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Lawsuit Abuse Reduction Act of 2005

Floor Speech

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Date:
Location: Washington, DC


LAWSUIT ABUSE REDUCTION ACT OF 2005 -- (House of Representatives - October 27, 2005)

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Mr. SCHIFF. Mr. Chairman, I yield myself such time as I may consume.

I rise today to offer an amendment in the nature of a substitute to H.R. 420, the Lawsuit Abuse Reduction Act of 2005, with the gentleman from Wisconsin (Mr. Kind).

I thank the Rules Committee for affording us this opportunity to offer and debate our substitute amendment on the floor today.

Mr. Chairman, the base bill certainly has an important and worthy stated goal of cracking down on the filing of frivolous lawsuits. As a former Federal prosecutor and a member of the bar, I strongly support this meritorious goal, as any responsible attorney should.

However, I am forced to oppose the legislation in its current form as it contains a number of serious deficiencies which I believe the substitute amendment will remedy. First, the legislation would revert to a failed regime that has been soundly criticized by those best equipped to comment on the proposed changes, the Federal judiciary.

Second, the legislation would inappropriately involve the States in the application of the Federal Rules of Civil Procedure. And, third, the legislation's forum-shopping provisions drastically change State venue laws to benefit foreign corporations over domestic corporations and victims, to say nothing of doing a great deal to damage States' rights.

Finally, the legislation would harm those seeking relief from civil rights violations. Instead, I ask my colleagues to support the Schiff-Kind substitute amendment, a proposal that would crack down vigorously on frivolous lawsuits. Members on both sides of the aisle agree that our laws and rules of procedure must prohibit frivolous litigation.

Our substitute amendment has a strong three-strikes-and-you-are-out provision for attorneys who file frivolous lawsuits. Unlike the base bill, these frivolous proceedings and pleadings could have been filed in any court. The mandatory sanctions begin after the very first violation; but after the third, the attorney shall be found in contempt of court and referred to the appropriate State bar associations for disciplinary proceedings, including suspension.

Unlike the base bill, the third sanction can also include disbarment.

Our substitute amendment also has strong three-strikes-and-you-are-out provisions for attorneys who engage in frivolous conduct during discovery, including causing unnecessary delay or needless increases in the costs of litigation. Again, mandatory sanctions begin after the first violation, and a third violation in any Federal court can include suspension and even disbarment.

Our substitute also limits the ability of wrongdoers to conceal any conduct harmful to the public welfare by requiring that such court records not be sealed unless the court finds that a sealing is justified. This important provision will help ensure that information on dangerous products and actions is made available to the public.

The Schiff-Kind substitute also includes tough enhanced sanctions for document destruction by parties punishable by mandatory sanctions under Rule 11 and referral to the appropriate State bars for disciplinary proceedings, including disbarment. We also include strong language to provide a presumption of a Rule 11 violation for repeatedly relitigating the same issue.

I am pleased that some of these important provisions have recently been added to the base bill. The venue provisions, however, in section 4 of the base bill would recast State and Federal court jurisdiction and venue in personal injury cases.

This section would actually operate to provide a litigation and financial windfall to foreign corporations at the expense of their domestic competitors. Instead of permitting claims to be filed wherever a corporation does business or has minimum contacts, as most State long-arm jurisdiction statutes provide, section 4 only permits the suit to be brought where the defendant's principal place of business is located.

This means that it would be far more difficult to pursue a personal injury or product liability action against a foreign corporation in the United States. In fact, this section could operate to make it impossible to sue a foreign corporation in this country, only further promoting the disturbing process of corporations in our country relocating their headquarters overseas to avoid U.S. taxes.

This is bad policy. And our substitute amendment includes language to ensure that jurisdiction for such legal actions is not limited in this manner.

Finally, by requiring a mandatory sanctions regime that would apply to civil rights cases, the base bill will chill many legitimate and important civil rights actions. This is due to the fact that much, if not most, of the impetus for the 1993 changes stemmed from abuses by defendants in civil rights cases, namely, the civil rights defendants were choosing to harass civil rights plaintiffs by filing a series of Rule 11 motions intended to slow down and impede meritorious civil rights cases.

A 1991 Federal judicial study found that the incidence of Rule 11 sanctions or sua sponte orders is higher in civil rights cases than in some other types of cases. Another study found that there is ample evidence to suggest that plaintiffs in civil rights cases, plaintiffs in particular, were far more likely than defendants to be the target of Rule 11 motions and the recipient of sanctions.

While the base bill purports to encourage that the provisions not be applied to civil rights cases, the fact of the matter is it does not explicitly exempt civil rights cases as our substitute does.

Mr. Chairman, this is a commonsense substitute. It cracks down on frivolous lawsuits in a tough fashion, but without jeopardizing civil rights claims or providing unnecessary shields to foreign corporations. It is a better bill, and I urge the House to adopt the substitute rather than the base proposal.

Mr. Chairman, I reserve the balance of my time.

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Mr. SCHIFF. Mr. Chairman, before I recognize my colleague from Texas, I want to respond to a couple of points made by my other colleague from Texas; that is, comparing the strength of the three strikes and you're out provisions in the substitute and base bill. The three strikes language in the Democratic substitute would apply to frivolous proceedings that are filed in any court. The base bill, on the other hand, would apply the three strikes provision only to the specific court in which the violation occurred. That is a narrower provision of the base bill.

Similarly, my substitute provides for the referral to the appropriate State bars for disciplinary proceedings, including disbarment after the third strike. With the first violation there is the required payment of costs and attorneys' fees. With the second, the attorney is held in contempt with a monetary fine. And then the third provision of referral to the State bar for possible disbarment, compared to the base bill which calls for a 1-year suspension only in the specific court where the three violations occurred. The violations have to occur in the same court. If you move from one court where you are sanctioned to another to another, the base bill seems to have far less strength and applicability than the substitute.

Second, I wanted to rebut the claim that the substitute will somehow promote litigation more than the base bill. In fact, when you ask the judges who have operated under both systems, the one that is proposed by the base bill and the one that is proposed by the substitute, the courts were quite clear that the earlier form of Rule 11, which we would go back to in the base bill, spawned a cottage industry where someone would file a Rule 11 motion, the opposing counsel would file a Rule 11 motion on the Rule 11 motion, and then you would have litigation over whose Rule 11 motion should succeed.

In fact, in 1993, the Judicial Conference remarked that the experience with the amended rule since 1993, since we got away from what the base bill would take us back to, has demonstrated a marked decline to Rule 11 satellite litigation without any noticeable increase in the number of frivolous filings.

Mr. Chairman, I yield 2 minutes to the gentleman from Texas (Mr. Gene Green).

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Mr. SCHIFF. Mr. Chairman, I have no further speakers, and I reserve the balance of my time.

Mr. SMITH of Texas. Mr. Chairman, I believe I have the right to close, and I am the remaining speaker on this side, so I will reserve the balance of my time.

Mr. SCHIFF. Mr. Chairman, I just have a parliamentary inquiry. Does my colleague have the opportunity to close or does the offerer of the amendment?

The CHAIRMAN. The gentleman from Texas (Mr. Smith) has the right to close the debate.

Mr. SCHIFF. Mr. Chairman, I know my colleague will close very well. How much time do I have remaining?

The CHAIRMAN. The gentleman from California (Mr. Schiff) has 3 minutes remaining, and the gentleman from Texas (Mr. Smith) has 12 minutes remaining.

Mr. SCHIFF. Mr. Chairman, I yield myself such time as I may consume.

In my concluding comments I want to reiterate some of the points that have been made with respect to the civil rights provisions and quote from the testimony of Professor Theodore Eisenberg, who testified before the House Committee on the Judiciary in the 108th Congress and said: ``A Congress considering reinstating the fee-shifting aspect of Rule 11 in the name of tort reform should understand what it will be doing. It will be discouraging the civil rights cases disproportionately affected by the old Rule 11 in the name of addressing purported abuse in an area of law, personal injury tort, found to have less abuse than other areas.''

I would also like to cite the testimony of the Honorable Robert L. Carter, U.S. District Judge for the Southern District of New York when he stated: ``I have no doubt that the Supreme Court's opportunity to pronounce separate schools inherently unequal in Brown v. Board of Education would have been delayed for a decade had my colleagues and I been required, upon pain of potential sanctions, to plead our legal theory explicitly from the start.''

We do not want to put off a Brown v. Board of Education civil rights case like that for a decade because of a Rule 11 that has been rejected by the Federal courts already.

The language in the substitute makes it clear that neither the sanctions approach we have taken in the substitute nor the sanctions approach taken in the base bill would apply in civil rights cases; and while there is some language of suggestion in the base bill, it is not definitive.

In fact, the NAACP wrote in respect to the language in the base bill: ``While language nominally intended to mitigate the damage that this bill will cause to civil rights cases has been added, it is vague and simply insufficient in addressing our concerns.''

So on the basis of a need not to chill civil rights legislation, which I think we have only seen the greater importance with, as Katrina ripped off the veneer of poverty and inequality in the country once again for all to see, as we consider that the base bill would implement a change that the courts themselves have rejected and found spawned a cottage industry in meritless Rule 11 litigation, and as the base bill has a stronger and I think more sensible three-strikes-and-you-are-out provision, I would urge my colleagues to support the Democratic substitute in preference to the flawed base bill.

Mr. Chairman, I yield back the balance of my time.

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