Introduction

Proposals are pending in Congress to limit consumer rights in product liability suits. One component would shield "small businesses" from punitive damages by capping the amount that could be awarded against companies that engage in conscious, flagrant indifference to safety. "Small business" is defined as a company employing fewer than 25 full-time employees and having annual revenues of $5,000,000 or less. Under this proposal, punitive damages would be capped at $250,000 or two times the amount of compensatory damages, whichever is less.

In September 1997 the Violence Policy Center (VPC) conducted a telephone survey of firearm manufacturers to determine which companies would stand to benefit from the "small business" cap.

The VPC found that the "small business" cap would protect many manufacturers of assault weapons and Saturday Night Special handguns.

The VPC was able to obtain information regarding the number of people employed by each company. However, when asked to provide an estimate of annual revenue, every company declined to give such an estimate. The Violence Policy Center, therefore, compared their products, annual production, and employee levels to a comparable firearms company, Lorcin Engineering, for which annual revenue figures are available because the company is currently in bankruptcy proceedings. In 1995, Lorcin had 26 employees, manufactured 151,208 pistols, and had gross sales of $4,564,270.51. The company sold products that are comparable� and in some cases almost identical� to the companies included in this analysis.

In 1995, Lorcin was the fifth largest producer of handguns in America, behind Smith & Wesson, Sturm, Ruger & Co., Beretta, and Colt. The company's .380 pistol is number one on the list of guns traced to crime scenes by the Bureau of Alcohol, Tobacco and Firearms. Lorcin filed for bankruptcy to protect itself from product liability suits filed by injured consumers. According to court documents, Lorcin currently has 17 liability suits pending against it.

Using Lorcin as a benchmark, the VPC estimates that the companies included in "Small" Favors would fall well within the $5,000,000 limit on annual revenues.