Senator HEFLIN. Senator Grassley, do you have any questions? Senator GRASSLEY. No, I don't. Thank you very much, Mr. Gerson, for your testimony.

Senator HEFLIN. Senator Thurmond, do you have any questions? Senator THURMOND. Thank you.

Mr. Gerson, in your prepared statement you claim that if enacted, S. 464 would likely result in billions of dollars of additional expenditures from the Federal Judgment Fund and many millions of dollars of additional costs generated by the necessity of additional lawyers and administrative support to represent the United States in cases now barred by the discretionary function exception. Could you elaborate on the costs the Government could be expected to bear if S. 464 is enacted and the basis for such estimates? Mr. GERSON. I will try, Senator Thurmond. Of course, it is impossible to make such an estimate with any scientific precision, but we know several things. This particular bill relates to activities in workplaces that have some sometimes attenuated Federal connection.

Two examples that we have cited just to highlight the magnitude of the number we are talking about are asbestos claims-a lot of the industries that are supporting this bill have a relationship to those claims-and safety and health claims that relate to OSHA workplace regulation.

As to asbestos claims, as I mentioned earlier, there currently are over 2,700 such cases pending where the damages sought are in excess, or have been in excess of $5 billion. To this point, the United States has not been a possible payor of such judgments solely because of the discretionary function exception. There would be some significant segment of those cases, in toto measuring $5.3 billion, to which the United States conceivably would become subject if this bill were to pass.

In the area of injuries and illnesses that occur in the workplace, OSHA reports almost 2 million such cases of varying sizes and complexities in a given year, 1986, the most recent year for which we have seen data. The cost of those cases, if they all resulted in lawsuits, would be well in excess of $100 billion.

The nexus between Government relationship and potential liability for a lawsuit, the way this bill is drawn, is so slight-and, of course, it is retroactive, given the way this bill is set up-that the potential liability for the United States could be a significant segment of a number that is well in excess of $100 billion for a single year.

There is no way to know how many cases there would be. Surely, the United States would have good defenses in the overwhelming majority of the cases that would be brought. But given the fact that so many cases are brought against private parties, in a sense it would be a free additional ride to join the United States and to make us defend the cases, Senator.

And so we know that while we would probably win a majority of the cases, we would lose some, and the amounts there would be immense. And, certainly, in defending the extra cases, which, as Senator Grassley pointed out earlier, would threaten logjams in the courts, I know that the Civil Division's budget would have to be far in excess of what it is today, and it is pretty substantial.

Senator THURMOND. Mr. Gerson, some believe that enactment of S. 464 may actually decrease workplace safety. In your opinion, would providing the possibility of indemnification by the Federal Government for negligence committed by private employers provide a disincentive to private industry to maintain a safe workplace?

Mr. GERSON. Well, I suggested earlier that I think the answer to that hypothetical question is yes. When you shift the responsibility from the private party, from the person or company that is performing the Government contract that has responsibility and an incentive to maximize its profit under the contract, and you shift that potential cost against the contract to the judgment fund, I think you reduce that incentive to the private party, who then takes a passive role trying to shift the responsibility over to the Government.

I think there are substantial incentives for Government inspectors and Government regulators under the current regime. This committee and others look with stringency at what the Federal responsibility is, and I think there are plenty of incentives for meeting it. I think if this bill were adopted, it wouldn't increase the Federal incentive, which already is high. It would decrease the private incentive to safety.

Senator THURMOND. Mr. Gerson, how do you react to the charge by those who seek indemnity from the Government that recent court decisions which have upheld the discretionary function exception are merely cases of unchecked judicial activism which requires the congressional clarification sought in S. 464?

Mr. GERSON. Well, I, like you, Senator, in a personal note, see an evolution in the decisions of the Supreme Court of the United States, which I think one can fairly say is generally a conservative Court.

In June 1988, the Supreme Court decided the case of Berkovitz v. United States, which deals with the discretionary function exception, describes three circumstances under which proponents argue that it could apply, and then holds that there is only one of them, a pure discretionary function, where there is a policy judgment made by the United States where the exception does, in fact, apply.

So I think that it is fair to say that a conservative Court has ruled that there are varying degrees of potential inquiry, and that the discretionary function exception is not a blank check, or a reverse blank check to the United States, and that the courts are equipped to deal with these cases as they come up. It is not a categorical bar to all litigation against the United States.

Senator THURMOND. Thank you very much. Thank you, Mr. Chairman.

Senator HEFLIN. Mr. Gerson, the bill would alter the discretionary duty defense under the Federal Tort Claims Act. Could you describe the general purpose for this defense in the Federal Tort Claims Act overall scheme?

Mr. GERSON. The purpose of the defense is twofold, in a sense, Judge Heflin. Historically, the discretionary function exception is what is left, an important matter of what is left, to sovereign immunity.

When, after 20 years of study on the matter, the Congress enacted the Tort Claims Act, it didn't want to go too far in waiving the sovereign immunity of the United States, or the immunity of any sovereign, for that matter. Sovereign immunity didn't originate in this Republic.

Hence, it was designed to serve as a check or balancing between public and private interests, short of a wholesale waiver of sovereign immunity. That is the historical reason, and it is still a valid

one.

The practical reason to have the discretionary function exception is to allow Federal decisionmakers to exercise that discretion in an unbiased, dispassionate way on behalf of the people of the United States without looking over their shoulder at being second-guessed.

We want our public servants, within their proper spheres of discretionary activity, to be able to exercise that discretion. And so it is a viable and valid method toward being able to get good public service out of public servants. I think those two reasons still obtain today, and that when you look at the system overall, it tends to work.

Senator HEFLIN. Thank you, sir.

Our first panel is Mr. Victor E. Schwartz and Prof. Andrew Popper. Mr. Schwartz, we would be glad to hear from you.

PANEL CONSISTING OF VICTOR E. SCHWARTZ, PARTNER, CROWELL & MORING, AND ADJUNCT PROFESSOR OF LAW, GEORGETOWN UNIVERSITY LAW CENTER, WASHINGTON, DC, ON BEHALF OF EAGLE-PICHER INDUSTRIES, INC.; AND ANDREW F. POPPER, PROFESSOR OF LAW, AND DEPUTY DEAN, AMERICAN UNIVERSITY, WASHINGTON COLLEGE OF LAW, WASHINGTON, DC

STATEMENT OF VICTOR E. SCHWARTZ

Mr. SCHWARTZ. I would ask that my statement be made part of the record.

Senator HEFLIN. It will be.

Mr. SCHWARTZ. Thank you, Judge, and I will just summarize it. S. 464, in essence, is just doing two things: to place clear and unambiguous incentives on the Federal Government to keep its workplace safe, incentives that are needed because currently criminal law sanctions don't apply, and provide tort compensation in situations where anyone else in our society would be held liable.

When I hear Mr. Gerson describe the Federal Tort Claims Act, there are certain things he really leaves out, and they are very, very important things. The Federal Tort Claims Act is not an openseason hunting license to plaintiffs. A person can only recover if he proves negligence-old-fashioned negligence from the forties and thirties, the type of negligence that we learn about in law school. Second, there are no punitive damages against the Federal Government. Third, plaintiff attorneys' fees are limited. Their contingent fee is not full and open as it is in private parties. Also, there is no jury.

Now, in addition to all of these things, there is a protection called the discretionary function_exception, and I agree with its purpose. When people are in the Federal Government and they are

in high positions, they ought to be able to exercise discretion and make policy decisions without fear of liability.

But, gentlemen, that is not what has happened with the discretionary function over the past 20 years. I hadn't looked at it in detail in a long time. I had stopped law teaching back in 1976. When I went back and looked at the monographs prepared by the Department of Justice and saw what happened to the discretionary function exception, I was really and truly surprised.

Somebody doesn't warn uranium miners about certain dangers, a warning that could be easily made; it is discretion. Somebody. doesn't warn people about asbestos dangers, where a mask could be provided for industrial hygiene and protection. That is discretion. There is a volume of cases of failure to warn people where very easily a person in charge of a workplace could make that warning, where the warning wasn't done, and it is called discretion.

Now, courts to some extent have realized that there has been discretionary function overkill. A couple of years ago, the Federal Government was in the Supreme Court of the United States and arguing that when it violated one of its own rules of law that that was discretion. Well, the Supreme Court didn't buy that, nine, nothing. But the case is an example of the kind of overkill that has been injected into this doctrine, overkill that was not there when I studied it a decade or so ago.

Recently, the first circuit has recognized that the discretionary function is an overkill, and they held in an asbestos case where a victim was seeking recovery that when no decision was made one way or the other, that wasn't a discretionary function judgment.

Now, that case has not been appealed by the Department of Justice, and it is kind of surprising. If all of this is going to cost billions and billions of dollars, I would think they would have appealed it. Maybe they have a feeling that it might have been right. You know, when young people come to the Department of Justice, they get these three volumes to teach them about discretionary function. And if you would go back in time and be a young law student coming in the Department of Justice, you would get these volumes and you would be told to read them, and probably they would quiz you on them.

Let me share with you very quickly what they tell the young people that are coming in the Department of Justice today about the discretionary function. They say that if no Federal statute has been violated and no mandatory requirement has been provided, that is discretion. In other words, if the Federal Government hasn't violated the law, they can do anything, and it is right in their own manual.

It has been said that this bill would break the Federal budget. It won't. It doesn't allow suits by Federal workers. It doesn't impose any duty on the Federal Government that is not there before. It doesn't create any new substantive rights for plaintiffs, and it excludes most matters that would be of concern-economic decisions made by the Government.

In my paper, I show how it would really affect asbestos cases, and the number of cases that would be affected by this bill. The numbers don't at all correspond with those put forth by the Department of Justice.

It has been argued that somehow this would delay cases, and I appreciate the concern that Senator Grassley brought forward earlier. We do not want this bill to delay cases, and if there are not sufficient protections in it, we would be pleased to work with the committee to avoid that result.

But, frankly, under current law, if a victim's claim is going to be delayed, the Federal court has absolute discretion to cut off any contribution claim against the Federal Government and try it separately. My paper details why there would not be delay from this bill.

There is modest retroactivity in the bill. We have provided, and will provide, detailed explanations of the degree of retroactivity that is appropriate.

In essence, what is going to be achieved with this bill is encouragement of the Federal Government to act safely. Broad, wideranging, open discretion will be at an end. We would return discretionary function to its roots and its original purpose, which was to allow officials to make broad-based public policy decisions.

Thank you, and I would appreciate your questions now. [The prepared statement of Mr. Schwartz follows:]