next to it.

To settle the suit, the company agreed to hold what amounted to a week long sale with a thirty percent discount on selected products. However, the company was not obligated under the terms of the settlement to advertise the discount. As a result, many of the class members eligible to receive the discount were not aware of it until long after the sale was over.

How did the game turn out for the class counsel? They won a whopping $1 million in attorneys' fees. And according to an independent analyst, KB Toys actually stood to benefit from the settlement because they were able to drive traffic into the store on the days of the discount.

All told, this was not a bad spin at the wheel for all parties concerned. That is, all parties except for the class members--in other words the people who were allegedly injured.

If you spin the wheel again you land on the in re Microsoft Litigation Settlement.

The wheel has landed on in re Microsoft Litigation Settlement.

Microsoft has been involved in multiple antitrust class action alleging that the computer giant used its control of certain programs to price gouge its customers. Ten of the class actions have been settled, including the suit brought in Johnson County, KS.

Under the terms of the settlement, class members who purchased Microsoft hardware will receive a $5 or $10 voucher toward the future purchase of particular computer hardware or software products.

If these settlement terms some like something less than a big victory for the consumers, wait until you hear about the onerous process they have to

endure in order to redeem the vouchers.

First, to even receive a voucher, a class member must first download a form from a website established for the purpose of handling the settlements, fill it out and mail it in. Then, to redeem the voucher itself, the class member must mail in the voucher with a photocopy of the original receipt and UPC code.

So the class members got some hard to redeem $5 and $10 coupons. Who then came out the big winners in the game? You guessed it, once again it was the class counsel. In these cases, they have received a mind- boggling sum in attorney's fees to the tune of hundreds of millions of dollars.

With a spin of the wheel, we come to Ramsey v. Nestle Waters North America.

This class action is better known as the Poland Springs Water class action. Let me refer to this Poland Spring Chart--this blue section which has $1.35 million on it.

The Ramsey suit alleged that Poland Spring water does not come from a spring deep in the woods of Maine as was advertised. Under the terms of the settlement approved by the Kane County, IL State court, the named plaintiff received $12,000 while the class members received discounts or free Poland Spring water of the next 5 years. The company, which denied any wrongdoing, agreed to enhance its quality control and make approximately $2.75 million in contributions to charities.

So in this round of the game, the class members got some free water. What about the class counsel? They were sitting pretty at the end of the game with $1.35 million in attorney's fees.

As Roger Parloff put it in the Forbes magazine article entitled ``Springtime for Poland,'' the settlement was ``pretty standard: next to undetectable benefits for us--some discount coupons and whatnot and $1.35 million cash for the plaintiffs' attorneys.''

That is right. Class action settlements have become so abusive that it is now standard and accepted practice for class counsel to receive millions of dollars for getting class members a bottle of water.

Now we come to the Register.com settlement, approved by the New York County, New York State Supreme Court, and affirmed by the New York Superior Court in 2003.

Register.com is the second largest domain registration company for the Internet. Those wishing to register a domain name through the company may do so for a $35 fee. But if the main name is registered, the company holds the Internet address and redirects the link to a ``Coming Soon'' page featuring promotional advertisements for Register.com and other companies until the domain nameholder develops a Web site of its own.

Michael Zurakov, serving as lead plaintiff for the class action, claimed that upon developing his own Web site, Register.com delayed in switching over the purchased domain name to him and continued to redirect the link to the promotional ``Coming Soon'' page for several months to sell advertisements. When the class counsel moved to certify the class, it was estimated that the class was comprised of approximately 3 million members.

Under the terms of the court-approved settlement, class members received $5 coupons to use. Each one got a $5 coupon to use with Register.com, assuming that the class member registered with the company again. Meanwhile, the lawyers received $642,500 in attorney fees--lawyer fees.

To quote an article appearing in Domains Magazine, ``The munificence of this reward may reflect that fact that the claim, while perhaps not utterly without a shred of merit, was not exactly the most compelling ever heard.''

However weak the suit, the class counsel had a good day at the game, taking home winnings of $642,500, especially compared to the $5 coupons each class member, so-called, got. That was the right to redeem, if they went to Register.com, and registered a name.

Cases such as this only further encourage the filing of frivolous claims by opportunistic class action counsel who are solely motivated by quick settlements that benefit only them.

Let me go to the Ameritech settlement for $16 million. This is a settlement approved by the notorious Madison County, IL, State court, one of the most abusive settlements I have ever seen.

You need to know about Madison County. Madison County is where a lot of these class actions go so they can make demand letters and get settlements as defense cases. Madison County has judges who seem to be in the pockets of the trial lawyers in Madison County who become cocounsel in these cases, and, of course, have an instant entree to the courts, and almost a guaranteed, outrageous award every time they go into court. Most of the time they don't go to court. You will find in the end very few actual cases are filed. But the demand letters are made. And these companies are so frightened over Madison County, because they know they are going to get killed if they go to court, that they almost automatically settle as a result of the demand letters. They settle for what it would cost them to defend these types of cases rather than go through the jackpot justice problem of getting slammed in a jurisdiction where apparently justice is not a measured factor.

Here we have the Ameritech settlement approved by the Madison County, IL, State court. This is one of the most abusive settlements I have ever seen.

Two suits were filed in Madison County, IL, by the same firm on behalf of customers in Michigan, Ohio, and Wisconsin, alleging that Ameritech wrongly charged customers for a wire maintenance program without informing them that the service was optional.

The settlement didn't provide customers with refunds for wrongful charges. Instead, it gave each class member a $5 pay phone card that could only be used at pay phones owned by SBC, the parent company of Ameritech, to make local and limited long distance calls within the State. Many of the class members complained that the cards were worthless to them because there were no SBC pay phones in the area. Other class members complained that the cards were worthless to them either because they did not use pay phones or because the cards contained so many restrictions that they were essentially unusable.

This was not exactly a sweetheart deal for these consumers. But how did the class action counsel come out in this round of the game?

They had a good spin of the wheel by any measure, winning $16 million in lawyer fees, while the class of people, alleged consumers who were supposedly abused, really got nothing.

We can no longer sit idly by and allow abusive settlements to continue. What will S. 5 do to help curb the gaming of our tort system?

First, the bill gives the Federal courts diversity jurisdiction over large, national class actions with at least 100 class members seeking an amount-in-controversy of $5 million.

They can still bring their suit, but it will be in Federal court where it is much more likely that justice will occur, fairness will occur, and decent treatment will occur.

As a result of the provision, large and national class actions may either be originally filed or removed to Federal court, a forum that is better equipped to handle these kinds of cases--and to do so fairly. They are not going to be deprived of their rights. They are just going to have to make their cases, and they are not going to be able to go to Madison County where they will have an automatic win absolutely guaranteed in the eyes of most companies which will be outrageous in nature as a general rule--or an automatic settlement for defense costs--which is as close to distortion as you can get because the companies can't afford to go to court in that particular jurisdiction with the judges the way they are, the attorneys the way they are, and all in cahoots the way they are.

Second, S. 5 contains provisions for the review and approval of proposed coupon settlements before a Federal court. It doesn't mean you can't have coupon settlements, but you are sure going to have to get the judge's approval. So these phoney coupons are going to be much fewer and much more far in between.

The bill provides that a Federal judge cannot approve a proposed coupon settlement until conducting a hearing with a written finding that the terms of the settlement are fair, reasonable, and equitable to the class members.

You would think that would be something every court in the land would want to do, but, unfortunately, we have had far too many of these class actions where that hasn't been the case, or where counsel are the ones who are basically mistreated in the end.

Our courts will no longer be used as a rubberstamp for proposed settlements. This provision ensures that the true beneficiaries of a settlement are the class members and not the lawyers who drew up the settlement.

It doesn't cost any more money to go to Federal court than it does State court. It isn't a tremendous inconvenience; it is just that you can expect the Federal judges not to be judges who are sustained by financial support by the local lawyers.

Third, this legislation requires that attorneys' fee awards be based on the actual recovery of the class members in coupon settlements. In other words, contingency fees must be based on the value of coupons actually redeemed by class members. This will give the attorneys an incentive to ensure the class members actually get something in the settlement they can use.

If you are going to get bottles of water, then the attorneys can get fees based upon how many bottles of water are gotten. I don't think many lawsuits would be brought on that basis anymore. Or, if you are going to get a coupon, they can get fees based upon how many coupons are redeemed. Or, in the case of the SBC coupons, they can get fees only to the extent that those coupons are viable and can be utilized, and how many of them are actually requested.

Practically speaking, class counsel will no longer look for a quick and hefty attorney fee settlement for themselves in which the class members recover relatively worthless coupons.

The time has come for us to put an end to this unfair system. I have heard many of my colleagues on both sides of the aisle decry the state of the current tort system. I ask my colleagues to recognize this bill as the opportunity that it is, an opportunity to end the abuses of the current tort system, or at least to make a start to ending the abuses of the current tort system and restoring confidence in our justice system.

Real good lawyers, the honest lawyers, if they bring class action lawsuits, will bring suits of viability, suits that mean something, suits that are deserving of the awards that are given, not suits just for the benefit of the lawyers involved. We have spent literally years now negotiating the provisions of this delicate compromise bill. The time has come to pass it.

I might add, this bill has evolved over a number of Congresses. We have negotiated with virtually everybody who has wanted to negotiate on this bill. We have made change after change after change. It is not a major change in our law, but it certainly will bring greater justice in our law and greater fairness and greater treatment in our law.

The fact is, we need this bill to remain intact. The House has indicated they will take this bill, if we pass it in its current form, and it will become law. There will be some attempts with amendments that may have merit that I may even like, but this bill is a result of a huge series of compromises that have taken years to achieve. We know if any amendment is added to this bill, it is very unlikely the House will take it. We are faced with the proposition of the need to vote down all amendments on this bill.

The distinguished Presiding Officer has a number of amendments he would like to add to this bill, as a distinguished former supreme court justice from the State of Texas, that would improve this bill. But he knows if we are going to pass this bill, we cannot take any amendments, including his. If we are going to take other amendments, we will have to take his. The fact is, we urge all amendments be voted down so we can pass this bill and, hopefully, get it to the House and get it passed so justice can occur.

Any Member who stands in the Senate and says consumers are going to be hurt by this bill, that we are not allowing suits to be brought, has not read the bill or is deliberately distorting what is going on. The fact is, suits can be brought, legitimate suits can be brought, there will be awards that will be made in legitimate cases, as they should be, and we all will be better off as a country if we get the tort system so that it does justice, rather than jackpot justice for a few, and in a number of instances I have been citing, for lawyers only. Unfortunately, we have people gaming this system to such a degree that this bill needs to pass. We need to straighten out the mess.

I yield the floor.

Mr. President, I send an amendment to the desk and ask for its immediate consideration.

Mr. President, I ask unanimous consent that the reading of the amendment be dispensed with.

Mr. President, I rise to offer an amendment to S. 5, the Class

Action Fairness Act of 2005, to ensure that State attorneys general elected by the people of their States as the chief law enforcement officer will still be able to do their business and protect the people of their States.

My amendment simply clarifies that State attorneys general should be exempt from S. 5 and be allowed to pursue their individual State's interests as determined by themselves and not by the Federal Government.

I know that S. 5 is intended to fix problems around class action law in America, and I think most agree that the attorneys general are not part of the problem. In the simplest terms, this amendment allows them to seek State remedies to State problems. I hope we can all agree infringement on State rights should not be a result of this bill.

I believe class actions remain an important tool for enforcing shareholder and employee rights, for cracking down on telemarketing fraud in attempts to prey on the elderly, and in forcing companies to improve product safety both in the manufacture of unreasonably dangerous products and in drugs. We need to make sure class action reform does not unnecessarily restrict the ability of citizens to seek redress for legitimate claims.

While we all may not agree with those in Congress that we need to improve the class action process, we should all agree that it should not be done by shutting State attorneys general out of the system. I believe to do so would circumvent the intent of our Founding Fathers in recognizing that State sovereignty should not be dismissed by Federal action so easily. To that end, I offer this amendment in an attempt to quash ambiguity about the authority of State attorneys general that may exist in this bill.

It should be known that this commonsense amendment in no way impairs the class action reforms as intended in this bill, nor does it in any way expand the authority of State attorneys general. What this amendment does is clarify the existing authority of State attorneys general.

I have heard in the hallways, and as I have gone through the corridors in the Senate in the last few days, that there are some who do not want any amendments to this bill. This amendment, if accepted, I believe is very consistent with the intent of the bill. I believe the authors of the bill did not intend to shut out State attorneys general. So even though some do not want amendments--I think we ought to consider all amendments; some of the amendments are very worthy of consideration. Although some do not want amendments, I think they can vote for this with a clear conscience that this will not change the intent of the bill.

I am a former State attorney general. I understand the important work they do for consumers and the most vulnerable in our society. It is not just my opinion that this amendment is needed. I offer this amendment on behalf of a bipartisan group of 46 State attorneys general who have expressed that it is critically important to all their constituents, especially the poor, elderly, and disabled, that provisions in this legislation be clarified so as not to compromise the traditional law enforcement authority.

I have a letter. Interestingly enough, in the first paragraph of the letter, it says--and these are 46 State attorneys general:

We take no position on the act as a general matter and,

indeed, there are differing views among us on the policy

judgments reflected in the act.

This is very clear. The attorneys general are split on the underlying act, but they are not split on their authority being called into question with this act.

They say:

Clarifying the act does not apply to and would have no

effect on actions brought by State attorneys general on

behalf of their respective States and citizens.

I want to talk in just a minute about how State attorneys general are different from private sector lawyers. I will get to that in a minute.

I ask unanimous consent to print in the Record this letter signed by 46 State attorneys general, Democrats and Republicans, collectively representing more than 90 percent of the country, who are very concerned that this legislation as it is written will stop them from doing an important part of their jobs.

Mr. President, I have served with some of these attorneys general, and I can say they come from different ideological points of view and different ways of practicing law. As a whole, they are not taking a position on the bill, but as you can see by this letter, the vast majority of State AGs agree on one point: As the chief legal officers for their respective States, there must be clarification in the bill to make sure they can continue to represent the citizens of their States and carry out their duties as elected officials.

As we all know, attorneys general frequently investigate and bring actions against defendants who have caused harm to their citizens. These cases are usually brought pursuant to the attorneys general parens patriae authority under their respective consumer protection and antitrust statutes. This is an important point. Not all States have parens patriae authority. In fact, the State of Arkansas, when I was attorney general, had very limited parens patriae. In fact, one could argue none at all. We always had to pursue our actions under the Deceptive Trade Practices Act, which is a State statute, and we had specific authority in that statute.

I heard some people say, again, in the hallways here, that all States have parens patriae and therefore we do not need this amendment. But that is not the case. In some instances, such actions have been brought with the attorney general acting as the class representative for consumers in the State. It is my concern, as well as those of 46 attorneys general, that certain provisions in S. 5 might be interpreted to hamper their ability to bring such actions, thereby impeding one means of protecting their citizens from unlawful activity and resulting harm.

It is important to all consumers, but especially to the poor, elderly, and disabled, that the provisions of the act not be misconstrued and that attorneys general maintain the enforcement authority needed to protect them from illegal practices.

I know there are many people who want this body to pass class action reform this year and do not want to ruin its chances by adding too many amendments to the underlying bill. But, as I said a few moments ago, in this case, with this particular amendment, we are not changing the intent of the bill.

I would like to address a falsehood about the amendment that I have heard, and that is that some people have said this amendment would create a major loophole because suits could be brought on behalf of State attorneys general, that some attorneys general may allow their friends to use their names to avoid moving the case to Federal court.

The notion is incorrect and, quite frankly, it is offensive. Let me be clear.

No one can add a State attorney general without his or her express consent or permission. Moreover, attorneys general are statewide elected officials accountable to the same citizens who vote for us. They work hard and take their responsibility as chief legal officers very seriously. State attorneys general would not expend the resources or their reputations to take up a class action they did not believe was worthy of protecting their citizens.

In addition, it should be noted that in many cases, attorneys general are not after the check or the payment in litigation. They are not eyeing the big settlement, although in some cases there are large settlements at the end of the horizon. The primary objective of State attorneys general is not chasing the money but bringing about reform.

Let me be clear on this point. I alluded to this a few moments ago. State attorneys general are fundamentally different from private attorneys. Private attorneys have clients, and they are out there doing what their clients want: trying to get a recovery and trying to make their clients whole. I understand that. That is a good thing. I do not have any problem with that.

State attorneys general are different. Generally speaking--maybe not in every single case but generally speaking, when the State attorney general becomes involved, there is a matter of public policy in the litigation. In fact, I said a few moments ago that the State attorneys general are elected officials. That is not true in every single case. I think there are about 35 elected attorneys general. There are a couple selected by the supreme court or by the State legislature, and some are appointed by the Governor.

Nonetheless, attorneys general have a level of accountability that you do not find in private practice because they are accountable to the people, either the people who elected them or appointed them or selected them for the office. And attorneys general, more than private lawyers, are sensitive to criticism.

I can assure you, the last thing an attorney general wants to read is an opinion by a judge who is criticizing the attorney general for bringing a frivolous lawsuit, criticizing the attorney general for going too far. That is the last thing the attorney general wants to read in the paper.

Also, there is the court of public opinion. The attorney general does not like bad editorials to be written about him or her. They do not like to be out on the street and people questioning their integrity or their sense. So attorneys general have a level of accountability that just does not exist in other areas of practice.

That is an important distinction. As I mentioned a few moments ago, normally cases brought by States involve a matter of public policy, and we can go through a long list of cases and show where the public policy is in the cases and also show how a lot of these cases would not be profitable for the private sector to bring.

Oftentimes there is a matter of fairness and not a matter of money involved in these cases. There are several major examples where State attorneys general have filed a cause of action in State court to protect their citizens or bring reform. However, if we do not act to clarify S. 5, I am concerned this legislation would make it much harder for the attorneys general to do their jobs.

Back in the 1990s, the attorneys general around the country pooled together and sued the tobacco industry for reimbursement of State moneys as a result of disease brought about by smoking. I know in some quarters that is still a very controversial decision. Let me very respectfully remind the Congress that the Congress a year, two or three before this settlement occurred had the chance to enter into a federally mandated global settlement of all claims. That did not happen. The States pursued their case after the Congress failed to act.

This tobacco case resulted in a historic global settlement that drastically altered the way our Nation views and approaches smoking. Money from these settlements was used by the States for youth smoking prevention, to improve health care, educate citizens on the dangers of smoking, and an increased level of treatment for smoking-related illnesses. My State of Arkansas has spent every penny of the tobacco money it has received on health-related issues--every single penny.

Back to the point about the difference in the private sector attorney representing the individual or representing a class versus the attorney general representing the State's interest and the citizens of the State, when you look at the settlement agreement between the tobacco companies and the State, if I recall right, it was about 147 pages long. It was very detailed, very negotiated, a very hard-to-reach settlement.

I believe it was 147 pages long without the attachments, and 91 of those pages, that is two-thirds of the pages approximately, were about the public policy and changing the tobacco industry's practices. Here again, in private litigation it is about getting recovery for one's client, and we understand that, but when the attorney general is involved it is a materially different type of litigation.

I have never seen a private settlement in which two-thirds of the settlement document requires the industry

or the company to change its practices, but that is the type of litigation the attorneys general enter into.

Each State in the tobacco case filed individual suits in their respective State's court alleging fraud. In our particular State, we alleged the Deceptive Trade Practices Act violations and also a number of common law claims. Due to the nature of the claims, if this legislation as it is written would have existed at the time of this case, it may have presented hurdles to the attorneys general that could have prevented a resolution.

In 2001, several State attorneys general took on Ford and Firestone for failure to disclose defects in Firestone tires used on Ford SUVs, of which they should have been aware. These cases were brought again in Arkansas, and other States have similar laws, under our State's Deceptive Trade Practices Act, fraud and consumer protection laws.

Let us make this point in another case. In private causes of action, and there were many relating to the Ford and the Firestone litigation, the parties' and the lawyers' primary concern was trying to make the plaintiffs whole. That is the nature of that type of litigation.

In the attorney general actions, we established a restitution fund and a long series of injunctions against the companies in the way they marketed their products. In fact, some people may have noticed they have seen some new Ford Explorer ads on television in recent weeks. These Ford Explorer ads are due to the attorney general lawsuit, and they deal with the safety of Ford Explorers. All this goes back to the way Ford Explorers were marketed originally. The buyers bought them thinking they were safe under pretty much all conditions, but practice has taught us differently. So I make that point one more time to show how different State litigation is versus private litigation.

Ultimately, the Ford case was settled. However, had these States been required to file separate State cases under their own consumer protection laws, as could be required under this class action bill, those States would have been removed to Federal court. The Federal court would then have been required to become an expert in each State's diverse consumer laws and remedies.

State litigation is different from private litigation, and I think to some degree this amendment is a matter of States rights. In 2000, 26 attorneys general from 26 States brought suit against Publishers Clearinghouse claiming that the company was intentionally preying on the elderly by misrepresenting their sweepstakes award. My colleagues may remember that for years people used to get mail with pictures of celebrities, and in big bold letters it would have your name and say: You have won X number of millions of dollars. Or it would say: Congratulations, millionaire.

Think about it. We do not get those letters anymore. Why? Because the States intervened. The States came in under consumer protection laws and looked at how deceptive those ads were. In fact, in Arkansas when I was in the attorney general's office I would talk to an adult child of a deceased person or an adult child who had put their parents in a nursing home and they would clean out the closets and the living room or whatever and they would find stacks and stacks of magazines that had been ordered through these sweepstakes companies.

Even if one reads everything in great detail, they would find in the fine print that ordering does not increase their chances of winning. Most people do not read all the fine print. Most people thought that ordering did increase their chance of winning, and what happened was people would order the same magazine. People would tell me they would find 10 copies of the same Sports Illustrated or 10 copies of the same Newsweek or Good Housekeeping because these senior citizens ordered to try to win the sweepstakes.

It is sad and unfortunate, but they saw this as a chance they were willing to take to leave a lot of money to their children and grandchildren. So we came in as States and put a stop to that. I think it was 26 States that banded together and put a stop to that.

It was alleged that Publishers Clearinghouse was profiting from this fraud at the expense of the vulnerable elderly. I can recall that these individuals had spent their life savings on these fraudulent sweepstakes. When we got inside of the cases, we found many seniors in Arkansas who had spent hundreds, maybe thousands of dollars trying to win sweepstakes.

Is there someone here who thinks the actions of the attorneys general are out of step with common sense and fairness? In this bill we should make sure we do not take away any existing authority of the attorneys general.

These are just a few examples of the very hard and worthy work by the State attorneys general where they are trying to protect the citizens of their States. I challenge my colleagues to deem the work they do as frivolous or as junk lawsuits because attorneys general around the country have a layer of accountability that does not exist elsewhere. They are accountable to the people. They are accountable to the legislature that makes their budgets. They are accountable to the Governor. They are accountable in the court of public opinion.

I ask my colleagues to support this amendment to this bill for several reasons. One is that the overwhelming majority of State attorneys general, our States' chief legal officers, are concerned about the language of this bill, and we should be concerned about it. Remember, these attorneys general represent the citizens in all of our States. They try to get out there and do the right thing for their citizens.

Secondly, by making this change, we are not obstructing the intent of the bill, but I believe very strongly we are clarifying the authority that already exists.

Third, we should allow our attorneys general to seek State remedies to State problems. I think this is an important piece of this. It goes back to States rights. It goes back to local control and people trying to do things the way they want to handle them in their own States.

So I implore all of my colleagues who are champions of States rights or who want to protect the integrity of the bill and want to leave the tools that currently exist with the State attorneys general, to vote for this amendment.

I yield the floor.

I thank my colleagues for their attention to this amendment. I am encouraged in one way because I know they have spent time with the amendment and studied it, analyzed it. What encourages me is all four who spoke against this--in fact, every Senator who spoke against the amendment--have said that this bill as currently drafted will not alter or limit the existing rights of any State attorney general. That is very good news.

I don't agree with that interpretation. In fact, there are 46 attorneys general, Democrats and Republicans from all over the country, who have written a letter saying they do not agree, or at least they have concern with that interpretation.

I hope when this law, if it passes, S. 5, is challenged, and it will be at some point or be litigated at some point, and a State attorney general tries to pursue some sort of action and there is a challenge saying the State cannot do it, I hope the courts will recognize the legislative history we developed today. The intention of this Senate and the conference is not to limit any existing rights or any existing abilities of the State attorneys general in pursuing cases they may deem appropriate to pursue.

In addition, a number of the opponents, maybe all, have focused on some language in the bill. We need to clarify that language so when we vote on this we will be able to vote from an informed position. The language is ``but does not include any civil action brought by or on behalf of any Attorney General.''

Chairman Grassley and others have pointed to that language and indicated they have some concern with that. I respect that concern.

Let me flesh that out, if I may. In virtually every State, and probably every State, the work of the attorney general's office is too large for one person to do. In other words, the AG himself or herself cannot sign every pleading, cannot attend every hearing, cannot participate in everything. They cannot do it. There are not enough hours in the day and the workload is too heavy. Again, I think every State law does this routinely. I don't know of any exception. What that means is every attorney general in America has an assistant attorney general or deputy attorney general or some other titled person in their office who every single day routinely does things on behalf of the attorney general. It has to be that way.

Under the laws of the States, the attorney general is the one who is ultimately responsible. When a pleading is signed, that signatory-- whichever deputy or assistant or attorney general it may be--that person is binding the State's attorney general to certain things in the pleadings.

The attorney general is the officer of the court. The attorney general has ethical responsibilities and ethical duties. I would argue that these ethical duties are above and beyond what is in the private practice of law because that lawyer, as the attorney general, is representing the State he or she was elected or selected to represent. Also, some are concerned that the phrase ``or on behalf of'' may mean that a private sector law firm could be retained by the State to pursue a matter. That is true. That is existing law today. And everybody has said the intention of S. 5 is not to limit or alter or change any authority of the States' attorneys general.

So all that is true. However, in every State I am aware of--I cannot promise this is true in every State, but in every State I am familiar with, there is a process which States' attorneys general have to go through in order to hire outside counsel. I think if we spent 30 minutes looking at various States and the needs of various States, probably 100 percent of the people in the Senate would understand that there may be cases where it might be appropriate to hire outside counsel under certain circumstances.

But there is a process. For example, in Arkansas, we had to go to the State legislature. We had to go to the State legislative committee and get approval to hire outside counsel. We also had to have the Governor sign off on the approval. So we had both the legislative and the executive branch signing off on that decision. Again, I cannot promise every State has that same process, but every one I am familiar with has some sort of process they go through and do that.

The United States is a union of States. We should not think of these attorneys general as attorneys. I tried to make this point several times. They are different than private practice attorneys. These attorneys represent the State. They are the mouthpiece for the State. They do the will of the legislature of the State in all of its various capacities.

Mr. President, may I ask how much time I have?

Mr. President, after the 15 seconds, what will happen? Can I ask unanimous consent to extend it for another, say, 10 minutes?

Thank you, Mr. President.

But the only point I was going to make on that is, we are a union of States. We should always see the States' attorneys general as being a little different than private sector lawyers. There is nothing wrong with private sector lawyers. Like I said many times during the course of this debate on this amendment, they are doing their job. They are representing their clients, and that is great and fantastic. That is the way the system works. But the State's attorney general does more. The State's attorney general has more responsibility. When they speak, they speak on behalf of the State. It is kind of like us being here in Washington. Certainly we are everyday citizens like everybody else, but we are elected to come here and represent our States in this great body.

So I will ask my colleagues to try to see States' attorneys general in a different light, in a materially different light, not a slightly different light but in a materially, substantially different light than you see your ordinary attorneys in private practice.

Like I said, some say this amendment is unnecessary because it honors the integrity of the bill. I like that in terms of legislative history. But I also say the counterargument there is: If it is unnecessary and if it does not change the impact of the bill, why not vote on it and allow the amendment to make sure we are all protecting the ability of our States to pursue litigation in the way they have always been able to do that.

Mr. President, I ask for the yeas and nays on my amendment.

Mr. President, I yield the floor.

Mr. President, I ask unanimous consent that the order for the quorum call be dispensed with.

Mr. President, I ask unanimous consent that I be able to speak for as much time as I consume in morning business.

Mr. President, something is happening in our Tax Code that very few people understand, and I wanted to call it to their attention.

There is something going on called repatriation, which is a $2 word that probably people won't understand. But I want to explain it.

Repatriation is a process by which U.S. companies that have moved some operations overseas, begun to manufacture and sell products overseas and made income overseas, are able to bring their profits back into this country.

When an American corporation makes a profit as a result of selling overseas, or producing overseas--we have something in this country called deferral in our tax law. It says you can defer paying taxes on your foreign profits as long as you don't bring them back into this country. But when you bring them back--which is called repatriation-- then you must pay taxes like everybody else does.

Let's take Huffy bicycle company, for example. The Huffy bicycle company made bicycles for almost 100 years in this country. They sold them in Wal-Mart, Sears, and Kmart. Huffy then shut down their plants in the United States, and got rid of their workers. Today Huffy bicycles are still sold in the United States but they are made in China for roughly 30 cents or 40 cents an hour labor by people who work 7 days a week, 10 to 12 hours a day. The company decided they should actually manufacture their bicycles in China and presumably make more money.

What happens to that income? We have a perverse and insidious provision in our tax law that says, shut your manufacturing plant, move those jobs overseas, and we will give you a deal. You don't have to pay taxes on the profits that you once made in the United States when you made that bicycle or the Radio Flyer little red wagon, which is now made in China, or the Newton cookies, but now earn on the same products made overseas until you bring those profits back to the United States. Only then do you have to pay taxes. That is the deal.

Whenever companies defer their tax obligation, they understand that when they repatriate the income to the U.S., they are going to have to pay taxes. But they got a special deal, as is always the case, it seems.

Last year a bill was passed with a tiny, little provision which was very controversial. I opposed the provision, but it got passed. The special deal is that the repatriation of income back into this country now by companies that earned that income overseas--in some cases by moving their American jobs overseas--now get to pay taxes at the 5\1/4\ percent tax rate.

What prompts me to come to the floor to talk about this, despite the fact I opposed this last year, was a New York Times article that says, ``Hitting the Tax Break Jackpot.''

Let me quote a part of it.

When Congress passed a one-time tax break on foreign

profits last fall, lawmakers said their main purpose was to

encourage American companies to build new operations and hire

more workers here at home. But as corporations are gearing up

to bring tens of billions of dollars back to the United

States this year, adding jobs is far from their highest

priority. Indeed, some companies say they might end up

cutting their workforces here in the U.S.

Hewlett-Packard, which has accumulated $14 billion in

profits and lobbied intensely for the tax break, announced

January 10 that it would continue to reduce its workforce

this year. That would come on top of more than 25,000 jobs

eliminated during the previous 3 years.

We have a provision in tax law now that says to these companies that have earned this money overseas, you deferred taxes on them previously, now you are going to bring them back. We encouraged them to bring them back. And, by the way, while all the other American people are working and paying income taxes--and, yes, those at the bottom of the ladder who pay income taxes pay the lowest rate of 10 percent but it is 10 percent, 15 percent, up to 35 percent, despite the fact everybody else is going to pay a higher rate of taxes--you repatriate those profits, and we will allow you to pay an income tax rate of 5\1/4\ percent.

There was a Governor of Texas named Ma Ferguson. Ma Ferguson became Governor of Texas, I believe, when her husband died. As Governor of Texas, Ma Ferguson got involved in a very controversial issue dealing with some sort of initiative in Texas about English only. She held a press conference. She held up a Bible. She said: If English is good enough for Jesus, it is good enough for Texas.

She didn't quite understand, I guess.

But the good enough concept is something we all talk about here. If the 5\1/4\ percent income tax rate is good enough for the biggest corporations in this country that have moved jobs overseas, and now bring profits back and get to pay 5\1/4\ percent, why is it not good enough for the Olsens, Johnsons, and the Larsens? Those are names from my hometown. Why is it not good enough for the people living down the street, or up the block, or on the farm who may pay multiples of this tax rate?

Let me show a chart. These companies aren't doing anything wrong. These companies are simply going to benefit handsomely from what this Congress did for them--to say to them: By the way, we will give you a very special deal. This is Exxon Mobil, IBM, Hewlett-Packard, Pepsi- Cola, and so on--unpatriated foreign earnings totaling tens of billions of dollars. And they get to pay income taxes at 5\1/4\ percent. That sounds like a sales tax, doesn't it? That sounds like a sales tax and not an income tax. But do average folks get to pay an income tax at 5\1/4\? No. Nobody else does.

It kind of reminds me Tom Paxton's old song. He seemed to be able to say it in kind of a simple way. He got all excited--this folksinger-- when the Congress gave a big, old loan to Chrysler Corporation. So he wrote a song saying, ``I'm Changing My Name to Chrysler.''

Oh the price of gold is rising out of sight, and the dollar

is in sorry shape tonight, what a dollar used to get us now

won't get a head of lettuce. No the economic forecast isn't

bright.

He says:

I'm changing my name to Chrysler. I am going down to

Washington, DC, I will tell some power broker, ``What you did

for Iacocca would be perfectly acceptable to me.''

Maybe he would want to write a couple more verses. Maybe he would like to pay income taxes at 5\1/4\ percent. Maybe every citizen of my home State of North Dakota would like to be able to pay a 5\1/4\ percent income tax rate.

If it is good enough for Exxon Mobil, why isn't it good enough for my citizens, or good enough for all the citizens of this country?

This was done last year with very little debate; just stuck in a big old bill and says it is going to create jobs. Let us give a special deal to some big old economic interests. Nobody will care and nobody will know.

Now we see the result--hitting the tax break jackpot. Those who are going to get the biggest benefits as a result of the generosity which I think has probably not ever been given before. All of these companies expected that the profits they earned overseas would be taxed at the regular tax rate when they brought the profits back. That is what they were told. That is what the deal was. That is what the deferral was in the Tax Code.

Guess what. They got a big old fat tax break unlike any that is given to any other American citizen. They get to pay 5.25 percent.

By the way, they boast that they would be creating jobs and that now appears not to be true. Some of the same companies that moved their American jobs overseas to boost foreign profits now get a special deal back home to pay lower taxes than virtually any other American citizen.

Congress ought to hang its head and maybe Tom Paxton ought to write another song: If it is good enough for Hewlett-Packard and good enough for Exxon Mobil, it ought to be good enough for constituents who live up the block and down the street and on the farm in this country.

Enough about that. These things happen behind closed doors with little debate and great complexity and people do not understand. Somehow at the end of the day it is always kind of the cake and crumbs approach to public policy: The big interests get the cake; the little folks get the crumbs and hope everyone is happy and nobody debates too much about it.

Social Security

There is a lot of this influence in the Social Security debate. I will talk for a moment about that. I also will talk about the budget that was offered yesterday. The Social Security debate is

an example of this strange approach to public policy.

Social Security was created in 1935. The first monthly benefit was paid in 1940. Social Security has lifted tens of millions of senior citizens out of poverty. Fifty percent of America's elderly were living in poverty when Social Security was enacted. Today it is less than 10 percent.

The fact is, Social Security works. It has been a Godsend for a lot of people who reach retirement age. Social Security is the one dependable source of income they know will be there. It is the social insurance that they have paid for over all the years when they worked. Social Security includes not only old-age retirement benefits but also provides disability and survivor benefits. It is the one piece of that social insurance that workers knew would be there, and it has always been there.

Now, in 1983, a commission said, when the baby boomers retire, they will hit the retirement rolls like a tidal wave.

After the Second World War, the soldiers came home. We have all seen the pictures. We beat back the oppression of Hitler and Nazism. What a wonderful time. There was a great outpouring of romance and affection when the soldiers got home. We had the biggest baby crop in the history of the world. We had a lot of babies. Those GIs came home; they had families; they raised families; they built schools; they created jobs; they went to college on the GI bill. They built this country.

There comes a time, then, when the baby boomers will retire and we have a strain on the Social Security system. So we decided to save for that. This year, for example, we collected Social Security taxes from worker paychecks--$151 billion more than needed to pay out current Social Security benefits. We are doing that every year. This will help grow Social Security trust assets to over $5 trillion by 2018.

The President said the other night something that is not right or not accurate. He said, in the year 2018, the Social Security system will be paying out more than it takes in. That is just flat wrong. Our colleague, Daniel Patrick Moynihan, once said everyone is entitled to their own opinion but not everyone is entitled to their own set of facts.

In the year 2018, the Social Security system will be taking in taxes from paychecks as well as a substantial amount of interest that will exist on the Treasury bonds that have been accruing over these many years in the Social Security trust. This interest, along with the tax collected from paychecks, will far exceed that which is necessary to be paid out. It is the year 2042 or 2052, according to either the Social Security actuaries or the Congressional Budget Office, where we hit the point we can no longer pay full benefits. It is not bankrupt at that point, but unless we make some adjustment, we cannot pay full benefits.

The President's proposal for private accounts, however, anticipates a level of investment return on private accounts that, if realized, means the economic growth in the country would put Social Security in a position where it would not have a problem at all for the long term. With that kind of economic growth as projected by the President, there will be no problem in Social Security. It will meet its obligations over the long term.

But we have a circumstance now where the President and Administration official say Social Security is in crisis, it is bankrupt, it is flat bust, depending on whom you listen to. The purpose of using that language is to convince people there is a very serious problem here. There may need to be some adjustments because people are living longer, better, and healthier lives. But there is not a crisis that justifies taking the Social Security system apart, which is what the President proposes to do.

He proposes several things, none of which he talks about but all of which are part of his plan: First, borrow a great deal of money, from $1 to $3 trillion. Second, change the indexing in Social Security and cut benefits. Under his plan, you are borrowing money, cutting benefits, investing the borrowed money in the stock market, and hoping in the end it comes out all right.

All the indications I have seen, whether from the Congressional Budget Office or the Brookings Institution or others, say that workers will come out further behind, not ahead, as a result of this plan.

The question, What should we do, is answered, we preserve, protect, and strengthen Social Security. This program works. It is probably true that almost none of those who are proposing these changes--borrowing money and putting it in private accounts and taking the Social Security system apart--will ever have to worry about Social Security. Almost all of them will have sufficient assets to not be too worried about Social Security for themselves. But there are a lot of people in this country who do worry about Social Security. It has always been there and can always be there as part of the social insurance that represents the foundation of retirement security.

Retirement security has two parts. One part is the guaranteed insurance on which we pay premiums in the form of taxes every month from our paychecks. That is always there. The second part in retirement security is private investments, 401(k)s, IRAs, and others. I support that. I believe we ought to do even more to incentivize private investments. But we should do that without taking apart the Social Security Program.

The Budget

Now, finally, I mention the budget. The budget offered yesterday is a budget that has a great many controversial issues. All Members would agree we have the largest deficits in the history of this country. This country is way off track in fiscal policy. It needs to be put on track. It is not just fiscal policy. Fiscal and trade policy, between them, contributed somewhere between $1 to $1.2 trillion in debt just in the last year. That is unsustainable. You cannot continue to do that.

The trade deficit we will know on Thursday of this week, but the trade deficit is somewhere around $600 to $700 billion--just in the past year. The fiscal policy budget deficit is somewhere around $560 billion. This country cannot continue it do this. It is off track.

We have to put it on track.

The budget that was offered yesterday claims that we will have a budget deficit this year of roughly $427 billion. The fact is that figure takes the Social Security tax money we are supposed to be putting into Social Security and uses it to make the deficit look smaller. The real budget deficit for the current year is expected to be about $587 billion, and although that is the real deficit, that does not include the costs of Iraq, Afghanistan, and prosecuting the war because the President does not include that in the budget. Why? Because he says we do not know what it will cost despite the fact we have known for a long while it is costing at least $5 billion a month. He is now saying, I want you to approve an extra $80 billion in emergency funding. So we have roughly a $580 billion out-of-balance budget that does not even include the extra money that is necessary that the President knows he will ask Congress to spend on Iraq and Afghanistan and the military budget.

You could get a much better grip on what all this costs by taking a look at the numbers in his proposed budget dealing with gross debt. He is proposing about a $677 billion increase in gross federal debt next year versus this year. So that is the real measure of how much we are spending that we do not have--a $677 billion increase in gross debt.

Now, we know we have to tighten our belt. There are some things in the budget I agree with, some I do not. I do not agree that, for example, we ought to shut down Amtrak except for the east coast. That is what the President wants to do. I do not support that. I think rail passenger service strengthens this country and it is good for this country.

I do not agree that we should cut back on Indian tribal colleges. It is the one step up and out of poverty and toward hope and opportunity that has been remarkably successful. I could go through a list of things where I might disagree.

On the spending side, I do not agree with the President that we ought to begin building earth-penetrating, bunker-busting, designer nuclear weapons. What on Earth is that about? Spending money to build more nuclear weapons? Bunker busters? I do not understand that. Not only is it the wrong

message for the world, it is spending money we do not have on things we do not need.

Let me give you an example of a little program in this budget that we have spent almost $200 million on over the years. It is Television Marti. It is this country deciding to send television signals to the Cuban people to tell them how good things are outside of Cuba. Well, I visited Cuba. The Cuban people know how good things are outside of Cuba. That is why they try to escape Cuba.

It is interesting, we spend all this money on Television Marti to broadcast into Cuba. We do it through Aerostat balloons, and now we do it with a sophisticated C-130 airplane, which is very expensive. And guess what. No Cubans see the television broadcasts. Oh, we broadcast. We have expensive studios and expensive people, and we have balloons, and we have airplanes, and we broadcast these television signals to the Cuban people. And the President wants to double the money for it, despite the fact that all those signals are jammed and the people do not see the broadcasts. I do not understand that.

What on Earth could they be thinking about? They are going to double funding for the broadcasting signals into Cuba that are jammed and that the Cuban people cannot see. In fact, one of the reasons he wants to double funding is he wants to buy another airplane for this program. So you talk about waste, it is unbelievable.

I think the most important point to make about the budget, however, is it is time for Republicans and Democrats, for the President and the Congress, to level with the American people. We have a fiscal policy that is reckless, is way out of control and is completely unsustainable. You cannot spend $677 billion that you do not have--not next year, not last year, not the year after next. You cannot have a trade deficit that is wildly out of balance. And you cannot have a Tax Code that incentivizes shutting down American factories and sending American jobs overseas. You cannot keep doing these things.

There are some who take a look at this place, and they see a bunch of windbags in blue suits, I suppose. They think we just talk, and occasionally, when the lights go out, we pass something like a 5.25 percent special tax break for the biggest economic interests.

The American people deserve for us to be serious about fiscal policy, about trade policy and about tax policy, and for us to begin to put together a plan to put this country back on track. It is not all the fault of one side or the other. But if both sides do not pull in the right direction, this country cannot provide economic health and opportunity and growth in the future.

What is happening in this country no one on this floor recognizes because no one in the Senate has lost a job because of outsourcing; no one here has lost a job because their plant was closed.

Let me again say, as I conclude, the people who worked for Huffy Bicycles know what that is like. The people who worked for Schwinn Bicycles know what that is like. The people who worked for Fig Newton know what that is like. The people who worked for Levi Strauss know what that is like. The people who made T-shirts and shorts for Fruit of the Loom know exactly what that is like. They all lost their jobs because they cannot compete with people who are willing to work for 30 cents an hour overseas. The employers have found a billion people on this Earth who are willing to do it. And they will not only work for 30 cents an hour, you can put them in factories and dump sewage and dump chemicals into the air and water. You can work them 7 days a week, and if they decide to create a union, you can fire all of them, just like that.

If this country does not get serious about stemming the outmigration of jobs and about stemming the hemorrhaging of red ink in international trade in our trade deficit and dealing with our fiscal policy and budget deficit, our economic future is not going to be a bright future.

We have far too much promise as a country to let this happen to us. We need leadership, yes, from the White House, and from Congress, to deal with serious things in a serious way. I hope that happens soon. I want to be a part of a group that is bipartisan that says let's put this country back on track. But I see precious little evidence of bipartisanship these days. The minute you stand and talk about the facts, all of a sudden you are being excessively partisan, and the White House comes after you; to wit, the story yesterday about the RNC and what they have decided to do with respect to Senator Reid.

Well, there is a lot at stake in this Congress and this President getting it right for a change: on budgets, on trade, on taxes. And I, for one, hope we can begin a serious discussion about serious issues in the days ahead and give people some hope that their future will be a brighter and better future.

Mr. President, I yield the floor.