Bowing to pressure from corporate lobbyists, the Senate Judiciary Committee voted 10 to 7 yesterday to reduce the potential penalties for price-fixers and to permit the changes to apply retroactively to pending cases.
The action represents a dramatic victory for a handful of companies found guilty of price fixing, led by Mead Corp., Georgia-Pacific Corp., Weyerhauser Co. and Milliken & Co., that will have their exposure to civil damage awards cut by hundreds of millions of dollars if the bill becomes law.
Opponents of the retroactivity provision--which has been the focal point of the year-long lobbying campaign--bitterly denounced the committee action as a "bailout" and vowed to defeat that provision on the floor of the Senate or in the House.
"This will prove to be a hollow victory," said Stuart Eizenstat, a former adviser to President Carter who lobbied the bill for International Paper. The company contends the bill could upset settlements it obtained as a defendant in a price-fixing case. "The bill as amended is one of the most blatant pieces of special interest legislation that has passed out of a committee in many a year," Eizenstat said.
Proponents of retroactivity--acorps of lobbyists including former attorneys general Griffin Bell and Benjamin Civiletti, and former U.S. senators Samuel Ervin and Birch Bayh--argued that because the bill is remedial in nature, its provisions ought to apply to the very cases that called forth the need for a cure.
The vote on the key retroactivity amendment, offered by committee Chairman Strom Thurmond (R-S.C.) was 10 to 7. The amended measure then passed 12 to 6.
The Milliken Co., based in Thurmond's state, would have a potential damage judgment of $21 million reduced by two-thirds by the retroactivity provision.
The bill would greatly weaken a longstanding legal rule that says that any member of a price-fixing conspiracy can be held liable for three times the amount of damages inflicted not only by his own acts, but also by the actions of all co-conspirators.
One provision of the bill would allow a convicted price-fixer to sue co-conspirators to force them to "contribute" to the damage penalties.Another provision, known as claim reduction, would say that any time a co-conspirator made a pre-trial settlement, the plaintiffs would no longer be able to recover his market share of the damages from the remaining non-settlers.
Proponents of the bill say that defendants in class action price-fixing cases are in an untenable position. They say that plaintiffs' attorneys make a practice of offering favorable pre-trial settlements to the most culpable defendants, thereby vastly increasing the damage exposure of the remaining non-settlers. Even those defendants who believe they are innocent cannot afford the risk of going to trial, and are forced to settle--so the argument goes.
The companies pushing hardest for the bill all chose to go to trial in a variety of recent civil price-fixing suits. All were found guilty, and all now face multi-million dollar damage judgments. In Mead's case, the damages could reach $750 million.
The judgments are not final, and the Thurmond amendment would permit a trial judge to apply the new claim reduction procedures if he believes it would be inequitable not to.
The retroactivity provision was supported by the Business Roundtable and the U.S. Chamber of Commerce--two broad-based business groups that themselves were objects of fierce lobbying.
After remaining neutral for months, both groups suddenly reversed themselves last week and supported retroactivity--after reportedly being told by Thurmond that the bill could not get out of his committee without his retroactivity amendment.