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Lawsuit Abuse Reduction Act of 2005

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Location: Washington, DC


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

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Mr. SMITH of Texas. Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, I support H.R. 420, the Lawsuit Abuse Reduction Act of 2005.

Frivolous lawsuits bankrupt individuals, ruin reputations, drive up insurance premiums, increase health care costs, and put a drag on the economy.

Frivolous lawsuits are brought, for example, when there is no evidence that shows negligence on the part of the defendant. These nuisance lawsuits make a mockery of our legal system.

Of course, many Americans have legitimate legal grievances, from someone wrongly disfigured during an operation to a company responsible for contaminating a community's water supply. No one who deserves justice should be denied justice; however, gaming of the system by a few lawyers drives up the cost of doing business and drives down the integrity of the judicial system.

Let me give some examples. The chief executive officer of San Antonio's Methodist Children's Hospital was sued after he stepped into a plaintiff's hospital room and asked how the patient was doing. Of course, a jury cleared him of any wrongdoing.

A Pennsylvania man sued the Frito-Lay Company claiming that Doritos chips were ``inherently dangerous'' after one stuck in his throat. After 8 years of costly litigation, the Pennsylvania Supreme Court threw out the case, writing that there is ``a commonsense notion that it is necessary to properly chew hard foodstuffs prior to swallowing.'' But, of course, the defendants had to absorb hundreds of thousands of dollars in legal fees.

In a New Jersey Little League game, a player lost sight of a fly ball hit because of the sun. He was injured when the ball struck him in the eye. The coach, who was forced to hire a lawyer after the boy's parents sued, had to settle the case for $25,000.

Today almost any party can bring any suit in almost any jurisdiction. That is because plaintiffs and their attorneys have nothing to lose. All they want is for the defendant to settle. This is legalized extortion. It is lawsuit lottery.

Defendants, on the other hand, can unfairly lose their lifetime savings, their careers, their businesses, and their reputations. This is simply not justice.

There is a remedy: the Lawsuit Abuse Reduction Act. It passed the House last year by a margin of almost 60 votes. The bill applies to both plaintiffs who file frivolous lawsuits to extort financial settlements and to defendants who unnecessarily prolong the legal process. If a judge determines that a claim is frivolous, they can order the plaintiff to pay the attorneys' fees of the defendant who was victim of their frivolous claim. This will make a lawyer think twice before filing a frivolous lawsuit.

It is a problem that even the American Trial Lawyers Association has tried to address in its own code of conduct by declaring, ``No American Trial Lawyers Association member shall file or maintain a frivolous suit, issue, or position.'' However, ATLA has not disciplined a single attorney for violation of this code of conduct in the last 2 years.

This legislation also prevents forum shopping. It requires that personal injury claims be filed only where the plaintiff resides, where the injury occurred, or the defendant's principal place of business is located. This provision addresses the growing problem of attorneys who shop around the country for judges who routinely award excessive amounts.

One of the Nation's wealthiest trial lawyers, Dickie Scruggs, has told us exactly how this abuse occurs. Here is what he says about forum shopping:

``What I call the magic jurisdiction ..... is where the judiciary is elected with verdict money. The trial lawyers have established relationships with the judges that are elected; they're State Court judges; they're populists. They've got large populations of voters who are in on the deal. They're 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're 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 ..... Any lawyer fresh out of law school can walk in there and win the case, so it doesn't matter what the evidence or law is.''

Forum shopping is a part of lawsuit abuse, and we must pass legislation to stop it from occurring. Even several largely recognized Democrats have acknowledged the need to end frivolous lawsuits. For instance, the John Kerry for President campaign endorsed national legislation in which ``lawyers who file frivolous cases would face tough mandatory sanctions.'' And former Vice Presidential candidate Senator Edwards stated, ``Lawyers who bring frivolous cases should face tough, mandatory sanctions.''

The Lawsuit Abuse Reduction Act is sensible reform that will help restore confidence to America's justice system.

Mr. Chairman, the following organizations support H.R. 420: American Tort Reform Association, National Association of Home Builders, National Association of Manufacturers, National Restaurant Association, American Insurance Association, and the United States Chamber of Commerce. And this legislation is the top legislative priority of the National Federation of Independent Businesses.

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

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Mr. SMITH of Texas. Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, the scourge of frivolous litigation mars the fabric of our legal system and undermines the vitality of our economy. As President Bush has stated, ``We have a responsibility to confront frivolous litigation head on.'' H.R. 420 would do exactly that.

Frivolous lawsuits have become a form of legalized extortion. Without the serious threat of certain punishment for filing frivolous claims, innocent people and small businesses will continue to confront the stark economic reality that simply paying off frivolous claims through monetary settlements is always cheaper than litigating the case until no fault is found. Frivolous lawsuits subvert the proper role of the tort system and affront fundamental notions of fairness that are central to our system of justice.

The effects of frivolous litigation are both clear and widespread. Churches are discouraging counseling by ministers. Children have learned to threaten teachers with lawsuits. Youth sports are shutting down in the face of lawsuits for injuries and even hurt feelings. Common playground equipment is now an endangered species. The Girl Scouts in the metro Detroit area alone have to sell 36,000 boxes of cookies each year just to pay for their liability insurance. Good Samaritans are discouraged. When one man routinely cleared a trail after snowstorms, the county had to ask him to stop. The supervisor of district operations wrote, ``If a person falls, you are more liable than if you had never plowed at all.''

Unfortunately, the times we are in allow for a much more litigious environment than common sense would dictate. A Federal lawsuit has even been filed against U.S. weather forecasters after the South Asian tsunami disaster.

Today results of frivolous lawsuits are written on all manner of product warnings that aim to prevent obvious misuse. A warning label on a baby stroller cautions, ``Remove child before folding.'' A five-inch brass fishing lure with three hooks is labeled, ``Harmful if swallowed.'' And household irons warn, ``Never iron clothes while they are being worn.''

Small businesses and workers suffer the most. The Nation's oldest ladder manufacturer, family-owned John S. Tilley Ladders Company near Albany, New York, recently filed for bankruptcy protection and sold off most of its assets due to litigation costs. Founded in 1855, the Tilley firm could not handle the cost of liability insurance, which had risen from 6 percent of sales a decade ago to 29 percent, while never losing an actual court judgment. The workers of John S. Tilley Ladders never faced a competitor they could not beat in the marketplace, but they were no match for frivolous lawsuits.

When Business Week published an extensive article on what the most effective legal reforms would be, it stated that what is needed are ``Penalties That Sting.'' As Business Week recommends, ``Give judges stronger tools to punish renegade lawyers.''

Before 1993, it was mandatory for judges to impose sanctions such as public censures, fines, or orders to pay for the other side's legal expenses. Then the Civil Rules Advisory Committee, an obscure branch of the courts, made penalties optional. This needs to be reversed by Congress. Today, H.R. 420 would do exactly that.

Rule 11 of the Federal Rules of Civil Procedure presently does not require sanctions against parties who bring frivolous lawsuits. Without certain punishment for those who bring these suits and the threat of serious monetary penalties to compensate the victims of frivolous lawsuits, there is little incentive for lawsuit victims to spend time and money seeking sanctions for lawsuit abuse. In fact, as currently written, Rule 11 allows lawyers to entirely avoid sanctions for filing frivolous claims by withdrawing them within 3 weeks. Such a rule actually encourages frivolous claims because personal injury attorneys can file harassing pleadings secure in the knowledge that they have nothing to lose. If someone objects, they can always retreat without penalty.

H.R. 420 would restore mandatory sanctions and monetary penalties under Federal Rule 11 for filing frivolous lawsuits and abusing the litigation process. It would also extend these same protections to cover State cases that a State judge determines have interstate implications and close the loopholes of a tort system that often resembles a tort lottery.

The legislation applies to frivolous lawsuits brought by businesses as well as individuals, and it expressly precludes application of the bill to civil rights cases if applying the bill to such cases would bar or impede the assertion or development of new claims or remedies under Federal, State, or local civil rights law. The Class Action Fairness Act, which was recently signed into law after receiving broad support in both Houses, prohibits the unfair practice of forum shopping for favorable courts when the case is styled as a class action. The same policy should apply to individual lawsuits as well.

One of the Nation's wealthiest personal injury attorneys, Richard ``Dickie'' Scruggs, and I quoted him at length a while ago, but I will quote him a little bit shorter right now, described what he calls ``magic jurisdictions'' as ``What I call the `magic jurisdictions' is where it is almost impossible to get a fair trial if you are a defendant. Any lawyer fresh out of law school can walk in there and win the case, so it does not matter what the evidence or the law is.''

America's system of justice deserves better, much better. H.R. 420 prevents the unfair practice of forum shopping by requiring that personal injury cases be brought only where there is some reasonable connection to the case; namely, where the plaintiff lives or was allegedly injured, where the defendant's principal place of business is located, or where the defendant resides.

The time for congressional action to close the loopholes that create incentives for frivolous lawsuits is now. Too many jobs have been lost and more will not be created if this legislation is not enacted into law.

I urge my colleagues to return a measure of fairness to America's legal system by passing the Lawsuit Abuse Reduction Act.

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AMENDMENT NO. 1 OFFERED BY MR. SMITH OF TEXAS

Mr. SMITH of Texas. Mr. Chairman, I offer an amendment.

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Mr. SMITH of Texas. Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, the bipartisan manager's amendment I am offering today reflects the important contributions of the gentleman from New York (Mr. Nadler) and the gentleman from Virginia (Mr. Scott). It incorporates into the base bill provisions imposing sanctions for the destruction of relevant documents in a pending Federal court proceeding, an amendment setting standards for a court's determination that certain court records should be sealed, and an amendment providing for a presumption on a Rule 11 violation when the same issue is repeatedly relitigated.

This manager's amendment also makes clear that in the antiforum-shopping provisions, if there is no State court in the county in which the injury occurred, the case can be brought in the nearest adjacent county where a court of general jurisdiction is located.

Finally, the manager's amendment makes clear that the legislation does not affect personal injury claims that Federal bankruptcy law requires to be heard in a Federal bankruptcy court. This reasonable request was made by the National Bankruptcy Conference Committee on Legislation.

I urge my colleagues to join me in supporting this bipartisan manager's amendment.

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

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Mr. SMITH of Texas. Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, I rise in opposition to this substitute amendment. And I have to point out that this same substitute amendment was defeated in the last Congress. Mr. Chairman, where to begin. I will begin with the title of the first section of the substitute. It is entitled, ``Three Strikes and You're Out.'' But the title of section 1 does not reflect the text it contains.

In fact, the substitute provides that following three violations of its provisions: ``The court shall refer each such attorney to one or more appropriate State bar associations for disciplinary proceedings.''

The substitute does not say the attorney shall be suspended from the practice of law. However, the base bill explicitly provides for such a sanction. Specifically, the base bill states that after three strikes: ``The Federal district court shall suspend that attorney from the practice of law in that Federal district court.''

The base bill contains a substantive three-strikes-and-you-are-out provision that will prevent attorneys who file frivolous lawsuits from getting into the courtroom. The substitute merely requires that repeat offenders be reported to State bar associations.

But it gets worse. Not only are filers of frivolous lawsuits not out after three strikes under the substitute, but the substitute even changes what constitutes a strike under existing law. Currently, Rule 11 contains four criteria that can lead to a Rule 11 violation.

The substitute references only three. Currently, Rule 11 allows sanctions against frivolous filers whose denials of factual contentions are not warranted on the evidence or are not reasonably based on a lack of information or belief.

The substitute removes this protection for victims of frivolous pleadings under existing law. In addition, the substitute for the first time without penalty allows defendants to file papers with the court that include factual denials of the allegations against them that are not warranted by the evidence and not reasonably based.

Instead, the substitute provides additional protection for defendants filing frivolous defenses that are not warranted by the evidence and not reasonably based.

This is a step backward for victims of frivolous lawsuits under both State and Federal law. So the substitute not only undermines the clarity of the three strikes and you're out rule, it purports to establish, it dramatically expands the potential for even more frivolous lawsuits.

Furthermore, the base bill provides that those who file frivolous lawsuits can be made to pay all costs and attorneys' fees that are ``incurred as a direct result of the filing of the pleading, motion, or other paper that is the subject of the violation.'' The substitute does not include that critical language which is necessary to make clear that those filing frivolous lawsuits must be made to pay the full costs imposed on their victim by the frivolous lawsuit.

The proponent of this amendment claims that the anti-forum shopping standards in H.R. 420 regarding where a personal injury lawsuit can be brought are somehow unfair, even though they are the very same standards contained in the vast majority of State venue laws. In fact, the gentleman from California's own State venue law provides as follows: ``If the action is for injury to person or personal property or for death from wrongful act or negligence, the superior court in either the county where the injury occurs or the injury causing death occurs or the county where the defendants, or some of them reside at the commencement of the action, is the proper court for the trial of the action.''

Insofar as foreign corporations cannot be sued in some limited circumstances in this country, that is not the fault of H.R. 420, nor is it the fault of California's venue law. It is a result of the Supreme Court's interpretation of the Due Process Clause.

Mr. Chairman, the substitute does not provide for three strikes and you're out. It provides for three strikes and you get referred to a State bar association that can continue to let the offending attorney practice law.

The Democratic substitute weakens existing law that protects plaintiffs from defendants that file frivolous denials that are not warranted by the evidence and not reasonably based. This substitute amendment includes provisions that are unconstitutional and penalizes those who would challenge those unconstitutional rules. That is more than three strikes against the substitute, Mr. Chairman, and I urge my colleagues to return it to the bench and vote yes for the job-protecting and job-creating Lawsuit Abuse Reduction Act when it gets to final passage.

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

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Mr. SMITH of Texas. Mr. Chairman, I yield myself 30 seconds.

Mr. Chairman, I want to point out to the gentleman from Wisconsin who just spoke that I could have saved him a lot of time. And I would like to remind him that he might want to take a look at the language of H.R. 420, that it applies just as much to businesses as it does individuals, despite statements to the contrary.

Mr. Chairman, I yield 3 minutes to the gentleman from Utah (Mr. Cannon), the chairman of the Administrative Law Subcommittee of the Judiciary Committee.

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Mr. SMITH of Texas. Mr. Chairman, I yield myself such time as I may consume.

Mr. Chairman, the gentlewoman from California who spoke previously to the gentleman from California who just finished used a couple of words that I would like to return to and clarify. She used the word ``madness,'' but anyone listening to this debate or anyone having a firsthand knowledge of frivolous lawsuits knows that the real madness is the filing of thousands of frivolous lawsuits across this country that unfairly tarnish the reputations of innocent citizens, that unfairly destroy the businesses of small business owners across the country. That is the type of madness that this bill addresses.

She also used the phrase ``special interests,'' but again, I think anyone listening to this debate today and anyone knowing firsthand the agony and the losses and the destruction caused by frivolous lawsuits realizes that the special interests that this bill hopes to protect are really the special interests of the American people who have stuttered and staggered and been burdened by frivolous lawsuits too many times and much too often in our history.

The special interests, if there are any, involved in this legislation again are obvious to those who listened to the debate, the trial lawyers of America; and, Mr. Chairman, let me take a minute here just to dwell on that subject because I happen to believe the vast majority of trial lawyers or personal injury lawyers are honorable people and they are members of an honorable profession.

I think one of the aspects of the debate that most troubles me is, in fact, the lack of sanctioning lawyers who engage in frivolous lawsuits by the Trial Lawyers of America. Their own code of conduct reads as follows: ``No ATLA member shall file or maintain a frivolous suit, issue or position.'' We checked and not a single member of the Trial Lawyers Association, not a single lawyer, had been sanctioned in the last 2 years; and, in fact, no one can even tell us when the last time any attorney was sanctioned for filing a frivolous lawsuit.

I think the trial lawyers would have a lot more credibility on this subject if, in fact, they had monitored their own ranks and, in fact, had sanctioned just a single trial lawyer for filing one of those tens of thousands of frivolous lawsuits that have been filed.

That, as I say, is discouraging; and I hope the Trial Lawyers of America will see fit in the future to sanction some attorney somewhere, somehow who has filed a frivolous lawsuit.

Mr. Chairman, anyone who is worried about what frivolous lawsuits will do to them, their family, their friends or their businesses ought to oppose this substitute amendment. It is an amendment that would do very little to prevent frivolous lawsuits. The underlying bill, however, will deter lawyers from filing those frivolous lawsuits.

Let me give some examples of actual suits that are frivolous, but that would be allowed under the Democratic substitute amendment.

A New Jersey man filed suit against Galloway Township School District claiming that assigned seating in a school lunchroom violated his 12-year-old daughter's right to free speech.

A Florida high school senior filed suit after her picture was left out of the school's yearbook.

An Arizona man filed suit against his hometown after he broke his leg sliding into third base during a softball tournament.

An Alabama person sued the school district after his daughter did not make the cheerleading squad, claiming that the rejection caused her humiliation and mental anguish.

The families of two North Haven, Connecticut, sophomores filed suit because of the school's decision to drop the students from the drum majorette squad.

A Pennsylvania teenager sued her former softball coach, claiming that the coach's incorrect teaching style ruined her chances for an athletic scholarship.

After a wreck in which an Indiana man collided with a woman who was talking on her cell phone, the man sued the cell phone manufacturer.

A Knoxville, Tennessee, woman sued McDonald's, alleging that a hot pickle dropped from a hamburger burned her chin and caused her mental injury.

A Michigan man filed suit claiming that television ads that showed Bud Light as the source of fantasies involving tropical settings and beautiful women misled him and caused him physical and mental injury, emotional distress, and financial loss.

A woman sued Universal Studios trying to get damages because the theme park's haunted house was too scary.

In every one of these instances and in thousands of others, the individuals sued were forced to spend considerable amounts of money, time and effort to defend themselves. This is a travesty of justice, and it is simply wrong.

H.R. 420 will end the filing of frivolous lawsuits. Unfortunately, the substitute amendment will still allow small businesses, churches, schools, hospitals, sports leagues, cities and others to be burdened with these meritless and frivolous claims.

This substitute amendment provides no disincentive to file a frivolous lawsuit. It would still subject small business owners to the cost of frivolous lawsuits and subject individuals to the cost of rising insurance premiums and health care costs that result from frivolous lawsuits.

In other words, Mr. Chairman, this substitute amendment does not provide any relief to those who would be unfairly targeted by frivolous lawsuits. The underlying bill would.

The substitute includes no real consequences for the attorney who repeatedly files frivolous lawsuits. The underlying bill does.

The substitute includes nothing to address the problem of forum shopping which is also a large part of the problem. The underlying bill does.

Mr. Chairman, I urge my colleagues to oppose the substitute amendment and vote ``yes'' on the underlying bill, which, in fact, would deter lawsuit abuse.

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

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MOTION TO RECOMMIT OFFERED BY MR. BARROW

Mr. BARROW. Mr. Speaker, I offer a motion to recommit.

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Mr. SMITH of Texas. Mr. Speaker, I rise in opposition to the motion to recommit.

The SPEAKER pro tempore. The gentleman from Texas (Mr. Smith) is recognized for 5 minutes.

Mr. SMITH of Texas. Mr. Speaker, I oppose this completely irrelevant motion to recommit. First, nothing in H.R. 420, the Lawsuit Abuse Reduction Act, prohibits anyone from being sued for fraud to the full extent of Federal law. Second, the motion to recommit relates to contract claims when the section of the bill that it modifies relates only to personal injury claims.

There is no flaw in the bill that needs to be corrected, but even if there were, the motion to recommit fails to correct it because it relates to contract claims rather than personal injury claims.

Mr. Speaker, I just received a statement of administration policy from the executive office of the President which I would like to read, because it provides a good summary of H.R. 420, the Lawsuit Abuse Reduction Act of 2005. This statement reads as follows:

``The administration supports House passage of H.R. 420 in order to address the growing problem of frivolous litigation. H.R. 420 would rein in the negative impact of frivolous lawsuits on the Nation's economy by establishing a strong disincentive to file such suits in Federal and State courts. Junk lawsuits are expensive to fight and often force innocent small businesses to pay exorbitant costs to make these claims go away. These costs hurt the economy, clog our courts, and are burdening the American businesses of America. The administration believes the bill is a step in the right direction toward the goal of ending lawsuit abuse.''

Mr. Speaker, I urge my colleagues to oppose this absolutely irrelevant motion to recommit and support the underlying bill.

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

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