    [House Hearing, 114 Congress]
    [From the U.S. Government Publishing Office]

                      LAWSUIT ABUSE REDUCTION ACT OF 2015

    =======================================================================

                                    HEARING

                                   BEFORE THE

                       SUBCOMMITTEE ON THE CONSTITUTION

                               AND CIVIL JUSTICE

                                     OF THE

                           COMMITTEE ON THE JUDICIARY

                            HOUSE OF REPRESENTATIVES

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    H.R. 758

                                   __________

                                 MARCH 17, 2015

                                   __________

                               Serial No. 114-15

                                   __________

             Printed for the use of the Committee on the Judiciary

          Available via the World Wide Web: http://judiciary.house.gov

                                          ______

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                           COMMITTEE ON THE JUDICIARY

                       BOB GOODLATTE, Virginia, Chairman
    F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
        Wisconsin                        JERROLD NADLER, New York
    LAMAR S. SMITH, Texas                ZOE LOFGREN, California
    STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
    DARRELL E. ISSA, California          STEVE COHEN, Tennessee
    J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
    STEVE KING, Iowa                       Georgia
    TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
    LOUIE GOHMERT, Texas                 JUDY CHU, California
    JIM JORDAN, Ohio                     TED DEUTCH, Florida
    TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
    JASON CHAFFETZ, Utah                 KAREN BASS, California
    TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
    TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
    RAUL LABRADOR, Idaho                 HAKEEM JEFFRIES, New York
    BLAKE FARENTHOLD, Texas              DAVID N. CICILLINE, Rhode Island
    DOUG COLLINS, Georgia                SCOTT PETERS, California
    RON DeSANTIS, Florida
    MIMI WALTERS, California
    KEN BUCK, Colorado
    JOHN RATCLIFFE, Texas
    DAVE TROTT, Michigan
    MIKE BISHOP, Michigan

               Shelley Husband, Chief of Staff & General Counsel
            Perry Apelbaum, Minority Staff Director & Chief Counsel
                                     ------

               Subcommittee on the Constitution and Civil Justice

                        TRENT FRANKS, Arizona, Chairman

                      RON DeSANTIS, Florida, Vice-Chairman

    STEVE KING, Iowa                     STEVE COHEN, Tennessee
    LOUIE GOHMERT, Texas                 JERROLD NADLER, New York
    JIM JORDAN, Ohio                     TED DEUTCH, Florida

                         Paul B. Taylor, Chief Counsel

                        James J. Park, Minority Counsel

                                C O N T E N T S

                                  ----------

                                 MARCH 17, 2015

                                                                       Page

                                    THE BILL

    H.R. 758, the ``Lawsuit Abuse Reduction Act......................     3

                               OPENING STATEMENTS

    The Honorable Trent Franks, a Representative in Congress from the
      State of Arizona, and Chairman, Subcommittee on the
      Constitution and Civil Justice.................................     1
    The Honorable Steve Cohen, a Representative in Congress from the
      State of Tennessee, and Ranking Member, Subcommittee on the
      Constitution and Civil Justice.................................     5
    The Honorable Bob Goodlatte, a Representative in Congress from
      the State of Virginia, and Chairman, Committee on the Judiciary     9

                                   WITNESSES

    Elizabeth Milito, Senior Executive Counsel, NFIB Small Business
      Legal Center
      Oral Testimony.................................................    11
      Prepared Statement.............................................    13
    Robert S. Peck, President, Center for Constitutional Litigation,
      PC
      Oral Testimony.................................................    23
      Prepared Statement.............................................    25
    Cary Silverman, Partner, Shook, Hardy & Bacon LLP
      Oral Testimony.................................................    44
      Prepared Statement.............................................    46

              LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

    Material submitted by the Honorable Steve Cohen, a Representative
      in Congress from the State of Tennessee, and Ranking Member,
      Subcommittee on the Constitution and Civil Justice.............     7
    Material submitted by the Honorable Ted Deutch, a Representative
      in Congress from the State of Florida, and Member, Subcommittee
      on the Constitution and Civil Justice..........................    66

                                    APPENDIX
                   Material Submitted for the Hearing Record

    Prepared Statement of Ralph Nader................................    95
    Letter from the American Bar Association (ABA)...................    96
    Response to Questions for the Record from Robert S. Peck,
      President, Center for Constitutional Litigation, PC............   100

                      LAWSUIT ABUSE REDUCTION ACT OF 2015

                                  ----------

                            TUESDAY, MARCH 17, 2015

                            House of Representatives

                       Subcommittee on the Constitution
                               and Civil Justice

                           Committee on the Judiciary

                                Washington, DC.

        The Subcommittee met, pursuant to call, at 10:06 a.m., in
    room 2141, Rayburn Office Building, the Honorable Trent Franks,
    (Chairman of the Subcommittee) presiding.
        Present: Representatives Franks, Goodlatte, Gohmert, Cohen,
    Nadler, and Deutch.
        Staff Present: (Majority) Paul Taylor, Subcommittee Chief
    Counsel; Tricia White, Clerk; (Minority) James Park, Minority
    Counsel; and Veronica Eligan, Professional Staff Member.
        Mr. Franks. The Subcommittee on the Constitution and Civil
    Justice will come to order. Without objection, the Chair is
    authorized to declare recesses of the Committee at any time.
    Good morning.
        Currently, Rule 11 of the Federal Rules of Civil Procedure
    sets out one of the most basic requirements for litigation in
    Federal court, that papers filed with a Federal district court
    must be based on both the facts and the law.
        That is to say, anytime a litigant signs a filing in
    Federal court, they are certifying that ``to the best of the
    person's knowledge, information, and belief'' the filing is
    accurate, based on the law or reasonable interpretation of the
    law, and is brought for a legitimate purpose.
        Now, this is a simple requirement, one that both sides to a
    lawsuit must abide by, if we are to properly have a functional
    Federal court system. However, under the current Federal
    procedure rules, there is no requirement that a failure to
    comply with Rule 11 results in sanctions for the party that
    filed that frivolous lawsuit. The fact that litigants can
    violate Rule 11 without penalty significantly reduces the
    deterrent effect of Rule 11.
        This harms the integrity of the Federal courts and forces
    both plaintiffs and defendants to spend money to respond to
    frivolous claims and arguments with no guarantee of
    compensation when the claims against them are found frivolous
    by a Federal judge.
        The Lawsuit Abuse Reduction Act corrects this flaw by
    requiring that Federal district court judges impose sanctions
    when Rule 11 is violated. It will relieve litigants from the
    financial burden of having to response to frivolous claims by
    requiring those who violate Rule 11 to reimburse the opposing
    party reasonable expenses incurred as a direct result of the
    violation.
        Furthermore, the legislation eliminates Rule 11's 21-day
    safe harbor provision, which currently gives litigants a free
    pass to make frivolous claims so long as they withdraw those
    claims if the opposing side objects within 21 days. As Justice
    Scalia correctly pointed out when Rule 11 was gutted in 1933,
    ``Those who file frivolous suits and pleadings should have no
    safe harbor. Parties will be able to file thoughtless,
    reckless, and harassing pleadings, secure in the knowledge that
    they have nothing to lose. If objection is raised, they can
    retreat without penalty.''
        Now although this legislation makes changes to Rule 11, it
    is important to recognize that nothing in this legislation
    changes the standard by which courts determine whether a
    pleading or a filing violates Rule 11. Courts will apply the
    same legal standard they currently apply to determine if a
    filing is frivolous under the rule.
        So in the end, all this legislation really does is make the
    technical and conforming changes to Rule 11 necessary to make
    sanctions mandatory rather than discretionary. Victims of
    frivolous lawsuits are just as deserving of compensation as any
    other victim, and there is no reason those who are the victims
    of frivolous lawsuits in Federal court should be the only
    litigants to go without compensation when they prove their
    injuries in court.
        According to Federal Rules of Civil Procedure, the goal of
    the rules is to ensure that every action and proceeding in
    Federal court be determined in a ``just, speedy, and
    inexpensive'' manner. That goal is best served through
    mandatory sanctions for violating the simple requirements of
    Rule 11 that every filing be based on both the law and the
    facts.
        And finally, this bill has been introduced in the House and
    Senate in previous Congresses. This Congress is different. For
    the first time, this bill has been introduced in the Senate by
    the Chairman of the Senate Judiciary Committee himself, Senator
    Charles Grassley, who is a leading advocate for the rights of
    victims, including the victims of frivolous lawsuits.
        With that, I look forward to hearing from all of our
    witnesses today, and I would now recognize the Ranking Member
    of the Subcommittee, Mr. Cohen from Tennessee, for his opening
    statement.
        [The bill, H.R. 758, follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________

        Mr. Cohen. Thank you, Mr. Chair.
        Today, we consider H.R. 758, titled the ``Lawsuit Abuse
    Reduction Act of 2015.'' It is substantially identical to bills
    we considered in the 112th and 113th Congresses, and we have
    considered even earlier versions of this bill going back at
    least a decade. Given this fact, I have this Bill-Murray-like
    feeling of being here before in Groundhog Day.
        H.R. 758, like its predecessors, is a solution in search of
    a problem that would threaten to do more harm than good, if
    enacted. H.R. 758 would restore the 1983 version of Rule 11 of
    the Federal Rules of Civil Procedure by making sanctions for
    Rule 11 mandatory and eliminating the current safe-harbor
    provision that allows a party to withdraw or correct any
    allegedly offending submission to the court within 21 days
    after service of submission.
        Safe harbor is important. The Chair in his opening remarks
    said it just guarantees that people have recourse. Well, they
    have recourse, but it is up to the judge's determination, and
    it is important that the judge have that discretion, I think.
        Moreover, the bill would go beyond the 1983 rule by
    requiring the court to award these reasonable attorney's fees
    and costs. I am all in favor of Rule 11, and sanctioning
    attorneys that violate such with frivolous lawsuits. But right
    now, they are discretionary, in the court's discretion. And we
    have judges for a reason, and they have more intimate knowledge
    of the facts and the circumstances and the attorneys involved
    in the safe-harbor option.
        No empirical evidence suggests there is a need, really, to
    change Rule 11. In fact, there were good reasons why the
    Judicial Conference of the United States amended the 1983 Rule
    11. And for these same reasons, H.R. 758 is ill-advised.
        The 1983 rule caused excessive litigation. Many civil cases
    had a parallel track of litigation, referred to as satellite
    litigation, over Rule 11 violations, because having mandatory
    sanctions and no safe harbor provisions caused parties on both
    sides to litigate the Rule 11 matter to the bitter end, so
    courts become more loaded with crowded dockets.
        The dramatic increase in litigation spawned by the 1983
    rule not only resulted in delays in resolving the underlying
    case, it increased costs for the litigants, but also strained
    our judicial resources. It is clear H.R. 758 will result in
    more, not less, litigation and impose a greater burden on the
    judiciary.
        Ultimately, the type of Rule 11 sanctions regime that H.R.
    758 envisions will only favor those with the money and
    resources to fight expensive and drawn-out litigation battles.
    H.R. 758 also threatens judicial independence by removing that
    discretion that judges presently have in determining whether or
    not to impose sanctions. It circumvents the painstakingly
    thorough rules-enabling act process by recklessly attempting to
    amend the rules directly, even over the Judicial Conference's
    objections.
        I would like each of our witnesses to tell me a precedent
    where rather than our process being that the courts recommend
    and propose rules and we approve or disapprove, where we in the
    Congress have in the past changed the rules by legislation
    without the courts submitting rules. It is definitely a
    deviation in the process of the judiciary making the rules,
    with the check and balance of the legislature approving or
    disapproving. We can disapprove a rule or recommend, but I
    believe it is extremely rare.
        And I look forward to our experts telling me where the
    legislature has specifically made a law that changed a rule
    without the judiciary coming forth on that.
        We know the 1983 rule had a disproportionally chilling
    impact on civil rights cases, and that is most concerning to me
    and to others. And there is no reason to think H.R. 758 will
    not have such a similar chilling effect.
        We just came through the reenactment of the Selma march. We
    have seen so many failures in our legislative and political
    system, to where we haven't moved forward on civil rights; we
    moved backward. And what happened in Selma, we need to see that
    we have vigorous enforcement of civil rights and voting rights.
    And this could be a chilling effect on civil rights cases that
    depend sometimes on novel arguments for the extension,
    modification, or reversal of existing laws that have brought us
    into the 21st century.
        Not surprisingly, the Federal Judicial Center found that
    the incidence of Rule 11 motions was higher in civil rights
    cases than other type of cases when the 1983 rule was in place,
    notwithstanding the fact that the 1983 rule was neutral on its
    face.
        Even a landmark case like the Brown v. Board of Education
    argument may have been delayed or may not have been pursued to
    its conclusion had our H.R. 758 changes to Rule 11 been in
    effect at the time. Certainly, the legal arguments in that case
    were novel and not based on existing law. At a minimum,
    defendants could have used Rule 11, as amended by H.R. 758, as
    a weapon to dissuade the plaintiffs or weaken their resolve.
        The Judicial Conference of the United States, the
    policymaking arm of the Federal judiciary, opposed legislation
    substantially identical to H.R. 758 last conference. Similarly,
    the American Bar Association in the past, and a coalition of
    groups concerned about justice--the Alliance for Justice,
    Consumer Federation of America, the National Consumer Law
    Center, and the National Employment Lawyers--previously opposed
    the measure.
        I ask unanimous consent to add a letter in opposition sent
    to the Subcommittee by Public Citizen dated March 16 be
    submitted into the record, and I appreciate that.
        Mr. Franks. Without objection.
        [The information referred to follows:]

        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT][

                                   __________
        Mr. Cohen. H.R. 758 takes away judicial discretion, which
    is so needed, and would result in more litigation rather than
    less.
        I urge my colleagues to oppose and yield back the balance
    of nonexistent balance of time.
        Mr. Franks. And I thank the gentleman.
        And I now yield to the Chairman of the Committee, Mr.
    Goodlatte of Virginia.
        Mr. Goodlatte. Well, thank you, Mr. Chairman.
        H.R. 758, the ``Lawsuit Abuse Reduction Act OF 2015,''
    would restore mandatory sanctions for frivolous lawsuits filed
    in Federal court. Many Americans may not realize it, but today,
    under what is called Rule 11 of the Federal Rules of Civil
    Procedure, there is no requirement that those who file
    frivolous lawsuits pay for the unjustified legal costs they
    impose on their victims, even when those victims prove to a
    judge the lawsuit was without any basis in law or fact.
        As a result, the current Rule 11 goes largely unenforced,
    because the victims of frivolous lawsuits have little incentive
    to pursue additional litigation to have the case declared
    frivolous when there is no guarantee of compensation at the end
    of the day.
        H.R. 758 would finally provide light at the end of the
    tunnel for the victims of frivolous lawsuits by requiring
    sanctions against the filers of frivolous lawsuits, sanctions
    which include paying back victims for the full costs of their
    reasonable expenses incurred as a direct result of the Rule 11
    violation, including attorneys' fees.
        The bill also strikes the current provisions in Rule 11
    that allow lawyers to avoid sanctions for making frivolous
    claims and demands by simply withdrawing them within 21 days.
    This change eliminates the free pass lawyers now have to file
    frivolous lawsuits in Federal court.
        The lack of mandatory sanctions leads to the regular filing
    of lawsuits that are clearly baseless. For example, a man sued
    a small-business owner for violations of Federal regulations in
    a parking lot he doesn't own or lease. A woman had her car
    repossessed and then filed a $5 million Federal lawsuit for the
    half tank of gas she had left in the car. A high school teacher
    sued a school district, claiming it discriminated against her
    because she has a phobia, a fear of young children. Her case
    was dismissed by the Equal Employment Opportunity Commission,
    but that didn't prevent her from filing a Federal lawsuit.
        These real yet absurd cases have real-life consequences for
    their victims. But the victims of lawsuit abuse are not just
    those who are actually sued. Rather, we all suffer under a
    system in which innocent Americans everywhere live under the
    constant fear of a potentially bankrupting frivolous lawsuit.
        As the former chairman of The Home Depot company has
    written, an unpredictable legal system casts a shadow over
    every plan and investment. It is devastating for startups. The
    cost of even one ill-timed abusive lawsuit can bankrupt a
    growing company and cost hundreds of thousands of jobs.
        The prevalence of frivolous lawsuits in America is
    reflected in the absurd warning labels companies must place on
    their products to limit their exposure to frivolous claims. A
    5-inch brass fishing lure with three hooks is labeled ``harmful
    if swallowed.'' In a warning label on a baby stroller, the
    caution is ``remove child before folding.'' A sticker on a 13-
    inch wheel on a wheelbarrow warns, ``not intended for highway
    use.'' A household iron contains the warning, ``never iron
    clothes while they are being worn.'' And a cardboard car sun
    shield that keeps sun off the dashboard warns, ``do not drive
    with sun shield in place.''
        In his 2011 State of the Union address, President Obama
    said, quote, ``I am willing to look at other ideas to rein in
    frivolous lawsuits.'' Mr. President, here it is, a one-page
    bill that would significantly reduce the burden of frivolous
    litigation on innocent Americans.
        I thank the former Chairman of this Committee, Lamar Smith,
    for introducing this simple, common-sense legislation that
    would do so much to prevent lawsuit abuse and restore
    Americans' confidence in the legal system.
        I look forward to hearing the testimony of our witnesses,
    and I yield back.
        Thank you, Mr. Chairman.
        Mr. Franks. And I thank the gentleman.
        And without objection, other Members' opening statements
    will be made part of the record.
        So let me now introduce our witnesses. Good morning to all
    of you.
        Our first witness is Elizabeth Milito, the senior executive
    counsel with the National Federation of Independent Business'
    Small Business Legal Center. Previously, she has worked for the
    U.S. Department of Veterans Affairs where she focused on
    employment and labor matters, a former editor of Notes and
    Comments for the Maryland Law Review, and a graduate of the
    University of Maryland's School of Law. Ms. Milito is
    responsible for managing cases and legal work for the NFIB
    Small Business Legal Center and working on labor and employment
    policy.
        Glad to have you here.
        Our second witness is Robert Peck, president of the Center
    for Constitutional Litigation. Mr. Peck has taught
    constitutional law and State constitutional law at the George
    Washington University Law School and American University
    Washington College of Law as a member of adjunct faculty. He is
    a co-chair of the Lawyers Committee of the National Center for
    State Courts, and a delegate in the American Bar Association's
    House of Delegates.
        Welcome, sir.
        Our third witness is Cary Silverman, a partner at the
    Shook, Hardy & Bacon Law firm in Washington, D.C. Mr.
    Silverman's public policy work focuses on civil justice reform,
    and he has published over 25 articles in prominent law
    journals. He is a recipient of the Burton Award for Excellence
    in Legal Writing, and an adjunct professor at the George
    Washington University Law School, where he earned his J.D. and
    master's of public administration.
        Welcome, sir.
        Each of the witnesses' written statements will be entered
    into the record in its entirety, so I would ask that each of
    you summarize his or her testimony in 5 minutes or less. And to
    help you stay within that time, there is a timing light in
    front of you. The light will switch from green to yellow,
    indicating that you have 1 minute to conclude your testimony.
    When the light turns red, it indicates that the witness's 5
    minutes have expired.
        And before I recognize the witness, it is the tradition of
    the Subcommittee that they be sworn, so if you would please
    stand and be sworn.
        Do you solemnly swear that the testimony that you are about
    to give will be the truth, the whole truth, and nothing but the
    truth, so help you God?
        You may be seated.
        Let the record reflect that the witnesses answered in the
    affirmative.
        So I would now recognize our first witness, Ms. Milito.
    And, Ms. Milito, if you would make sure you turn that
    microphone on before speaking.

     TESTIMONY OF ELIZABETH MILITO, SENIOR EXECUTIVE COUNSEL, NFIB
                      SMALL BUSINESS LEGAL CENTER

        Ms. Milito. Thank you, Mr. Chairman, and distinguished
    Subcommittee Members for inviting me to provide testimony
    regarding the impact lawsuits, and particularly frivolous
    lawsuits, have on small businesses.
        While specific stories of lawsuit abuse vary from business
    to business, there is one reoccurring theme: This country's
    legal climate hinders economic growth and hurts job creation.
        Due to this, NFIB's members and small-business owners
    throughout the country are fed up with the inability to pass
    meaningful legal reform. When it comes to lawsuits and small
    business, today I wish to highlight four things.
        First, small businesses are easy targets for frivolous
    lawsuits. Sophisticated attorneys do not sue NFIB members.
    Instead, small businesses are more likely to be sued by
    smalltime lawyers, who threaten cookie-cutter lawsuits that are
    expected to be settled immediately.
        One of the most prevalent forms of lawsuit abuse occurs
    when plaintiffs or their attorneys are merely trolling for
    cases. A plaintiff or an attorney will travel from business to
    business, looking for violations of a particular law. In such
    cases, the plaintiff is generally not as concerned with
    correcting the problem as she is with extracting a settlement
    from a small-business owner. In many instances, the plaintiff's
    attorney will initiate the claim, not with a lawsuit, but with
    a demand letter, requesting immediate settlement.
        In California, attorneys have been known to rake in several
    million dollars a year fleecing small-business owners with
    these sorts of schemes. Ann Kinner, who owns Seabreeze Books &
    Charts in Point Loma, California, is one such small-business
    owner and an NFIB member who has been targeted by frivolous
    litigation.
        Kinner's store has been sued twice for ADA violations. She
    went to court, fought, and won both these lawsuits. But the
    defense has cost her $10,000, money she could have used, in her
    words, to pay a new employee for half a year. In Kinner's
    words, ``The only people who win in these cases are the
    lawyers.''
        Two, small businesses settle and avoid going to court. When
    a conflict arises, small businesses or the insurer on their
    behalf will likely pay rather than fight a claim, whether there
    is a meritorious defense or not. Calculating attorneys know
    that they can extort settlements from small businesses by
    threatening to sue. Small businesses simply cannot absorb the
    costs of a legal battle as easily as larger businesses or, for
    that matter, the cost of paying damages if they should lose in
    the end.
        This means that, in many cases, the small-business owner
    may be risking financial ruin if the owner refuses to settle.
    Since there is no guarantee that, at the end of the fight, the
    defendant will prevail, small-business owners often rationally
    opt to avoid the costs of litigation by agreeing to settle
    claims that they believe to be without merit. Indeed, they will
    rationally decide to settle cases where they realize that the
    probable cost of litigation will exceed the benefit of winning
    in court.
        Three, small businesses pay more to fight frivolous claims.
    While NFIB members are loath to write a check to settle what
    they perceive to be a frivolous claim, they express as much, if
    not more, frustration with the time spent defending against a
    lawsuit. In the end, of course, time is money to a small-
    business owner.
        Once the suit is settled, however, the small-business owner
    will pay with higher insurance premiums. Typically, it is a
    fact that the small-business owner settled a case, for any
    amount, which drives up the insurance rates. It does not matter
    if the business owner was ultimately found liable.
        Many small-business owners understand this dynamic and, as
    a result, will settle claims without notifying their insurance
    carrier. As such, small businesses annually pay over $35
    billion out of pocket to settle these claims.
        Four, small businesses support common-sense legal reform
    like H.R. 758. In crafting solutions here, we must acknowledge
    the practical circumstances of the small-business owner
    threatened with protracted legal battle. Regardless of whether
    the plaintiff's claims are meritorious, the small-business
    owner faces a difficult, and often impossible, dilemma: Settle
    or risk everything.
        For this reason, NFIB has championed the Lawsuit Abuse
    Reduction Act, which focuses on tightening sanctions for
    frivolous lawsuits. This is the best reform, to date, to rein
    in the bottom feeders that target small business.
        Simply put, NFIB believes that this bill will help
    disincentive both plaintiff and defense attorneys from taking
    brash and cavalier legal positions that result in frivolous and
    protracted litigation.
        We are hopeful through your deliberations you can strike
    the appropriate balance to protect those who are truly harmed
    and the many unreported victims of our Nation's civil justice--
    America's small businesses.
        Thank you very much, and I look forward to answering any
    questions you might have.
        [The prepared statement of Ms. Milito follows:]

       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   __________
        Mr. Franks. Thank you, Ms. Milito.
        And I now recognize our second witness, Mr. Peck. Please
    turn on your microphone, sir, before speaking.

                TESTIMONY OF ROBERT S. PECK, PRESIDENT,
                CENTER FOR CONSTITUTIONAL LITIGATION, PC

        Mr. Peck. Thank you, Mr. Chair.
        The 1983 rule was a failed experiment that caused some of
    the strongest judicial advocates of mandatory sanctions to
    reverse course and support its internment. Judge William
    Schwarzer, who also served as head of the Federal Judicial
    Center, originally supported the changes but later saw that it
    was used for tactical purposes, multiplied proceedings, caused
    waste and delay, and increased tensions between the parties. It
    made the job of judges harder.
        The Judicial Conference, which opposes this legislation,
    has told this Committee that the 1983 experiment spawned a
    cottage industry of tremendously wasteful satellite litigation
    that was all about strategic gamesmanship. It is a typical
    defense tactic to take a case away from the substance of the
    dispute, delay resolution, and outwait the patience and
    resources of the injured party who is desperate to be
    compensated for his or her injuries.
        The mandatory nature of the 1983 version encouraged this.
    The discretionary nature of the current rule caused much of
    that churning to evaporate.
        Many lawsuits have multiple counts. Success on any one of
    them is success. The 1983 version of Rule 11 had the perverse
    effect of causing post hoc review of the counts that did not
    succeed, resulting in sanctions against the prevailing parties.
    A discretionary approach to sanctions allows a judge to
    separate the wheat from the chaff and only sanction when
    warranted.
        Sometimes a novel but difficult cause of action fails, but
    helps illuminate the merits of a sister cause of action pleaded
    together. As I stated in my written testimony, both Brown v.
    Board of Education and National Federation of Independent
    Business v. Sebelius, the Obamacare challenge of 2012, would
    likely have faced Rule 11 motions under the 1983 regime, but
    not under the current approach.
        The switch to the 1993 rule did not cause frivolous
    lawsuits to be filed. Judges have reported that little changed
    in filings, and, in fact, they may have improved.
        Truly frivolous cases are still sanctioned. Judges have the
    same authority that this bill would require of them, and the
    requirement of making it mandatory sort of indicates that
    judges, who really have very little patience for someone who
    wastes their time and are ready to invoke sanctions, are
    basically not trusted to act with the discretion that the
    current rule allows. They have that authority, and they can
    award attorneys' fees and costs under the current regime.
        Sanctions are not always the best result. The distrust I
    mentioned is exacerbated by the distrust of the process set out
    by the Rule's Enabling Act. Rather than allow the courts to
    determine how to govern their own proceedings, H.R. 758 would
    directly amend Rule 11, cutting the judiciary out of the
    process altogether. It is not hard to imagine the protests that
    this body would make if the judiciary did the same as to how
    Congress conducted its own proceedings.
        Despite claims that civil rights cases, in particular, were
    not adversely affected once judges got the hang of the 1983
    rule, the devastating impact on civil rights cases was
    palpable. The drop off could be explained by fewer cases, only
    the slam-dunks being filed, because of fear of sanctions.
        Even if advocates are right, that judges eventually are
    going to be less harsh on civil rights cases, we have a new
    generation of judges now who would go through the same growing
    pains that the 1983 version had, thereby harming the
    constitutional right of access to the courts.
        The safe harbor language in H.R. 758 for civil rights in
    statuary-based claims does nothing to alleviate the problem. It
    merely repeats the same standard that applies to all cases,
    regardless of how the lawsuit is filed.
        I suggest that today's Iqbal and Twombly standard for
    pleadings sufficiently protects against ill-considered
    lawsuits, making the comparisons between 1983 and 1993
    academic. The plausibility standard basically supercharges the
    1993 rule.
        I urge the Committee to reject this proposal, which seeks
    to return to what Professor Stephen Burbank accurately
    described as an irresponsible experiment with court access. Its
    enactment will only expose Americans to more harmful products
    and misconduct by diminishing the opportunity to hold those
    responsible accountable.
        We would not know about the ignition switch defect in GM
    vehicles that took lives if the 1983 rule, the rule that this
    bill would re-establish, was in effect, because the case was
    filed on a theory that there was a problem with the steering
    wheel. Compulsory discovery unearthed the ignition switch
    problem.
        In addition, this legislation would add to the cost of
    litigation, not lower it, as the vast number of cases affected
    will not be sanctionable.
        The double counting, wildly inaccurate figures this
    Committee received that purport to reflect the cost of the tort
    system instead reflect the cost to maintain the insurance
    system plus the money that goes into it. It does not provide
    helpful or relevant information.
        Judges and attorneys overwhelmingly, plaintiff and defense,
    support the rule as it is written today. I urge you not to
    alter it.
        [The prepared statement of Mr. Peck follows:]

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        __________
        Mr. Franks. Thank you, Mr. Peck.
        And I would now recognize our third and final witness, Mr.
    Silverman.
        And, sir, if you would make sure that microphone is on.

                 TESTIMONY OF CARY SILVERMAN, PARTNER,
                        SHOOK, HARDY & BACON LLP

        Mr. Silverman. Good morning, Mr. Chairman, Ranking Member
    Cohen, and Members of the distinguished Subcommittee. Thank you
    for the opportunity to present testimony today on behalf of the
    U.S. Chamber's Institute for Legal Reform.
        The civil justice system is established to provide a remedy
    to a person who was wrongfully injured, to make that person
    whole. But what happens when the system is misused to harm
    someone, when it is transformed from righting a wrong to
    inflicting one? This happens when a person files a lawsuit to
    harass or extort someone, ``I'll sue you.'' It also happens
    when a lawyer takes a reckless or cavalier attitude, deciding
    to sue first and then research the law or investigate what
    actually occurred later.
        Now victims of frivolous lawsuits have no meaningful
    remedy. They are not made whole for the very real losses that
    they incur as a result of a wrongful act. It is a problem that
    stems from the Federal rules.
        The simple act of filing a short, plain statement of the
    claim, all that is needed to file a complaint, compels the
    person on the receiving end to respond. For an ordinary person
    or a small business, as Ms. Milito has shown, that means
    quickly hiring a lawyer and finding the money to pay the lawyer
    for his services. Lawyers are expensive. Dealing with the
    lawsuit means time away from work and lost income. It is
    stressful.
        Most of your constituents would be shocked to learn that,
    if they are hit with a lawsuit that has no basis whatsoever in
    law or fact, they have near zero chance of recovering a penny
    of their expenses, even if they can prove to a judge that the
    case was baseless or brought in bad faith, even if the case is
    certain to be thrown out.
        This is how Rule 11 works in practice. You can be the judge
    of its fairness.
        Let us say John Small is served with a $100,000 lawsuit by
    a tourist who claims that while visiting D.C. 2 years earlier,
    he tripped and fell in the 5th and N Street market. John has no
    recollection of this person or anyone else falling in his
    store. John now needs to hire an attorney to defend his family
    and his business from the lawsuit. The attorney quickly
    discovers that the plaintiff visited a store across town at 5th
    and N Northeast, not John's store at 5th and N Northwest.
        Nevertheless, the plaintiff's lawyer will not drop the
    claim. ``Let the court sort it out,'' he says. John's attorney
    tells his client that he should be able to get the case
    dismissed.
        Best-case scenario, John is looking at about $12,000 in
    legal fees for the cost of the initial investigation, preparing
    an answer, preparing a motion to dismiss, and appearing at any
    status conferences and hearings.
        The only way to seek recovery of his expenses is to file a
    motion for sanctions. This seems worthwhile to John until he
    learns three facts about Federal Rule 11.
        First, his attorney must draft a motion for sanctions,
    separate from the motion to dismiss, and share it with the
    plaintiff's lawyer before he can file it. This is more lawyer
    time and money, maybe about $5,000.
        Once the plaintiff's attorney receives the motion, he can
    then choose to withdraw the lawsuit. A judge will never see the
    motion. John will not have his day in court to ask for
    reimbursement. The plaintiff's lawyer walks away without
    consequence. The motion and money spent goes in the trash.
        Second, even if the plaintiff's attorney continues to
    pursue the lawsuit and the judge actually finds the case
    frivolous, the court may choose not to impose any sanction at
    all.
        Third, if the court does find a sanction appropriate, the
    rule prohibits the judge--we were talking about discretion
    here--the rule prohibits the judge from using sanctions for the
    purpose of reimbursing John's legal expenses. The court could
    simply require the plaintiff's lawyer to pay a small penalty to
    the court to deter future misconduct. That is what the rule
    says.
        The plaintiff's lawyer has asked for $10,000 to make the
    case go away, an amount just under the cost of litigation.
    John's attorney will give him three options. Option one, let us
    try to settle this case for $5,000 without incurring more costs
    for you, and you can move on with your life and your business.
    Option two, let us fight this lawsuit and be vindicated, but
    you will have to pay at least $12,000 in unrecoverable legal
    fees to get it dismissed. Third, let us seek dismissal and
    sanctions. You will incur closer to $20,000 in legal fees but
    you will have a very small chance of recovering some of them.
        Individuals, business owners, and their insurers routinely
    face this choice. Most settle and cut their losses. Some fight
    for dismissal on principle. Very few seek sanctions today.
        What choice would your constituents make?
        LARA restores a remedy for victims of lawsuit abuse and
    ensures that judges have an opportunity to consider whether
    claims and defenses are frivolous.
        Thank you.
        [The prepared statement of Mr. Silverman follows:]

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                             __________

        Mr. Franks. Thank you all for your testimony. We will now
    proceed under the 5-minute rule with questions, and I will
    begin by recognizing myself for 5 minutes.
        Ms. Milito, we hear anecdotal stories of small businesses
    being forced to settle lawsuits for $5,000 or $10,000, not
    because there is any merit to the plaintiff's case, but because
    it is simply cheaper to settle than to defend against a
    lawsuit.
        In your experience, in addition to your testimony, can you
    elaborate? Does this occur? And if so, will the Lawsuit Abuse
    Reduction Act change this reality for at least some cases
    brought in or removed to Federal court?
        Ms. Milito. Thank you for that question, Mr. Chairman, and
    yes, absolutely.
        The passage of the bill would benefit small-business owners
    in many ways, and I want to go back to actually your word in
    your opening statement about the deterrent effect of the bill,
    and that is really so important. The business owners whom I
    represent and speak with on a near daily basis don't want to be
    in court, period. They don't want to be threatened with a
    lawsuit, but they don't want to be in court, period.
        And the simplicity of this bill is just that it is going to
    force attorneys, again both plaintiff attorneys and defense
    attorneys, to do their homework, and, as you said, before they
    file a paper in court, ensure that it is based on facts and
    law.
        I think it will really do a lot to deter these kinds of
    frivolous claims that might lead to a lawsuit, and deter
    attorneys from making these settlement demands, because of
    knowing that they can't file a suit afterwards, a frivolous
    claim afterwards. So I think it will have a very big impact on
    small businesses.
        Mr. Franks. Thank you.
        Mr. Silverman, recently, a prominent consumer advocate,
    Ralph Nader, described the Lawsuit Abuse Reduction Act as,
    quote, ``evenhanded,'' in that it would apply sanctions to both
    plaintiffs and defendants when they make frivolous claims or
    defenses.
        Can you help me understand why a gentleman with the
    perspective of Ralph Nader would describe this bill as, quote,
    ``evenhanded''?
        Mr. Silverman. Well, Mr. Chairman, I think that even very
    knowledgeable people sometimes have the misconception that Rule
    11 only applies to frivolous claims brought by plaintiffs. But
    Rule 11 is actually an extremely balanced rule.
        If you look at its text, it applies to victims of frivolous
    litigation on both sides. It applies to any pleading, written
    motion, or other paper, whether it is filed by a plaintiff or a
    defendant. And a plaintiff's factual contentions must have
    evidentiary support, just as a defendant's claims of denial of
    facts must be based on evidence. Claims and defenses must be
    warranted by existing law.
        Plaintiffs can't file lawsuits to harass others, just as
    defendants cannot use delay tactics for purposes of litigation.
    That is all covered by Rule 11, and I think if you look at the
    case law between 1983 and 1993, you will see many cases, many
    Rule 11 sanctions, brought against defendants, as well.
        Mr. Franks. Thank you, sir. Let me just follow up.
        One of the concerns raised by mandatory sanctions is that
    they will potentially chill plaintiffs from being able to bring
    legitimate cases. Isn't the bar fairly high, in terms of what
    the courts would consider a frivolous claim? I mean, a
    frivolous claim isn't frivolous simply because the plaintiff
    loses. Can you elaborate on that?
        Mr. Silverman. Thank you, Mr. Chairman. Yes, that is
    correct.
        Plaintiffs with legitimate claims really should have no
    concern about LARA. Rule 11 sets a very high standard for a
    violation. It is not simply losing on a motion to dismiss.
    There has to be either an improper purpose shown--harassment or
    delay. There has to be no basis in fact, or no basis even after
    a legitimate chance for discovery, and no basis in the law or a
    reasonable argument for a change in the law.
        And judges have significant discretion under the current
    rule and under LARA to decide whether those standards apply.
    Judges are lawyers, too, and they are very reluctant to impose
    sanctions on a party's lawyer for not meeting these standards.
    They take a very hard look and take the responsibility very
    seriously.
        Mr. Franks. Well, thank you. And I will now yield 5 minutes
    to Mr. Cohen for questions.
        Mr. Cohen. Thank you, Mr. Chair.
        First, I asked each of you to consider telling me when
    there had been another instance where the Congress had
    initiated a law, a rule, without the courts requesting it.
        Ms. Milito, can you give me an example?
        Ms. Milito. I cannot and I would be happy to----
        Mr. Cohen. Mr. Silverman, can you give me an example?
        Mr. Silverman. Well, Mr. Cohen, there are examples----
        Mr. Cohen. What are they?
        Mr. Silverman [continuing]. Of situations where Congress
    has intervened when they found that fee shifting is supported
    by public policy. And those are not in the rules themselves,
    but they are in the statutes.
        Mr. Cohen. The answer is no. The answer is no. You know of
    no rule that has been passed this way.
        Mr. Silverman. No rule.
        Mr. Cohen. Mr. Peck?
        Mr. Peck. The only time that Congress has ever suggested
    any kind of procedural change is when it is intermingled with a
    new substantive cause of action. No general rules.
        Mr. Cohen. Thank you, sir.
        Ms. Milito, in your statement, you said, quote, unquote,
    ``Smalltime lawyers bring these cases.'' As a self-practicing
    attorney, and I know lots of them, how do you define
    ``smalltime lawyer''?
        Ms. Milito. I am talking about the lawyers that are
    printing out form complaints and maybe only changing the
    business name. Lawyers that are not doing their homework before
    they file a----
        Mr. Cohen. I would submit to you, that is--I don't know
    what you meant, but ``smalltime lawyer'' I find offensive to
    many lawyers who have small practices, who are smalltime
    businesspeople. They are small-business people and they work
    hard, and they work by the rules, and they bring cases, and
    they don't boilerplate. I would submit that you should try to
    find a better term than ``smalltime lawyers.''
        Ms. Milito. My intent was not to offend any attorneys. We,
    certainly, have many members at NFIB who are attorneys, and we
    have members at NFIB who----
        Mr. Cohen. Thank you. Thank you very much.
        Ms. Milito [continuing]. Practice plaintiff----
        Mr. Cohen. Mr. Peck or anybody else here, are you all
    familiar with the examples that the Chair gave about an ironing
    board warning that you shouldn't iron while clothes are on? And
    a fishing lure that you shouldn't ingest it? Or a wheelbarrow
    shouldn't be on the highway? Did the courts order that, because
    of a smalltime lawyer or some other lawyer that went into court
    and got some kind of a judgment? Or is that just a manufacturer
    being overboard?
        Mr. Peck. I am not aware of any case where liability was
    assessed for the failure to provide a warning of that nature.
        What we have found in studies that have been published in
    various law reviews is that often when these warnings appear,
    they are the result of in-house counsel making a suggestion to
    their company, saying, ``Let's use something like this so that
    there is no chance anyone can get it wrong.'' This is, of
    course, over-lawyering.
        Mr. Cohen. Mr. Silverman, the American Bar Association and
    the Federal Judicial Conference both oppose LARA. Neither are
    known to be great apologists for trial lawyers or smalltime
    lawyers. In the 2005 Federal Judicial Center, more than 80
    percent of judges who responded agreed that Rule 11 is just
    right in its current form. Only 5 percent favored the 1983
    revision.
        Why should Congress not defer to the judgment of the
    judiciary?
        Mr. Silverman. Mr. Cohen, Rule 11 is different, and LARA is
    different than other Federal rules. Unlike other rules that
    deal with changing the number of days for filing a complaint or
    an answer, how many interrogatories you can have, time limits,
    et cetera, it is not a purely procedural rule. This is a rule
    that deals with providing rights and remedies of people. It is
    something that Congress does----
        Mr. Cohen. I know what Rule 11 is, but the courts are all
    against it. If the Judicial Conference is against it, and the
    Bar Association is against it, why should we go against the
    expert logic and come up with something that----
        Mr. Silverman. They weren't against it when the rule was in
    effect. If you look back, there was a 1990 study where 95
    percent of judges said, and this was a survey of all of the
    judges, and 75 percent actually responded. Ninety-five percent
    said it did not impede development of the law. Three-quarters
    said that the benefit in deterring frivolous lawsuits and
    compensating those who are harmed outweighed the use of
    judicial time to decide the motions. And 4 out of 5 said it had
    a positive effect on litigation.
        Now, there are other studies, which others have cited here,
    and those are later. They are small----
        Mr. Cohen. And the Judicial Conference 3 years later
    recommended a change.
        Mr. Silverman. They did recommend the change----
        Mr. Cohen. But they don't recommend a change now. But you
    are submitting we should go against the Judicial Conference
    now?
        Mr. Silverman. The Judicial Conference knows a lot about
    the procedures, the mechanics of the courts, but this is an
    area that involves rights and remedies. And it is a good
    place----
        Mr. Cohen. This is an area where we should forget the
    courts and appeal to the thoughts of the public that think all
    judges are bad, that all government is bad, and we should kill
    the judges. This is what you are saying, that we shouldn't
    listen to the judges on this; we should listen to the public
    that says the judges are bad, the lawyers go first, and all
    that.
        Mr. Silverman. That is--that is----
        Mr. Franks. Mr. Silverman, you didn't say anything about
    killing the judges, did you?
        Mr. Silverman. I certainly did not.
        Mr. Franks. I just wanted to----
        Mr. Cohen. Shakespeare did that.
        Mr. Silverman. In fact, I would like more discretion than
    they have today to look at these cases.
        Mr. Cohen. Ms. Milito, small business said this is a very
    minor problem they have. They rated it, in surveys, the lower
    three or four out of 75 problems that they had with business.
    Cost and frequency of lawsuits, threatened lawsuits, was 71st
    out of a possible 75 in a survey taken in 2012 by the NFIB.
        Why is it such an important issue when it is 71st out of
    75?
        Ms. Milito. I am going to start off with a quote Mr.
    Silverman used in his testimony. Judge Learned Hand said, ``I
    should dread a lawsuit beyond almost anything short of sickness
    and death.'' If today you were told you had a terminal illness,
    I bet it would become your number one problem and priority. And
    as with a lawsuit, most of the members I speak with don't even
    think of it until it is staring them in the face.
        Mr. Cohen. Well, Ms. Milito, I don't have cancer right now,
    but I am concerned about it, and I am frightened of it and the
    prospect in the future of all the illness. And I think if it
    was a major thing for small business because it could happen,
    it would rank higher than 71st out of 75th.
        And I yield back the balance of my time.
        Mr. Franks. And I thank the gentleman.
        I now recognize Mr. Nadler, the gentleman from New York,
    for 5 minutes.
        Mr. Nadler. I thank you.
        Mr. Peck, one of the points against LARA is that it makes
    sanctionable, arguably, the use of novel legal theories, which
    could be considered frivolous, and that implicates, in
    particular, civil rights lawsuits. The Committee report from
    last Congress cited the case Nicole ``Nikki'' Youngblood, who,
    ``filed suit after her picture was left out of the school
    yearbook when she refused to wear a feminine drape instead of a
    shirt and tie as she wished,'' as an example of a frivolous
    claim.
        To date, there are 14 States with laws that address
    discrimination against students based on gender identity. While
    the majority clearly considered Nikki to be an example of a
    frivolous lawsuit, might this be an example of a valid civil
    rights claim worthy of judicial consideration? Doesn't this
    highlight the potential chilling effect on civil rights claims?
    And by the same token, might the claim in Loving v. Virginia on
    mixed-race marriages or, in fact, when the same-sex marriage
    case brought before the Supreme Court, I forget how many
    decades ago, was dismissed as absurd. And now the Supreme Court
    has ruled differently.
        Might all of these things be barred and sanctionable under
    LARA, under this bill?
        Mr. Peck. It is entirely possible that they would be. We
    often get fractured versions of the facts that underlie cases
    when they are used as examples like this. But let me give you
    two examples from my own experiences, two cases that I am
    currently working on.
        In one, I am representing the City of Miami in a Fair
    Housing Act case that it brought against various banks. Los
    Angeles has also brought similar cases. In Los Angeles, the
    cases are in Federal Court. The ruling was against the motion
    to dismiss and the cases are going to trial. In Miami, the
    judge found a precedent that not even the banks had cited and
    said that there is no basis for the city to have standing here
    and that this was a frivolous argument.
        If this rule was in effect, the City of Miami would have
    been sanctioned for bringing this suit, which is approved by a
    U.S. Supreme Court case, which upheld the standing of
    municipalities to bring these kinds of lawsuits. We are now in
    the 11th Circuit on that case.
        A second case that I want to bring up, on Saturday, I
    received a petition for certiorari. Actually, it was two
    petitions for certiorari filed by Walmart out of a Pennsylvania
    case. These are cases in which Walmart lost wage and hour class
    actions, but they are not sure whether they are supposed to be
    appealing from the Pennsylvania Supreme Court's decision or the
    Pennsylvania Superior Court, so they filed two petitions for
    certiorari and asked the court to sort out what they should do,
    in an abundance of caution.
        If LARA were in effect, it would seem mandatory that one of
    those petitions was frivolous.
        Mr. Nadler. Thank you. Let me just ask, before I switch to
    a different topic, such lawsuits as Citizens United v. Federal
    Election Commission, the District of Columbia v. Heller on the
    Second Amendment, Commonwealth of Virginia v. Sebelius that
    went to the Supreme Court on the Affordable Care Act, could not
    all these cases have been considered frivolous and
    sanctionable, given the novel legal theories underlying them?
    All these cases, of course--well, go ahead.
        Mr. Peck. Yes. And you know, in each of those instances,
    people made claims that the theory behind them was ridiculous,
    was frivolous. And as a result, even in the Obamacare case, you
    had law professors urging the government to seek sanctions.
        If this mandatory rule were in effect, they would seek
    sanctions, and we would have seen hearings on the sanctions
    rather than----
        Mr. Nadler. Okay, thank you. And talking about hearings on
    the sanctions, during the decade that the 1983 version of Rule
    11 was in effect, which this bill would seek to reinstate, at
    least a quarter of all cases of the Federal civil docket were
    burdened by Rule 11 proceedings that did not result in
    sanctions. Almost every case had two cases, a sanctions case as
    well as the underlying case.
        Based on our experience with the 1983 version of the rule,
    and for that matter with the 1993 revision, do you think that
    this bill, if enacted, God forbid, would lead to a lot more
    rather than less litigation?
        Mr. Peck. It is not only my judgment but it is the judgment
    of the Judicial Conference.
        Mr. Nadler. So the Judicial Conference judged that this
    would be increasing litigation, increasing court costs for all
    involved.
        Let me ask Mr. Silverman, on what basis are they wrong? And
    how are we making the whole system cheaper by increasing
    litigation, so that every lawsuit, a large majority of
    lawsuits, have Rule 11 hearings and litigation appended to
    them?
        Mr. Silverman. Mr. Nadler, thank you. It is a pleasure to
    be before you today as Brooklyn native, so I want to thank you
    for your service.
        Satellite litigation, there was a lot of concern about
    that. I understand those concerns. And some of it----
        Mr. Nadler. There was a reality to it, not just a concern.
        Mr. Silverman. Some of it stemmed from the change in the
    rule in 1983. It was very different before that.
        But there are a couple of factors I would ask you to
    consider. First, I think we have to look at why is a Rule 11
    motion different from other types of motions that the courts
    decide every day. If you look at any Federal court docket,
    there are going to be motions for summary judgment, for
    dismissal, for expert testimony, issues for venue,
    jurisdiction, what have you.
        Judges decide those motions in the routine course of
    business, and if they find that it lacks merit, as with a Rule
    11 motion, all they have to say is one word, ``denied,'' and
    they move on with it.
        I think we also should consider the alternatives to
    allowing the motion, which is a system where a person who
    believes they were harmed by a frivolous lawsuit or defense has
    no way of bringing that before the judge.
        In terms of the satellite litigation issue and the numbers
    I have seen, I know in Mr. Peck's testimony and I have seen it
    cited in other places, that there were something like 7,000
    sanctions motions in the period where the stronger rule was in
    effect. But you have to look at that in context. That was over
    a 10-year period. There were almost 700 Federal judges.
        Mr. Nadler. My time has expired. I want to say one sentence
    in response to what you said, and that is the reason it is
    different is that a motion to dismiss or motion for summary
    judgment is on the same underlying questions, whereas a Rule 11
    proceeding is an entirely different question than the
    underlying questions. So it is a whole different fact
    consideration.
        I yield back. Thank you.
        Mr. Franks. And I would, certainly, defer to the
    gentleman's expertise in novel legal theories.
        And I would now recognize gentleman from Florida, Mr.
    Deutch, for 5 minutes.
        Mr. Deutch. Thank you, Mr. Chairman.
        Mr. Peck, can we just back up for a second? When the Rules
    Advisory Committee amended Rule 11 in 1993, it gave courts
    discretion to impose sanctions, and noted that the purpose of
    the sanctions was to deter bad conduct, not to reward the other
    party.
        Why did the Rules Advisory Committee give courts this
    discretion, which this bill would take away? And why was the
    purpose deterrence rather than compensation?
        Mr. Peck. Well, first of all, the courts do not want
    frivolous filings, and so that is the reason for the deterrence
    factor. And what the Committee did was say, here the filing of
    these motions are something that we will determine but not
    every motion and every filing is necessarily of the same
    nature. They don't have the same qualities to it. They may be
    better remedied by instruction to the jury that they are
    allowed to infer something because of this filing. And that
    often can be more devastating to a case than not. So there is
    flexibility because different sanctions are appropriate for
    different types of filings.
        But second of all, the courts retain inherit power to shift
    costs, if they want to. So it didn't have to be in the rules,
    and courts continue to use that power.
        Mr. Deutch. And then looking ahead, Mr. Silverman, you had
    cited a survey to support the 1983 version, a survey from 1991.
    But obviously, at this point, we acknowledge that the Judicial
    Conference opposes restoring mandatory Rule 11 sanctions.
        Federal judges overwhelmingly support Rule 11 as it
    currently exists. Your study is from 1991, which you use to
    show that the old system worked. But in 2005, the Judicial
    Center issued a report entitled, ``Report of a Survey of U.S.
    District Judges' Experiences and Views Concerning Rule 11.''
    More than 80 percent of the judges said that Rule 11 is needed
    as is, is just right, and is just right as it now stands.
    Eighty-seven percent of the judges who responded preferred the
    current version of Rule 11. And just 5 percent preferred the
    version of Rule 11 that existed between 1983 and 1993. And only
    4 percent preferred the version of Rule 11 as proposed in the
    Lawsuit Abuse Reduction Act.
        Ninety-one percent opposed the requirement that sanctions
    be imposed for every Rule 11 violation. And 84 percent
    disagreed with the proposition that an award of attorney's fees
    should be mandatory for every violation. Eighty-five percent
    believe that the amount of groundless civil litigation has not
    grown since the promulgation of the 1993 rule.
        Before getting to the question, Mr. Chairman, I ask for
    unanimous consent to submit the 2005 Federal Judicial Center
    report in the record.
        Mr. Franks. Without objection.
        [The information referred to follows:]

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                                   __________

        Mr. Deutch. I appreciate that.
        So other than your statement before that this is something
    you would like Congress to address, why should we consider the
    1991 results relevant when in 2005, with a lot of experience,
    the judges who actually deal with Rule 11 have determined that
    it works the way it is now?
        Mr. Silverman. I appreciate your question. I think it is
    important to look at the 1991 survey, not just because it was
    the most extensive of the surveys that had been conducted, but
    because these were judges who actually had several years'
    experience with the former rule.
        The 2005 survey, half of the judges that were included
    never actually were--they were appointed after the new rule,
    the current rule, was in effect. So they never saw how the
    rule----
        Mr. Deutch. They didn't know. The overwhelming majority of
    judges, 87 percent who prefer the current version, since some
    of them had only become judges since the rule changed, their
    opinions don't matter on this?
        Mr. Silverman. Actually, there are two areas where I think
    all of the surveys are consistent. I think they are consistent
    even if you look at the 2005 and the 1995 and the older one I
    cited, all the judges say that a compensatory function,
    compensatory----
        Mr. Deutch. Mr. Silverman, I am sorry. I am running out of
    time.
        But I just want to be clear. I am not looking for
    consistency in the surveys. I am trying to understand why we
    should discard the overwhelming support for the system the way
    it is now, moving forward.
        But let me just finish with Mr. Peck.
        Mr. Peck, you had raised some concerns about what this
    change would do to civil rights cases and you mentioned Brown
    v. Board of Education. Could you elaborate a bit on how that
    case, in particular, might have been impacted if this change
    had been in place then?
        Mr. Peck. As you know, the issue was whether separate was
    not really equal. And the evidence that was produced in the
    case showed that the Topeka, Kansas, schools were actually
    substantially equal, in facility, in quality of teachers, in
    the curriculum, in what they provided to both Black and White
    children. Robert Carter, who served as a Federal district court
    judge in New York for many years, was part of that litigation
    team.
        It was his judgment that if the 1983 version of it was in
    effect, Brown would have received sanctions. They would have
    been fearful of bringing the case and may have waited another
    10 years before it happened.
        Mr. Deutch. Right.
        And, Mr. Chairman, this country would look very different
    than it does today. I thank you, and I yield back.
        Mr. Franks. I thank the gentleman.
        And I thank all of you. And this would conclude today's
    hearing.
        Without objection, all Members will have 5 legislative days
    to submit additional written materials and written questions
    for the witnesses, or additional materials for the record.
        We would again thank the witnesses and the Members and the
    audience.
        With that, this hearing is adjourned.

        [Whereupon, at 11:02 a.m., the hearing was adjourned.]

                                A P P E N D I X

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                   Material Submitted for the Hearing Record

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     Response to Questions for the Record from Robert S. Peck, President,
                    Center for Constitutional Litigation, PC

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