Congressional Record, Volume 141 Issue 41 (Monday, March 6, 1995)

[Congressional Record Volume 141, Number 41 (Monday, March 6, 1995)]
[House]
[Pages H2663-H2703]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

ATTORNEY ACCOUNTABILITY ACT OF 1995

The SPEAKER pro tempore. Pursuant to House Resolution 104 and rule
XXIII, the Chair declares the House in the Committee of the Whole House
on the State of the Union for the consideration of the bill, H.R. 988.
The Chair designates the gentleman from Ohio [Mr. Hobson] Chairman of
the Committee of the Whole, and requests the gentleman from Florida
[Mr. Goss] to assume the chair temporarily.

{time} 1438

in the committee of the whole

Accordingly, the House resolved itself into the Committee of the
Whole House on the State of the Union for the consideration of the
bill, H.R. 988, to reform the Federal civil justice system, with Mr.
Goss, Chairman pro tempore, in the chair.
The Clerk read the title of this bill.
The CHAIRMAN pro tempore. Pursuant to the rule, the bill is
considered as having been read the first time.
Under the rule, the gentleman from California [Mr. Moorhead] will be
recognized for 1 hour, and the gentleman from Michigan [Mr. Conyers]
will be recognized for 1 hour.
The Chair recognizes the gentleman from California [Mr. Moorhead].
Mr. MOORHEAD. Mr. Chairman, I yield myself such time as I may
consume.
(Mr. MOORHEAD asked and was given permission to revise and extend his
remarks.)
Mr. MOORHEAD. Mr. Chairman, I rise in support of H.R. 988, the
Attorney Accountability Act of 1995.
It is widely believed that the American legal system no longer serves
to expedite justice and ensure fair results. It has become burdened
with excessive costs and long delays. For many people, especially
middle and lower income litigants, justice is often delayed and as a
result is often denied. For instance, in 1985, the percent of civil
cases over 3 years old in Federal district courts was 6.6 percent. Five
years later that figure grew to 10.4 percent.
In addition to excessive costs and long delays, the American legal
system has been hurt by an overreliance on litigation. According to
Judge Stanley Marcus, chairman of the Judicial Conference Committee on
Federal-State Jurisdiction,

If present trends continue, the federal courts' civil
caseload will double every fourteen years, and in the twenty-
eight years between 1992 and 2020 the compounded effect of
that doubling and redoubling will raise the annual number of
civil cases commenced from roughly 226,000 per year to nearly
840,000 per year.
Judge Marcus went on to observe that

Under current workload standards this volume of litigation
would require an enormous increase in the number of district
judges and circuit judges, transforming the existing nature
of the federal judicial system virtually beyond recognition.

The overuse of litigation imposes tremendous costs upon American
taxpayers, businesses, and consumers. H.R. 988 will begin the process
of restoring accountability, efficiency, and fairness to our Federal
justice system.
H.R. 988 addresses these concerns in three ways. First, it sets up a
settlement-oriented loser-pays-attorney's-fee mechanism that rewards
reasonable parties who negotiate to settle claims prior to trial. If
either side rejects a settlement offer and goes on to win something
less at trial, that side would be liable for attorney's fees and court
costs. However, it is important to note that the awarding of attorney's
fees under this section is not automatic. If the judgment is anywhere
in between the last offer and counteroffer of settlement existing 10
days or more before trial, the traditional American rule applies and
each side bears its own costs and fees. There are also two exceptions
to the mandatory requirement that a court award costs and attorney's
fees under this section. The first exception would allow the court to
exempt certain cases based upon express findings that the case presents
novel and important questions of law or fact and that it substantially
affects nonparties. The second instance where a court would not be
required to award costs and attorney's fees, would be when it finds
[[Page H2664]] that it would be manifestly unjust to do so. This
provision was drafted by my colleague from Virginia, a member of the
Courts and Intellectual Property Subcommittee, Mr. Goodlatte. I would
like to commend him for his hard work and leadership on this important
issue.
Second, the bill would limit the admissibility of scientific
testimony of expert witness. It would make a scientific opinion
inadmissible unless it: First, Is scientifically valid and reliable;
second, has a valid scientific connection to the fact it is offered to
prove; and third, is sufficiently reliable so that the probative value
of such evidence outweighs the dangers specified in rule 403.
The dangers specified in rule 403 are ``unfair prejudice, confusion
of the issues, or misleading the jury.'' What we intend to do here is
to codify a relatively recent Supreme Court case of Daubert versus
Merrell Dow Pharmaceuticals (1993). That case overruled the 70-year-old
common law test enunciated in Frye versus United States (1923) that
expert scientific opinion was admissible only if it were based on
techniques that were ``generally accepted'' by the scientific
community. The Daubert court held that the common law rule of
``generally accepted'' by a scientific community had been superseded by
the new rule 702 and ``generally accepted'' was just one of several
standards that should be used when a judge considers the admissibility
of scientific testimony.
The value of the Daubert decision is that the court spoke extensively
about how rule 702 should be applied. What we are trying to do here is
to cut back on the possibility of distorted scientific evidence from
being introduced into a Federal trial of civil litigation. We do this
by shifting the burden of proof, whereas under present law the
presumption is in favor of admitting expert scientific testimony,
however, under H.R. 988 such testimony is presumed to be inadmissible
unless certain standards are met.
Third, H.R. 988 would amend rule 11(c) of the Federal Rules of Civil
Procedure relating to the sanctions a Federal judge may impose against
lawyers who file frivolous lawsuits or engage in abusive litigation
tactics.
Although Federal courts have always had the authority to sanction
frivolous pleadings and papers, the early judicial, statutory, and
procedural guidelines were very vague, and sanctions were extremely
rare. Speaking before the 1976 National Conference on the Causes of
Popular Dissatisfaction with the Administration of Justice, then-Chief
Justice Burger noted with alarm the

Widespread feeling that the legal profession and judges are
overly tolerant to lawyers who exploit the inherently
contentious aspects of the adversary system to their own
private advantage at public expense.

In 1990, the Judicial Conference's Advisory Committee on Civil Rules
undertook a review of the Rule and asked the Federal Judicial Center
[FJC] to conduct an empirical study of its operation and impact. The
study found that a strong majority of federal judges believe that:
First, The old rule 11 did not impede development of the law--95
percent; second, the benefits of the rule outweighed any additional
requirement of judicial time--71.9 percent; third, the old rule 11 had
a positive effect on litigation in the Federal courts--80.9 percent;
and fourth, the rule should be retained in its
then-current form--(80.4 percent).

Despite this clear judicial support for a strong rule 11, in 1991,
the Civil Rules Advisory Committee included provisions to weaken the
1993 rule in a broader package of proposed amendments to the Federal
rules. The proposed changes were then sent to the Supreme Court for
approval or modification.
Exercising what it viewed to be a limited oversight role, the Supreme
Court approved the proposed changes without substantive comment in
April 1993. In a strongly worded dissent on rule 11, Justice Scalia
correctly anticipated that the proposed revision would eliminate a
``significant and necessary deterrent'' to frivolous litigation:

[T]he overwhelming approval of the Rule by the federal
district judges who daily grappled with the problem of
litigation is enough to persuade me that it should not be
gutted.

H.R. 988 makes several important changes to rule 11. First, it
reestablishes a system of mandatory, as opposed to discretionary,
sanctions. That is if a judge finds that a lawyer has filed a frivolous
lawsuit or otherwise abused the system and if it's warranted the judge
shall award attorney's fees to the abused party. Second, it mandates
the use of attorney's fees as part of the sanction. Third, it puts a
bigger emphasis on the rule's compensatory function by clarifying that
sanctions should be sufficient to deter repetition and to compensate
the parties that were injured.
All of these changes make good, common sense. Mandatory sanctions
send a clear message that abusive litigation practices will not be
tolerated by our judicial system or the judges who form its core.
Appropriate monetary sanctions, including the award of attorney's fees,
also help in deterring abuse and provide some recompense for parties
that are harmed by sanctionable misconduct.
Fourth, H.R. 988 would eliminate the so-called safe harbor provision
of the current rule, which permits a lawyer or litigant to withdraw a
challenged pleading, without penalty, prior to the actual award of
sanctions. As Justice Scalia noted in his dissent to the Court's
transmission of the new rule 11 to the Congress,

Those who file frivolous suits and pleadings should have no
``safe harbor.'' The Rules should be solicitous of the abused
and not of the abuser. Under the revised rule, parties will
be able to file thoughtless, reckless, and harassing
pleadings, secure in the knowledge that they have nothing to
lose * * *

Fifth, it would return to the pre-December 1993 practice of applying
rule 11 to discovery abuses. An empirical study conducted by the
American Judicature Society suggested that discovery made up over 19
percent of the motions that were filed under the old rule 11. It is
important to sanction discovery abuses just as it is important to
sanction abuses at any stage of the litigation process.
By so doing the public has a sense of fairness in the knowledge that
abusive practices will not be tolerated by our justice system.
Mandatory sanctions also prevent judges from going easy on lawyers who
break the rules. Most judges do not like imposing punishment when their
duty does not require it, especially on their own acquaintances and on
members of their own profession. This is human nature.
Mr. Chairman, in conclusion, I believe it is important to point out
that we have over 850,000 lawyers in this country. Of these very, very
few ever step foot into a courtroom. And of those who do, the vast
majority do not file frivolous lawsuits or otherwise abuse the system.
In fairness to my profession and in fairness to the vast majority of
lawyers in this country, this legislation and my comments are not
directed at them. They work hard and they participate fairly and they
make an important contribution to this country and to our system of
justice. This legislation is intended to make an impact on those few
lawyers who do take advantage and abuse and misuse the system for their
own private benefit. Rule 11 sanctions are to be implemented and like
other types of clear penalties in our civil and criminal justice
system, are intended to send an unambiguous message that abusive
conduct from lawyers will not be tolerated.
I urge a favorable vote on H.R. 988.

{time} 1445

Mr. Chairman, I reserve the balance of my time.
Mr. CONYERS. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, when the loser-pays provision was unveiled, it was part
of the controversial Contract With America. Now we know that H.R. 988
is really part of the Republican majority's contract with corporate
America. And reading the fine print of this provision makes clear that
the average American citizen is not a party to the contract.
This bill, and all of the other bills we debate this week on civil
justice reform are drafted from a single point of view: the corporate
defendant's. All these bills seek to cut out the plaintiffs' right to
bring cases in the first place by either eliminating who you can sue,
where you can sue, or how much you can receive in compensation for harm
suffered.
If this bill really strived in a neutral fashion to penalize
frivolous lawsuits
[[Page H2665]] or to discourage the filing of clearly unmeritorious
cases, no one in this Chamber would have any trouble supporting this
proposition. But when the bill is clearly drafted to deter middle-
income persons from pursuing reasonable claims in court and placing
them at a severe disadvantage with risk-free parties, such as large
corporations whose legal fees are normally deducted as a business
expense, then I have great objection to this legislation.

We are told that the motivation behind the loser-pays provision is
the tremendous number of frivolous lawsuits filed every day in America.
But the proponents offer no empirical data to support their claims.
They did not in the committee, perhaps there will be some arriving here
today.
The so-called explosion in litigations throughout the 1980's and
1990's upon examination we find was brought by corporations suing other
corporations or domestic relations suits, it was not an explosion of
product liability actions or medical malpractice actions, or of tort
actions in general.
It is notable that the new majority of Republicans are eager to
embrace the so-called English rule just as prominent voices in England
are calling increasingly for the abandonment of the rule in that
country itself.
In a January 14 editorial, the conservative British magazine, The
Economist, called for the abandonment of the rule because ``only the
very wealthy can afford the costs and risks of most litigation'' under
the English rule.
I continue to quote, ``This offends one of the most basic principles
of a free society: equality before the law.''
This comes from England, not from the United States. It is clear that
the loser-pays provision in H.R. 988 fails to distinguish between
frivolous cases and reasonable cases in which liability is closely
contested, and thus will deter many, particularly middle-income
citizens and small businesses, from pursuing reasonable claims for
defenses.
As one scholar has noted, for a middle-income litigant facing some
possibility of an adverse fee shift, defeat may wipe him out
financially. The threat of having to pay the other side's fee can loom
so large to be intimidating in the mind of a person without
considerable disposable assets that it deters the pursuit of even a
fairly promising and substantial claim for defense.
It is intimidating to have such a proposal now brought before the
Congress to become part of our law.
Middle-income parties and small businesses may have to place their
very solvency on the line in order to pursue a meritorious claim. And
frequently in tort cases we do not know what a meritorious claim is
because the evidence might determine a case becoming a big winner or a
total loser. The burden of proof in a civil case is preponderance of
the evidence often described as the amount of evidence that shifts the
scale, if even only slightly, from the point of balance. A middle-
income plaintiff confronted with a written offer to settle under
section 2 of this bill must settle at that point, must settle at that
point unless he or she is willing to assume the risk of payment of the
other side's attorney's fees, and for a middle-income plaintiff who
would be financially ruined by such an award, the calculus becomes in
effect whether it is reasonable beyond doubt that they will prevail.
That is a pretty high standard, and it is notable that the States
often referred to as the laboratories of democracy have not in any
significant numbers perceived the English rule to be an appropriate
measure for their court systems, nor do I.
The Florida experience, in which doctors first demanded the English
rule and then demanded that it be abolished, should be a reminder to us
that unintended consequences often overtake the intended ones,
particularly when we act hastily and without thoughtful deliberation.
Mr. Chairman, I reserve the balance of my time.
Mr. MOORHEAD. Mr. Chairman, I yield 8 minutes to the gentleman from
Pennsylvania [Mr. Gekas].
Mr. GEKAS. Mr. Chairman, I thank the gentleman for yielding me this
time.
Mr. Chairman, the gentleman from California quite adequately
described the provisions that are to appear for general debate and then
during the 5-minute rule for amendment. The gentleman from Michigan is
worried about the English rule. I think we ought to set the stage for
the debate that is yet to come by at least an attempt by this Member to
give a kind of a historical development of how we reached this point. I
will not start with William and Mary or 1066 or the Battle of Hastings
or 1215 or any of those historical dates, but I will start in this
House of Representatives when long ago, I say to the gentleman from
Michigan, we abandoned the English rule, even in the drafting of our
loser pays provisions as they appear in this bill. So that should be
noted.
But for the public, let us talk about this for a minute and for the
record.

{time} 1500

Loser pays is a concept that pleases the American people who are
watching our court system disintegrate before their very eyes. Loser
pays simply says to our people that if a claimant goes into court, has
his lawyer file a suit that is totally frivolous, but does so for the
purpose of trying to get a settlement from a company that is not
willing to go to court but knowing that the case is not worth anything
but just to get them off their backs, offers something and the
plaintiff walks off with a windfall, something that they could not have
earned in court but because of the system they are able to get a
settlement, well, people look askance at that, and it is causing a
great tremor in our justice system.
So we thought about that. Many people favor the concept of loser
pays. It says that if a claimant comes into court with a frivolous
claim, let us assume, just for the moment, one of these claims that has
very little basis in law or fact, but is known to generate an offer
from the insurance company representing the other side, just for the
sake of getting that person off their back, the loser pay context says
that if that case should go into court and the defendant insurance
company and the others say:

We are not going to pay you a penny of blackmail or
extortion type or pressure type of damages; you take us to
court. We do not care, but if you lose under the loser pays,
you are going to have to pay the attorney fees and costs that
it cost us to come to court and defend this lawsuit.

And vice versa, if the plaintiff makes a bona fide claim of $100,000
and the defendant insurance company says it is not worth a darn when it
really is and they know that they are stiffing the plaintiff by not
agreeing to negotiate for settlement and they dare to go into court,
and the plaintiff does win the $100,000 or something akin to it, then
the defendant should pay the attorney's fees and costs.
So that is what loser pays is all about. Should we have something
like this in the current situation? Should we try to modify that?
Should we try to bring loser pays into the American judicial system?
Because right now we have what is called the American system. The
American system is you go to court and each pays his own attorney's
fees and costs and there are some rare cases where, by reason of a
statute, attorney's fees have to be paid by the losing party, et
cetera. But generally that American rule allows each party to pay or
forces each party to pay his or her own attorney's fees and costs, et
cetera.
So now, where are we? The English rule says loser pays no matter what
happens in court. The loser has to pay the attorney's fees and costs of
the other party. We found some objection even among the lawyers in the
Committee on the Judiciary on that.
I point this out to the gentleman from Michigan, and it is astounding
that it is the gentleman from Michigan, because what I have to say
touches upon his own State. When we decided that we had to have some
kind of loser pays but something that makes sense, we adopted, the
gentleman from Virginia [Mr. Goodlatte], the gentleman from South
Carolina [Mr. Inglis], and I and others, reformulated, as did the
gentleman from California [Mr. Moorhead] and his staff, reformulated
rule 68. So those of you who would condemn loser pays are also
condemning, if you condemn loser pays in its generic form, in its broad
form, you are also condemning rule 68 as it now
[[Page H2666]] applies to the rules in the rules of Federal procedure.
So those who condemn loser pays are not even satisfied with what has
already been a Federal rule for a long time, rule 68, which is a
modified form of loser pays.
Now, further, our modification modifies further the modification that
appears in rule 68 of the Federal rules of civil procedure. So do not
give us this rhetoric about you are opposing loser pays unless you also
oppose rule 68 and are not satisfied with the judicial conference and
its promulgation of its rules as it applies to loser pays.
We already have loser pays. We are trying to perfect it.
And you know what rule I want to see applied, I say to the gentleman
from Michigan? Is the gentleman from listening to me?
I want to apply the Michigan rule which, for a long time, has had
loser pays in the State and it works, and it is loser pays. Do you, in
your condemnation of loser pays and the English rule, are you ready to
concede that the rule 68 in Federal rules of civil procedure, and the
Michigan rule which is a modification of that, are acceptable modes
projecting loser pays? That is what the debate is going to be about.
We feel we have come up with a thoughtful analysis
of loser pays, and to try to get these parties to negotiate to
reduce the number of frivolous debates, of frivolous suits that are
filed, and try to get people to come to the middle of offer of
settlement so that these cases would not have to clog up the docket and
the negotiations would be fostered.

Here is the idea, when the plaintiff demands $100,000 and the
defendant says, ``I can only pay $50,000,'' then if the verdict comes
in somewhere between the two, each one has to pay his own costs. If it
comes in over $100,000 where the defendant could have settled for 100,
then the defendant has to pay the costs. If it comes in under $50,000
where the defendant has to pay now more than they have conjured up that
it had to pay, it should also have to pay the attorneys fees and the
costs.
The plaintiff would have to do that if it is under $50,000. That is a
reasonable way to do it.
And the Michigan rule, which I would like to see occur and which I
will debate under the 5-minute rule, is this, I say to the gentleman
from Michigan, the claimant offers to settle for $100,000. The
defendant says no, $50,000 is enough. Well, that strikes immediately
under my amendment the number 75,000, and if the verdict comes in at
90,000, then the defendant has to pay the costs. If it comes in under
75, the plaintiff has to pay the costs.
What we are trying to do is drive these people into a negotiating
mode in which the reasonable middle area would be found for possible
settlement of the case so that the loser would pay and keep the case
out of court.
We have a thoughtful approach to this, and I will reject the rhetoric
of you are against loser pays because you are against the present law
if you are against loser pays.
Mr. CONYERS. Mr. Chairman, I yield 6 minutes to the gentleman from
Virginia [Mr. Scott].
Mr. SCOTT. Mr. Chairman, I thank the gentleman for yielding this time
to me.
I just have a couple of comments to make. First is on the sanctions.
Many plaintiffs bring the cases on a contingent fee. If you lose the
case, if the lawyer brings such a case and does not win, whether it is
frivolous or not, if he does not win he does not get paid a fee at all.
That is certainly a sanction.
If the case is, in fact, frivolous, the present law already provides
significant sanctions.
There have been recent improvements in that law, and we need to let
them play out to make sure they work.
There have been no complaints, or very few complaints, about the
present law as it has been improved, and in terms of the loser pays,
Mr. Chairman, that is a good sound bite but it is just not good sound
policy. It will have the effect of denying the average citizen access
to the courts.
The corporations who are suing each other, obviously their attorneys
fees can be a cost of business, if they are defending or bringing cases
against individuals, it can be a cost of doing business.
Our courts ought to be a place where citizens can have their rights
vindicated and resolve those differences. If we have the loser pays, we
are going to have a significant situation where the average citizen
will not have access to the courts.
Mr. GEKAS. Mr. Chairman, will the gentleman yield?
Mr. SCOTT. I yield to the gentleman from Pennsylvania.
Mr. GEKAS. Mr. Chairman, on that point, I tried as strenuously as I
could, and I ask the gentleman, does he reject rule 68 of the Federal
rules of civil procedure which is a current law which is a type of
loser pays?
Mr. SCOTT. It is my understanding if you bring a frivolous lawsuit,
then you can have attorneys fees assessed against you. I agree with
that if it is frivolous. I am not supporting frivolous cases. A lot of
cases that are not frivolous, it is a close call. You do not know the
people are going to lie about the color of the red light, and you lose
your case because of that. That is not a frivolous case.
Mr. GEKAS. It still remains, under your definition, to determine
whether or not it is frivolous, but you would favor loser pays in that
situation?
Mr. SCOTT. I would favor loser pays as a sanction against a frivolous
lawsuit, but not against a meritorious law suit.
Mr. GEKAS. Nobody does.
Mr. SCOTT. If someone in good faith, if someone brings a good-faith
lawsuit, they ought not be threatened in the way this loser pays
threatens them if it is a close call, and you lost a close case, you
not only lose your case, lose all you are putting into the case, you
lose your house, lose your kids' education for having dared to come
forward with a case that was meritorious, you just did not win. I do
not agree with loser pays to put people into bankruptcy for having
dared to come into court to vindicate their rights in good faith.
Mr. GEKAS. Mr. Chairman, if the gentleman will yield further, if we
are to demonstrate to the gentleman from Virginia that none of the
thoughtful, reasonable loser pays provisions that we are projecting
does anything except militate against frivolous suits----
Mr. SCOTT. Reclaiming my time, that is not what it is.
Mr. GOODLATTE. Mr. Chairman, will the gentleman yield?
Mr. SCOTT. I yield to the gentleman from Virginia.
Mr. GOODLATTE. Mr. Chairman, I thank the gentleman for yielding.
First, let me say is it not that the situation a defendant is placed in
right now, they have absolutely no choice about being brought into
court? They are made a defendant, and even whether the case is
frivolous or has a close call, they have to bear risk, they have to
bear attorneys' fees, no matter what their background is. They may be
poor, they may be middle class, they may be a small business, they may
be a large business. They still have to bear that risk.
In a contingent fee case, you see the ads in the paper all the time
now, no fee if no recovery. No risk is the message, and do you not
think there should be something on that situation that the plaintiff
has to look at?
Mr. SCOTT. I would say the present law provides if people have a bona
fide claim they want to bring to court, they have their rights they
want vindicated, if they have been ripped off by a business, if they
are trying to get money they loaned to somebody and they want to get it
back, there are technicalities in the law they may not be able to get
it back. Whatever the reason they are in court vindicating their
rights, they ought to be able to come forward without having to bet
their house and kids' education on the outcome.
Mr. Chairman, I only have a short period of time, and all that I am
asking, Mr. Chairman, is we not change this law, we not force people
into a situation where they have to bet their house in order to get
what they deserve. That is not right.
This bill ought to be defeated. The courts are not only for those
that can bet tens of thousands of dollars on the outcome, it is for
average citizens that can come into court to vindicate their rights.
Mr. MOORHEAD. Mr. Chairman, I yield 10 minutes to the gentleman from
Virginia [Mr. Goodlatte].
[[Page H2667]] Mr. GOODLATTE. I thank the chairman for yielding and
for his hard work on this bill, which I think is a very good bill.
I rise in strong support of it. This bill has three provisions, all
of which are geared toward bringing more common sense to our legal
system.
The first deals with the losing party in a lawsuit under certain
circumstances paying the winning party's attorneys' fees, limited to
just 10 days before trial, through the trial, limited to not exceeding
the amount they paid their own attorney and limited by other discretion
given to the judge; I think this is eminently reasonable and allows the
award of attorneys' fees only in cases where they party who is the
losing party, whether it is the defendant or the plaintiff, is
unreasonable, or has a frivolous action or a nonmeritorious action.
I would say to the gentleman from Virginia that he recognizes that
this, even taking his point of view, is a substantial improvement over
the loser pays provision that was in the bill from his point of view.
He voted for this amendment in the committee.
Mr. SCOTT. Mr. Chairman, will the gentleman yield?
Mr. GOODLATTE. I yield to the gentleman from Virginia.
Mr. SCOTT. I will acknowledge that your amendment in committee made
the bill less worse than it is.
Mr. GOODLATTE. Thank you.
Mr. SCOTT. I will also acknowledge that you have to try the
meritorious good suits and the frivolous suits under the same
procedure, and people coming into a lawsuit do not know whether they
are going to lose in many occasions, and ought not be, when discussing
whether they are going to bring the suit or not----
Mr. GOODLATTE. The gentleman's point is correct. The same thing is
true of a defendant, whether that be an individual, regardless of their
economic background, whether that be a small business person whose
business could be lost, the bringing of the lawsuit imposes risk upon
that party; it does not impose risk upon the plaintiff.
Now this changes that in this respect, it says that if the party, if
a suit is filed, and the parties negotiated in good faith, then the
losing party in those negotiations will be responsible for the
prevailing party's attorneys' fees limited, as I described earlier,
when it occurs that the losing party's recovery in the case either
being a verdict against them or a verdict lower than the amount that
was offered by the defendant occurs, and it just seems to me in every
single case this would apply the defendant or the plaintiff if they do
not prevail is shown to have had: First, a nonmeritorious case, and
second, not to have prevailed in the case, to not having been
reasonable in the case. For example, if the plaintiff sues the
defendant for $100,000, the defendant offers the plaintiff $50,000, the
plaintiff turns that down and goes into court, if they get an award
greater than $50,000 but less than the $100,000 they sued for, there is
going to be no award of attorneys fees; if they get something less than
$50,000 and they were up at $100,000, they were unreasonable in their
negotiations and they should be required to compensate the reasonable
party that in good faith offered to settle the case or a defendant who
feels there is no merit to the case and offers to dismiss the case
because it has no merit and they insist on going into court, they ought
to suffer some exposure for liability and not simply have the system we
have right now where it is estimated, here is an article by George
McGovern of all people just published in the news very recently.

{time} 1515

This was just published in the newspapers just recently, ``America
Must Curb Its Lawsuit Industry.'' He says:

First, we must put a stop to the frivolous and fraudulent
lawsuit. It has been estimated at a meeting of the American
Board of Trial Advocates that a fourth of all the lawsuits
filed in the United States are either frivolous or
fraudulent. Another study by Harvard University on medical
injury and malpractice litigation found that 80 percent of
the participants in those suits suffered no real injury as a
result of medical negligence. Attorney sanctions should be
strengthened to keep frivolous or fraudulent cases out of
court.

Mr. McGovern speaks from his own personal experience. He started a
business in Connecticut. He had a small hotel there, and, after
successfully defending against two slip-and-fall cases at the hotel,
discovered that, while he was successful in defeating each one of these
cases that did not have merit, he in each case spent large sums of
money defending the case which never should have been brought in the
first place.
So, Mr. Chairman, it seems to me that we are being entirely
reasonable and we are doing this for the benefit of all parties
involved, plaintiffs and defendants, and, more importantly, we are
doing this for the benefit of consumers because, if we use this to
encourage settlement of cases, to cut down on the amount of litigation,
to cut down on the amount of court time, and, if we can use this to
encourage or discourage the bringing of frivolous suits and fraudulent
suits, the price of goods and services are going to be reduced in this
country because anybody who offers a product for sale has to factor
into the price that they sell that product for the insurance they pay
and the other legal costs they have attendant to that, and in addition,
Mr. Chairman, the cost of insurance would be reduced if these cases
could be screened out.
This is an effective mechanism for screening them out, and I urge the
passage of this bill.
Mr. GEKAS. Mr. Chairman, will the gentleman yield?
Mr. GOODLATTE. I yield to the gentleman from Pennsylvania.
Mr. GEKAS. Mr. Chairman, I am glad that the gentleman is taking some
time in general debate because I want to debate early between ourselves
the negotiations that the gentleman and I have been carrying on and
what the final formulation might be if the loser pays.
I say to the gentleman, ``You and I had discussed, even before
markup, the possibility of utilizing the Michigan rule, to which I
referred to before. In that case let me give the hypothetical and see
if you agree. I offer--as a claimant I claim $100,000, and you, the
defendant, offer $50,000, just like in your example that you gave the
gentleman from Virginia. But in applying the Michigan rule, which I
looked upon with favor, if we stopped there and were hard set that
those two figures, and it moves into trial, the figure, for the purpose
of loser pays, becomes the median between the two at $75,000. So then,
if the verdict comes in at $76,000 or above $75,000, then the defendant
has to pay all the costs.''
Correct; under the Michigan law?
Mr. GOODLATTE. That is correct.
Mr. GEKAS. And if it comes under $75,000, at $62,000, or $73,000, or
whatever, then the plaintiff would have to pay the--because the median
figure was not met.
Now I know the gentleman agrees with me when I say to him and I say
to the Members, ``This stimulates and urges negotiation because, when
we're sitting on the other side of the table, you and I, and I'm at
$100,000, and you're at $50,000, and we know that $75,000 is going to
be the point at which the attorneys' fees costs are going to be
relegated, then maybe I will--well, look, I'll settle for $87,500, or
you move it up to $62,500, that type of thing.''
Mr. Chairman, does the gentleman agree with me that that does
stimulate a negotiation?
Mr. GOODLATTE. I would agree it stimulates negotiation.
Let me say that the concern I have is that the difference between the
Michigan rule that the gentleman is articulating very accurately here
and the bill, as it is currently drafted, is that under the current
circumstances only when the Plaintiff meets or exceeds the amount of
their demand will they get attorney fees. Only when the defendant keeps
the plaintiff below the amount of their settlement offer will the
defendant get attorney fees, and in the area in between that $50,000 to
$100,000 no one, no party, pays the other party's attorney fees as the
bill is written.
I say to the gentleman, ``You would make it razor sharp by saying, if
it's 75 thousand and one dollar, the plaintiff prevails, and the
defendant pays his attorney fees. if it's $75,999, the defendant
prevails, and the plaintiff pays his attorney fees,'' and I really
don't think the merit of whether or not a case was reasonable ought to
fall on one dollar. That can never happen.
Mr. GEKAS. Will the gentleman yield further?
[[Page H2668]] Mr. GOODLATTE. Let me finish this. That can never
happen under the circumstances we currently have in this bill because,
if it got that close together, $1, or even $1,000, or $5,000, the way
the bill is written they will close that up. They will not go to court
over a difference of a few dollars. But in the gentleman's case they
are between $50,000 and $100,000, and they will often decide that it is
not fair to go to court. It will put more pressure on them to settle
because of that razor sharp limitation, but in the end the decision
will be made based on the difference of $1, and that is the hesitation
I have with that----
Mr. GEKAS. Mr. Chairman, will the gentleman yield further?
Mr. GOODLATTE. I yield to the gentleman from Pennsylvania.
Mr. GEKAS. That razor would be brought down on the neck of the
$50,000 to $100,000 proposal that the gentleman and I are using as an
example, and even under the main language of the bill, because if the
verdict is $49,999, are we not making an arbitrary cut there as to who
is----
Mr. GOODLATTE. Reclaiming my time, Mr. Chairman, the gentleman is
correct, but the difference is that in my case the plaintiff is at
$100,000 in the case, and the defendant is at $50,000 in their
settlement offer, so if the plaintiff recovers $49,999, if the
gentleman will, the plaintiff was off by $50,000 in terms of their
offer, and there is that $50,000 gap between when one side has to pay
attorney fees and when the other side has to pay attorney fees. In the
gentleman's case there was a $1----
The CHAIRMAN. The time of the gentleman from Virginia [Mr. Goodlatte]
has expired.
Mr. MOORHEAD. Mr. Chairman, I yield 2 additional minutes to the
gentleman from Virginia.
Mr. GEKAS. Mr. Chairman, will the gentleman yield?
Mr. GOODLATTE. I yield to the gentleman from Pennsylvania.
Mr. GEKAS. Mr. Chairman, what we are really saying--I do want to
predict how the argument is going to go later when the amendment
process begins.
The gentleman is saying that the present language, not the Michigan
rule, but the present language, is more likely to deter frivolous suits
because the gap between the $49,999 and the $100,000 is so great that
that proves that the plaintiff should not recover because it is more or
less frivolous or----
Mr. GOODLATTE. I do not know that it is more likely to deter
frivolous suits, but I do think it is more fair in the sense that one
dollar should not decide the difference between who gets attorney fees
and who does not, and that is the effect of that adding that additional
point in there in the Michigan----
Mr. GEKAS. If the gentleman would yield further, I would be willing
to talk to the gentleman from Virginia on the other side, and the
gentleman from North Carolina on the other side, and the gentleman from
Michigan at a sidebar following the general debate to see which of the
two approaches, assuming that they are going to have to accept, or at
least recognize, the possibility that loser pays is going to find its
way into this law, to see which of these two approaches they would find
acceptable. If they say, ``Go back to your closet,'' I will do that.
But if they want to discuss it with me, that discussion that I will
have with those three gentlemen will make me determine whether or not I
will advance my amendment when the time comes for general--for the
amendments.
But in either case, Mr. Chairman, I would offer an amendment to
tighten up the second offer that is made in this bill's language after
the first negotiations are ended.
Mr. GOODLATTE. Yes, that amendment would be helpful, and I think it
is a good amendment.
Mr. GEKAS. All right.
Mr. CONYERS. Mr. Chairman, I yield 15 minutes to the gentleman from
North Carolina [Mr. Watt].
Mr. WATT of North Carolina. Mr. Chairman, I thank the minority
ranking member for yielding this time to me.
Mr. Chairman, I want to spend a few minutes putting this bill in a
little bit different context than the discussion that has been taking
place here because I think my colleagues and the American people really
need to understand that this bill is part of a larger package of bills,
and they need to have a better understanding of what that package of
bills, when considered together, will yield in the legal context.
This bill is called the Attorney Accountability Act of 1995. There is
a Securities Litigation Reform Act which will follow this bill in
sequence. And then finally there is a bill which we around this body
call the Tort Reform Act, which proposes to reform product liability
cases and punitive damages in a general way, and I do not think we can
talk about this particular bill without putting it in the context of
this whole reform package in having a better understanding of what my
colleagues in this body are trying to do.
I have some serious reservations about this whole major reform effort
because my experience is somewhat different than many of my colleagues
in this body, and I represent to some extent a constituency that is a
little different than many of my colleagues in this body. The
experience that I bring to this body is one of having practiced law for
a total of 2 years before being elected to Congress, and, while I am
aware of general assumptions, jokes, negative comments that people make
about lawyers and the representation that lawyers tend to have in this
country, my experience has been one of being on the side of lawyers and
clients who were fighting to secure their constitutional rights and
fighting to be free of the invasion of the State into their homes and
lives, and fighting to have equal rights in a system which sometimes
does not assume that they ought to have those rights, and in my
experience lawyers have played an important and valuable role in
protecting the rights of people, and I think, if we look at the
totality of these three bills that we are debating this week, there are
some troubling assumptions that underlie these bills.
One of those assumptions is that most lawyers are bad or dishonest.
Well, I am not going to come into this body and try to tell my
colleagues or tell the American people that there are not dishonest or
bad lawyers, but I would come into this body and say to my colleagues
that for every one bad and dishonest lawyer, I will submit to my
colleagues, that there are thousands of good and honest lawyers who
take their responsibilities to represent their clients seriously and
view that as a serious responsibility.
The second assumption that I think we need to be aware of, as we
debate these three bills that are on the floor this week and we need to
be very careful about how we approach our assumptions on this issue, is
that when our courts get clogged and there are backlogs in the court
system, that poor people should not have access to the courts anymore,
that the court system should be the place and province only of people
who are dealing with big litigation, dealing with lots of money and
major business rights that may be at play.
{time} 1530

That is one of the assumptions that I think is implicit in this whole
loser pays system, that everybody who comes in to the court, either,
well, both, really, has a case which is frivolous or that they can
afford to pay the cost of the other side in the litigation. They have
big bucks, so to speak.
Well, think about what we are saying when we talk about the loser
pays. It says that even if you have a valid lawsuit, a good lawsuit, it
is going to cost a lot of money to bring that lawsuit. And if you
happen to lose that litigation, not only are you going to have to pay
your own litigation expenses and legal fees, you are going to be called
upon to pay the litigation expenses and legal fees of the opposing
party.
Now, this bill that we are debating today started off, as my
colleague, the gentleman from Virginia [Mr. Scott], has indicated, to
be a lot worse in this regard than the bill that has come to the floor.
I am the first to commend the gentleman from Virginia [Mr. Goodlatte]
for taking what was an absolutely terrible piece of legislation and
revising it somewhat in committee to make it a better piece of
legislation. But I would submit to my colleagues that this bill still
assumes that poor people really do not have a place in the legal
process and they are going to be
[[Page H2669]] discouraged from bringing lawsuits to court.
I would submit to my colleagues that if this plays out, we need to be
careful that we do not send the wrong message to poor people who are
finding a legal process that is available to them. Because if the legal
process is not available to poor people to resolve their disputes, then
what process is available to poor people to resolve their disputes?
Would we have more people go back to the days that they are dueling and
challenging each other in the alleys and streets of America? Or would
we make available to them on a fair and equitable basis the right to
have their grievances addressed in a court of law?
There is a third assumption that I think is implicit in these three
pieces of legislation that we need to be leery of. That assumption is
that we should somehow in this body be protecting the rich and
subjecting ordinary people to the whims of the rich business community
to even their experimentation and their bad motivation, because I think
by the time we get to the third bill and we start to see that we are
putting limitations on punitive damages and we are redefining the
standards that apply in products liability cases and in other tort
cases, to increase the standard to a higher standard of care or a
lesser standard of care for the manufacturer and a higher standard of
proof for people who seek to come into court and file a claim against
the manufacturer, that we are beginning to take sides in this issue.
I want to get through this not in the context of this particular bill
but in the total context of these bills, all of which started out as
one big legal reform package and, I would submit to my colleagues and
the American public, will end up back together in one big reform
package, if we follow the policy that was followed last week to split
these reform measures into little pieces, pass the little pieces one at
a time and then at the end of the week come back and make a motion to
consolidate all of them into one package so that they can check off or,
as I said earlier, punch another little hole in their Contract With
America and check off another one of those little contract items, which
is what, I submit to my colleagues, this is all about.
So the effort in these bills is not only to limit
access to the courts. That is what loser pays, in my estimation, is
all about, because any time somebody is poor and wants to go and file a
lawsuit, they are going to have to think not only once, twice, or
thrice, but many, many times before they will have the nerve to file a
lawsuit, even if they think their claim is meritorious.

It also has the effect, these bills, of limiting the possibility of
plaintiffs' recoveries, by making it more difficult to win the cases by
raising the legal standards, by raising the legal fees that must be
paid to the other side if you lose the case, and even by limiting the
amount of attorney fees that plaintiffs can win and be awarded if they
win the case to correspond with the amount that was paid by the
defendant in the case to his or her counsel.
Now, is that not a pretty radical idea? The plaintiff, which comes
into court and has the burden of proof in every case that is filed, all
of a sudden, even if they have a meritorious case and they win the
case, the maximum that they can recover in attorney's fees from the
other side is the amount that was paid by the other side to the
defendant in the case.
Mr. GOODLATTE. Mr. Chairman, will the gentleman yield?
Mr. WATT of North Carolina. I yield to the gentleman from Virginia.
Mr. GOODLATTE. Mr. Chairman, the reason that is in there is to limit
the exposure of parties that may be lower-income parties because the
converse is true as well. If the defendant prevails, the plaintiff
cannot pay any more than he pays himself.
Mr. WATT of North Carolina. Mr. Chairman, reclaiming my time, I did
not think the gentleman was going to get defensive as quickly as he
did, to be honest with my colleagues. But that should show everybody
exactly the point that I am making here. This is a radical concept, and
if we are going to have equity, that situation ought to be flowing both
ways. It should not just be flowing one way.
Let me make one final point, and then I will be through. We will have
the opportunity to debate this back and forth during the course of this
whole week, I expect, that we will be on this legal reform package.
The final point I want to make to my colleagues and to the American
people is that somebody in this process ought to be worried about
protecting ordinary people in our society. I submit to my colleagues
that neither one of these bills, neither this bill that is coming to
the floor today, the securities litigation bill that will be right
behind it, nor the products liability limitation and punitive damages
limitation bill that will come later in the week is designed to be in
the interest of ordinary American people. We have gotten to the point
in this body that we are so consumed with lifting the burden off of
business that the pendulum has swung completely to the other end of the
spectrum.
I would submit that the American people ought to be concerned about
that and my colleagues ought to be concerned about it. We ought to be
opposing this bill.
Mr. MOORHEAD. Mr. Chairman, I yield such time as he may consume to
the gentleman from Illinois [Mr. Flanagan] for a colloquy.
Mr. FLANAGAN. Mr. Chairman, I thank the gentleman for yielding time
to me. I appreciate the gentleman's leadership on H.R. 988 and would
like to address a question to the gentleman regarding section 3, the
honesty in evidence provision.
As the gentleman is aware, this section establishes some guidelines
for determining the admissibility of scientific expert testimony. It is
my understanding that in consideration of this bill, the committee
intended that H.R. 988 serve to codify the holding in the Supreme Court
case Daubert but felt that the specific criteria in Daubert were not
meant to be exhaustive and, therefore, did not limit the statute
facially to such criteria.
Instead, the committee anticipates further expansion of the criteria
through continuing appellate review. This criteria, namely testing,
peer review, and publication, are certainly criteria that should be
utilized in determining scientific validity and reliability.
Mr. Chairman, is this a correct interpretation of the intention of
this bill?
Mr. MOORHEAD. Mr. Chairman, will the gentleman yield?
Mr. FLANAGAN. I yield to the gentleman from California.
Mr. MOORHEAD. Yes, it is a correct interpretation of the committee's
intent. The value of Daubert is that the Court spoke extensively about
how rule 702 should be applied. In our report we make it very clear
that we intend to codify Daubert and that we expect it to be further
developed through case law. As the Department of Justice pointed out in
its submission to the subcommittee, the Daubert decision is complex and
cannot be easily distilled into a word or two of black letter law. That
is why we did not just adopt the four standards set forth in Daubert.
We intended to both codify and complement the standards established in
Daubert.
With the judge acting as the gatekeeper, section 3 is intended to
prevent lawyers from taking advantage of the court system.
Mr. FLANAGAN. Mr. Chairman, I thank the gentleman. I was glad we
could clear that up.
Mr. MOORHEAD. Mr. Chairman, I yield myself 2 minutes.
Comments have been made about this legislation helping the rich at
the expense of the poor. My clients throughout the 25 years that I
practiced law were basically poor people. I ran the legal aid service
in Glendale for 16 years. I want to help people that cannot help
themselves. But I can tell my colleagues, poor people are more apt to
be the defendants than they are the plaintiffs. Rich people are more
apt to be the plaintiffs than are the poor.
I think this legislation helps the poor defendant who otherwise would
be bankrupt by frivolous cases that are filed against him. And by poor
we do not necessarily mean people who have no money whatsoever, but
people who are middle class or below, as far as their financial ability
is concerned. They can be bankrupted very easily by a frivolous lawsuit
that is filed against them and the little that they have taken away
from them.
[[Page H2670]] The portion of the bill toward the end that deals
with rule XI, I tried to defeat several years ago when the law was
changed after 10 years of successful existence.
That part of the bill is a reenactment of legislation that we had
that was effective for 10 years and that the courts liked
overwhelmingly because it helped them when lawyers were doing things
that should not be done and filing frivolous cases or frivolous
pleadings at the expense of people at the other side.
I think we have a good bill. I think we have a bill that is aimed to
help all litigants, includes the people who do not have means, who need
to be helped, but who are very badly hurt by the present system.
I think we need this change. For that reason, I am for it. I think
those Members that have said that it is aimed to hurt the poor just do
not understand the legislation, because that is not what it does.
{time} 1545

Mr. CONYERS. Mr. Chairman, I yield myself 4 minutes.
Mr. Chairman, I rise to point out the problems that we are confronted
with, which are multiplying rapidly. First, the gentleman from
Pennsylvania has suggested that rule 68 somehow has application here. I
think he challenged me or someone on this side as to whether we support
rule 68 or not.
I would hope he would revisit this important Federal rule, because it
has nothing to do with this bill in terms of assessing attorney fees.
It has a lot to do with assessing costs of the parties, but it does not
apply to the consideration of attorney's fees that are taking up our
time at the moment.
Second, Mr. Chairman, there is another additional reason why loser
pays is not a highly desirable proposal that we codify into law at this
time. It is true, we do have a Federal rule that permits the court to
assess pay to any of the parties that he considers to be frivolous,
upon a motion properly brought. But this bill changes the option that
the court has to mandatory consideration, that the court will assess
attorney fees in these kinds of situations.
It is there that I think we need to examine this vary carefully for
the prejudicial impact that it has on plaintiffs who may be working-
class people, and heaven help them if they are poor. They do not have
anything to put up.
That gets to another point that has been made about cases that are
being accepted without cost. They are seen on television advertised all
the time.
First of all, an attorney is unlikely, after hearing a person come
into his office, that he would accept a case that he does not see some
merit in, because it would be a cost he would be bearing, so many of
those cases are washed out. In a way, those attorneys are doing the bar
a great service.
On the other hand, those that advertise that they will take tort
cases without pay for a plaintiff are doing the plaintiff a great
service, because if a poor person does not have the means to pay for a
lawsuit, he or she is then put upon to go through the entire list of
dozens, sometimes hundreds, sometimes more than hundreds of lawyers to
find out what office, what lawyer in which office, might entertain
their case, assuming that they have merit.
Therefore, Mr. Chairman, it is very important that we understand that
these kinds of cases exist; that poor people do have important tort
claims; that they have no way of financing the attorney as they go
along.
Mr. Chairman, let me turn to the goal of deterring frivolous
lawsuits, which everyone would like to do, even without statistical
information. Notice that this general debate, like the debate in the
Committee on the Judiciary, has gone on without one statistic ever
being cited to determine that this is the problem, none. Now the loser
pays provision goes well beyond it.
The CHAIRMAN. The time of the gentleman from Michigan [Mr. Conyers]
has expired.
(By unanimous consent, Mr. Conyers was allowed to proceed for 2
additional minutes.)
Mr. CONYERS. Mr. Chairman, the loser pays provision now gives a
wealthy party or a corporate party the power to slam the courthouse
door shut in the face of a working class individual, or heaven help him
if it is a poor individual, or an individual who was injured by the
very claim that they are suing and seeking to get recompensed.
The proponents of the bill say that this measure will encourage the
parties to settle, but our goal, however, should not be to encourage
the parties to settle at any cost. The goal should be to encourage
reasonable settlements with all parties on a level playing field.
This bill encourages unreasonable settlements in cases where the
liability is a close question and there is great economic disparity
between the parties. We are now turning the negotiating into rolls of
the dice that neither party can accurately predict what will happen if
the case is a close one.
Remember, we are not talking about cases with no merit, or cases that
have a clear potential, we are talking about close cases, and close
cases are the ones that are being forced to be settled at any cost.
Mr. Chairman, I think that is a very difficult proposition. I would
like Members to know that former Senator George McGovern on television
this week is now beginning to virtually recant the ads we have all been
seeing. He said ``I'm not sure Federal legislation is the way to go,''
and he disavows his remarks in the ad. I would say sorry about this,
fellows, I know they wanted to rely on George McGovern to build their
case here; that ``frivolous lawsuits helped drive my small inn in and
out of business.''
Like most of those who claim that suits, not competition or other
factors, are the cause, he now says that that comment is an
exaggeration, and that his biggest problem leading to bankruptcy was
the economic national downturn that he and his competition with other
hotels sustained.
Mr. MOORHEAD. Mr. Chairman, I yield 5 minutes to the gentleman from
Tennessee [Mr. Bryant].
Mr. BRYANT of Tennessee. Mr. Chairman, I rise today in support of
H.R. 988.
I believe access to the courts is an intricate part of our freedom.
And so I would not want to discourage anyone with a legitimate case
to seek a judgment for it.
But I do want to discourage the thousands of frivolous and senseless
cases which cost taxpayers and consumers billions of dollars and bog
down our courts.
And that is exactly what H.R. 988 will do.
H.R. 988 will encourage a complainant and a defendant to work out
reasonable agreements and settlements before they seek court action.
From a logistical and economical perspective of the courts, it makes
sense for both parties to work toward--and arrive at--a mutual
agreement.
The issue here is whether or not it is our responsibility to
encourage complainants and defendants to do that.
I think it is our responsibility.
If I am a complainant seeking $100,000 in a case, and the defendant
in my case offers me $70,000 and I refuse it, and a jury awards me
$60,000, it makes sense that I should be required to cover at least
some of their legal costs.
After all, had I taken the offer, I would have eliminated much of our
legal fees and given the court more time to address other cases.
This legislation will send a clear message to greedy litigants and
their lawyers who milk the system.
And that message is very simply this: Our judicial system and
America's consumers and taxpayers will no longer pay for the selfish
and greedy behavior at their expense.
Mr. Chairman, as an attorney, I can tell you we must reform our
litigation procedures.
If we do not, we have only higher product costs and insurance rates
to look forward to as well as a bogged down court system.
I urge my colleagues to support H.R. 988.
Mr. CONYERS. Mr. Chairman, I am delighted to yield 3 minutes to our
distinguished colleague, the gentleman from Virginia [Mr. Scott].
Mr. SCOTT. Mr. Chairman, I just wanted to comment on some of the
things we have heard. We have heard about this poker game people are
going to have to play in order to figure out whether to settle or not
to settle.
Mr. Chairman, some of these cases are very difficult to evaluate.
They are
[[Page H2671]] impossible to judge by $1 or $2 or $50. Sometimes you do
not know exactly what to settle for. Some people just want their day in
court. Whatever happened to that?
Mr. Chairman, we have heard a lot about what happens to people who
are poor when they come to court. Let us talk about a middle-class
person who happens to be just a regular homeowner, has a little money
set aside for college education for the children, who has been ripped
off in a real estate deal or been maimed in an automobile accident when
they say they had the green light and the other side said they had the
green light; your client knows that the light was green, but you do not
know whether you can win that case or not when you discuss the case,
whether to bring it with your lawyer, and he says, ``You have a 70
percent or 80 percent chance of winning, but there is a chance we might
lose the case and you will have to pay tens of thousands of dollars for
the other side for their attorney's fees for having brought the case
that you thought that you were in the right;'' you are going to lose
your house, you are going to lose the money you have set aside for the
college education for your children.
You are there in a position where you do not know whether or not you
can even afford to take the chance, the outside chance, that you might
lose the case. That is what this loser pays does. It discourages the
bona fide cases for people to have their day in court, middle class,
poor, or otherwise.
It does not affect the corporations that can just put this as the
cost of doing business. It affects the right of an average man or woman
to have the courts mean what they say they mean, a place to vindicate
your rights and to resolve disputes.
Mr. MOORHEAD. Mr. Chairman, I understand the minority has no further
speakers.
Mr. CONYERS. Mr. Chairman, I would ask now much time we have
remaining on both sides.
The CHAIRMAN. The gentleman from California [Mr. Moorhead] has 19
minutes remaining, and the gentleman from Michigan [Mr. Conyers] has 24
minutes remaining.
Mr. CONYERS. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, I am in possession now of a letter that has been sent
to the Speaker of the House from the Attorney General of the United
States, Janet Reno, as well as Abner Mikva, counsel to the President,
which I will include in the Record. I would like to quote one part of
it.

First, we believe that fee-shifting provisions such as that
in H.R. 988 are unfair, unnecessary, and unwise. That
provision would, with limited exceptions, require the court
to order one party to pay attorney's fees of another if the
former did not secure final judgment more favorable than
offered by the latter.
While such fee-shifting may be appropriate in some
contexts, a blanket fee-shifting rule would work a
significant injustice, particularly against parties that have
fewer resources. Such a loser pays rule is alien to the
American legal system, and we know of no empirical evidence
that such a rule would address the primary problems facing
our civil justice system, the slow pace and high costs of
justice.

I hope our colleagues will consider this as we move forward.
The letter referred to is as follows:

Office of the Attorney General,

Washington, DC, March 6, 1995.
Hon. Newt Gingrich,
Speaker of the House, U.S. House of Representatives,
Washington, DC.
Dear Mr. Speaker: This week, the House of Representatives
is expected to consider legislation that would significantly
reform the American legal system. While we believe that our
legal system can and should be improved, several provisions
that the House is likely to consider are deeply problematic;
therefore, we write to express our concerns and reservations
about several of those provisions.
Our comments divide into three sections, but are by no
means exhaustive on this subject. Instead, we focus on
provisions that, based on our extensive legal experience, are
simply too extreme--provisions that are unfair and tilt the
legal playing field dramatically to the disadvantage of
consumers and middle-class citizens.
First, we believe that fee-shifting provisions such as that
in H.R. 988, are unfair, unnecessary, and unwise. That
provision would, with limited exceptions, requires a court to
order one party to pay the attorney's fees of another if the
former did not secure a final judgment more favorable than
offered by the latter. While such fee-shifting may be
appropriate in some contexts, a blanket fee-shifting rule
would work a significant injustice, particularly against
parties that have fewer resources. Such a ``loser pays'' rule
is alien to the American legal system and we know of no
empirical evidence that such a rule would address the primary
problems facing our civil justice system--the slow pace and
high cost of justice.
Second, several of the provisions concerning product
liability in H.R. 1075 are also unfair and unjustified. As a
general matter, we believe that product liability reform
should be enacted by the States, rather than by Congress.
This area of law has traditionally been the purview of State
courts and legislators; if changes are needed, those changes
should generally be left to the States. In fact, product
liability is one area in which States truly have served as
``laboratories of democracy''--over the last twenty years
virtually every State has significantly reformed its legal
system as it relates to product liability.
We find certain of the preemptive provisions under
consideration particularly puzzling in light of the
contemporary and ongoing debate about the extent to which the
Federal Government has usurped responsibilities that
appropriately belong to the States. On issue after issue,
broad bipartisan groups have emphasized the advantages of
devolving authority to State and local governments. As in
other spheres of government, proponents of Federal
restrictions on traditional State and local prerogatives bear
a heavy burden of persuasion in justifying new Federal
intervention. For several provisions in particular, we
believe that that burden has not been met.
For example, we believe that the preemption of State law to
establish differential treatment of ``economic'' and
``noneconomic'' losses is both unjustified and unsound. This
provision (section 107 of H.R. 1075) would severely and
unfairly prejudice, among others, elderly citizens,
plaintiffs whose losses include pain and suffering, and women
who suffer loss of their reproductive ability.
We are equally critical of section 201 of H.R. 1075 which
establishes an arbitrary formulaic limit on punitive damages.
Virtually all parties agree that, in certain rare
circumstances, punitive damages are appropriate:
occasionally, an award of punitive damages is the only way to
bring an offender to justice, or to keep a dangerous product
off the market. While every State maintains judicial controls
to revise or reverse punitive-damage awards, there is not any
a priori basis for fixing a ceiling on the award of punitive
damages, measured either by a dollar amount or as a multiple
of compensatory damages; instead punitive damages are and
should be imposed based on the facts and circumstances of the
particular claim.
Perhaps most disturbing of all is the fact that section 201
would mandate certain procedural rules in every civil action
filed in Federal and State court. This provision--even more
than those limited to product liability actions--represents a
disturbing and unprecedented federal encroachment on two
hundred years of well-established State authority and
responsibility.
Third, with regard to reforms of the Federal securities
laws, we share the concerns articulated by SEC Chairman
Levitt. In this Federal regime, congressional activity is
more appropriate, and we agree with the Chairman that the
securities-litigation system can be improved. Our securities
laws must encourage innovation and investment, while at the
same time deter white-collar crime and ensure the integrity
of the financial markets. The experience of the past decade
has shown that taxpayers and honest business people can
suffer greatly from fraud and improper behavior. We support
reasonable reforms to this system but believe that certain
provisions in H.R. 1058 are problematic, while others are
manifestly unfair and could lead to inadequate deterrence
against financial fraud. We hope to work closely with
Congress and the SEC to address these concerns so that sound
legislation can be enacted to correct the problem of
frivolous suits and enhance the integrity of the securities
markets.
In closing, we would emphasize that we believe that our
civil justice system can and should be reformed--but reform
must be fair to all parties and respectful of the important
role of the States in our Federal system. We have some ideas
that would be constructive. While we oppose the particular
provisions mentioned above, we look forward to working with
the Congress to develop thoughtful and balanced reform of the
American legal system.
Sincerely,
Janet Reno,
Attorney General.
Abner J. Mikva,
Counsel to the President.
{time} 1600

What we are suggesting in this bill before us now in terms of whether
someone should be punished for bringing a suit that may turn out to be
meritorious is that we are saying here that we are going to pass a law
in the Congress that says that people with no money must sit on their
rights for fear that they will be totally bankrupted in the event they
lose the suit. That is precisely what this bill is about that is before
us today. And that if they hesitate for a lengthy enough period, the
statute of limitations will kick in and
[[Page H2672]] their claim will have expired because it was not timely
brought.
What is a working person to do? Forget a person that has no money and
cannot even put up anything or lose anything or lose their bank
accounts or their home. But what about a working person gambling on
pursuing a lawsuit, if he could be exposed to paying both his
attorney's fees and the defendant's fees? The answer is obvious, that
he is going to hesitate.
Why is it that we are going after working people, someone earning
$30,000 should now be caught up in the claim that the wave of
litigation must now be somehow subsided by making them pay both
attorney's fees of all parties in the event that they do not succeed?
Let us look at a typical case that might be brought to an attorney's
firm. What if a person sought to become a plaintiff and thought that
there was a 70-30 percent chance that he would prevail. Under the
current law, a person could be very justified in determining to go
forward. But under H.R. 988, he would be very prudent to hesitate and
perhaps decide not to go, because he is not going to win. He may not
win. And why should he risk this huge loss under these circumstances?
Mr. MOORHEAD. Mr. Chairman, will the gentleman yield?
Mr. CONYERS. I yield to the gentleman from California, the
distinguished subcommittee chairman, and the floor manager of the bill.
Mr. MOORHEAD. First if he is as broke and poor as you say, of course,
I would not want a judgment against him because it would not be worth
very much. But there is a provision in the law that we are promoting
that says if it would be manifestly unjust, the court does not have to
order those attorney's fees.
Mr. CONYERS. You have another provision where we are changing the law
from ``may'' to ``shall.''
Mr. MOORHEAD. But it still says that those class of expenses if they
would be manifestly unjust, there is an exception.
Mr. CONYERS. Then I take it that the gentleman from California agrees
with me that a working person bringing a suit where he thought he had a
70-percent chance of recovery would be under the gun if he had to go
into court with the assumption that if he did not win, and he thinks he
only has a partial chance of winning, that he would be stuck with
attorney fees. Are you telling me that this bill would exonerate him
from having to pay the defendant's fees?
Mr. MOORHEAD. If the judge determines that it would be manifestly
unjust for him to order those fees, he can avoid them.
Mr. CONYERS. Why are you tightening the rope around the neck of a
plaintiff, a working class plaintiff in the first place?
Mr. MOORHEAD. The rope is going to be around anyone that has money
far more than it is going to be around the neck of the working class
person. I would rather have one judgment for fees against one man that
had a little money than I would 10 or 50 or 100 that had none.
Mr. CONYERS. So would I, but that is not what is in the bill
unfortunately. I quite agree. But why would we make this a more
difficult lawsuit for a working person who thinks he might have a 70-
percent chance than he already has? I mean, if it is a frivolous
lawsuit, he is going to be subject to attorney fees under the present
law.
Mr. MOORHEAD. All he has to do is to make a reasonable offer.
Mr. CONYERS. You are tightening the tourniquet. You are making it
tougher on people to bring lawsuits. You are making it impossible for
an injured person without means or resources who may have an excellent
lawsuit to bring them at all because we keep talking about, what about
a person that walks into a lawyer's office having read a television
advertisement saying that he will take the case without any up front
payment of attorney fees on a contingency basis? What is wrong with
that?
The attorney that would take a case knows that if he does not have a
reasonable case, he is not going to get anywhere, and he is not even
going to get paid by his own admission.
So I would urge the gentleman to consider the harm that we are
bringing to working people and people bringing tort suits who may be
injured with meritorious claim but may not have the $500 or $1,000 or
$3,000 that an attorney might reasonably claim to start a suit.
Mr. MOORHEAD. Mr. Chairman, will the gentleman yield?
Mr. CONYERS. I yield to the gentleman from California.
Mr. MOORHEAD. We do not discourage people who have a just claim from
filing a lawsuit, and we even give them the opportunity up to 10 days
before the case would come to trial to make a reasonable offer of
settlement, so that if they have a claim, they believe in their claim,
they make a reasonable offer of
settlement, and if it is not far above what is eventually ordered by
the court, there will be no attorney's fees whatsoever.

Mr. CONYERS. I would like the rest of my colleagues that are a party
to this bill to take into consideration the American Bar Association's
evaluation of this measure.
They say that the ``loser pays'' bill as amended, although extensive
revisions have been made to this legislation, to the legislation as
introduced, and were made by the Committee on the Judiciary, ``serious
problems remain with the current loser pays provisions of H.R. 988.''
``The case has not been made for jettisoning the tradition in this
country of requiring each party to bear its own attorneys' fees. While
some fee-shifting occurs under some State or Federal statutes and
procedures, the heavy burden of persuasion must rest on proposers of
such variance from the American rule. The American Bar Association is
particularly troubled because of the accelerated timetable under which
H.R. 988 has been considered in the House. There has been no
opportunity to have this debate.
``The ABA is concerned that H.R. 988 may undermine diversity
jurisdiction and will surely encourage undesirable forum shopping. In
addition, it imposes a requirement that is inconsistent with the
American system of justice. Among the fundamental problems inherent in
the current proposal is that it places an extra burden on the poor, the
middle class, and small businesses who are entitled by law to choose a
Federal forum. This extra burden is unrelated to the merits of their
claims. Worse yet, its weight is involuntary when it falls on the poor,
the middle class, and small businesses when they are brought to the
Federal forum by a litigant much better able to bear the burden of
possible fee-shifting. Any such procedure could only be justified if it
provided safeguards to allow reasonable access to the Federal courts
for all litigants and provided safeguards against an abusive misuse of
the fee-shifting procedures. Unfortunately, the exemption and the
relief provided for manifest injustice do not begin to level the
playing field.''
For shame, that out of the Committee on the Judiciary of the House
would come a bill of such draconian magnitude that we are now asking
working people, middle-class people, poor people now to bear the
corporate defendant's fees if they do not win. There are too many good
cases that are so close that not even the most skillful plaintiff's
counsel or defense counsel can predict the outcome. There are too many
variables. We see that in the history of civil litigation.
I am stunned by the punitive nature, the severity and the unfairness
that is all rolled together in this one bill to say now that the
historic tradition of the American system of justice should be
jettisoned this week because we are tired of so many frivolous claims
being brought.
I urge that the Members reject this bill and any of the feeble
attempts to improve it that may ensue on the floor.
Mr. Chairman, I reserve the balance of my time.
Mr. MOORHEAD. Mr. Chairman, I yield myself 1 minute.
Mr. Chairman, I think that this bill has been totally misdescribed
throughout the debate here. There are going to be far more people that
have money, and have the ability to pay, that have to pay the other
side's attorney's fees than will ever be able to be paid by these poor
defendants that we keep talking about. I would surely much rather have
an order for attorney's fees from some of the main corporations than I
ever would someone that is as described in this bill.
[[Page H2673]] We do not have a copy of the letter that supposedly
came from the Attorney General's office, but I suspect they do not,
also, understand what is in this bill, because it just is not as
described in the letter that was written and I hope that we can get a
copy of that letter.
Mr. Chairman, I yield such time as he may consume to the gentleman
from Virginia [Mr. Goodlatte].
Mr. GOODLATTE. I thank the gentleman for yielding me the time.
The gentleman is correct. This bill has been very grossly
mischaracterized by the other side. The whole purpose of this provision
is to promote reasonableness in bringing lawsuits, reasonableness in
settling lawsuits, and will have the ultimate effect of seeing more
suits settled and fewer frivolous and nonmeritorious suits brought.
This will not have the effect of depriving anything from any
plaintiff who brings a meritorious suit in court and it in fact will
have, I think, a very positive effect on the cost of goods and services
for people who are low income as well as the cost of insurance for
people who are low income, auto insurance, homeowners' insurance, et
cetera.
This bill is designed to say that you cannot come into court under
the pretense that there is no risk to bringing a lawsuit. That is
exactly what this does, and it counters the ads that we see time and
time again in the Yellow Pages and elsewhere that say no recovery, no
fee. That is, there is no risk to you to bringing a lawsuit. So come on
in.
Well, there is a risk to society, there is a risk to defendants who
are unfairly sued, and that is what this is designed to correct and it
will correct it in a way that is fair by limiting the attorney's fees
to just those 10 days before trial, through trial, and it will limit it
to not more than the losing party pays their own attorney's fees so you
do not have the possibility of a deep-pocket corporate party to a suit
that wins the case overloading the other party with enormous attorney's
fees that they cannot match. It cannot be more than they are paying
their own attorney's fees, and for that reason I think this is an
entirely reasonable provision that discourages suits from being brought
that are nonmeritorious.
Mr. CONYERS. Mr. Chairman, I yield myself 1 minute.
I cannot help but respond to the gentleman from Virginia, a very
well-known lawyer on the committee, that this is the kind of law that
people, working-class people and poor people, have been looking to get
a chance to help them bring their cases into court. I simply find that
preposterous.
I think it goes against all of the testimony that we have heard
before the committee. For him to suggest that this is just what
working-class people need to get into court means that he has now
thrown the bill out to the winds and this is just a free-wheeling
rhetorical debate.

{time} 1615

The American Bar Association, whose letter I just recited, said that
the bill would work a harm to just people that the gentleman thinks it
would be a benefit to, and I remind the gentleman that the American Bar
Association is made up of more defendants' lawyers than even
plaintiffs' lawyers.
Mr. MOORHEAD. Does the gentleman from Michigan have further requests
for time?
Mr. CONYERS. Mr. Chairman, I reserve the balance of my time.
Mr. MOORHEAD. Mr. Chairman, we have the right to close the debate. I
have one more Member who desires time. We will reserve our time.
Mr. CONYERS. Mr. Chairman, if the gentleman is reserving his time to
close debate, I yield 3 minutes to the gentleman from Illinois [Mr.
Durbin], a distinguished former member of the bar.
Mr. DURBIN. Mr. Chairman, still a member of the bar but not
practicing for about 12 years. But I want to tell my colleagues this a
very dangerous concept that we are pushing in this bill. In the course
of this week we are going to have two or three pieces of legislation.
I think the most important question any Member of Congress can ask
when these bills come before the floor is a very simple one: Who wants
this bill? I can tell Members who wants a loser-pay bill: a defendant
who, frankly, does not want to be in court in the first instance, and
wants to make sure that he can discourage as many people as possible
from going to court.
Are there frivolous lawsuits? Yes. Should they be weeded out? Of
course. But there are an awful lot of people who do not have the means
in their own personal savings or the wherewithal to go to court and to
go there with an attorney in an attempt to try to get redress of their
grievances. What we are talking about here is as fundamental as our
Constitution, the basic rights of individuals, the rights of victims if
you will, to come to court. I think all of us understand who practice
law that over 90 percent of cases are settled now. This is not needed
as an incentive to settle. Cases settle today, both sides try to reach
an agreement and in the overwhelming majority of cases they do reach an
agreement.
But what this is an attempt to do is to hang a blade over the head of
the plaintiff in the closing days before trial and say, incidentally,
if you guess wrong, if the jury does not go along with you, not only
are you going to have your own expenses, you have to pay the
corporation's legal expenses too from the date when they made their
offer to settle. I think that is a sad thing.
I also think we ought to put in context what the Republican contract
is talking for. At the same time as the Republican contract is taking
away the regulatory authority of the Government to protect consumers
and individuals, the contract comes through the back door and takes
away the rights of those same consumers and individuals to go to court.
This is the first installment.
So we are leaving America's consuming public unprotected in both
instances; first, from a regulatory agency which is trying to protect
them and second, from their day in court which is their ultimate
recourse.
I can tell my colleagues in the practice of law I had in Springfield,
IL, most of my clients were working folks who came in and they had
never filed a lawsuit before. Something had occurred in their lives,
usually some personal tragedy, and they came to me asking for
representation. If I told them up front that they had to pay all of
their attorneys' fees going in, frankly, they could not have been
there. If I told them also there was a chance if we could get a trial
they would have had to pay the railroad's attorneys' fees that happened
to have the railroad car that ran over and killed one of their loved
ones, they might have thought twice about it.
That is what this is all about, this is who wants this bill.
Corporate America wants this bill; they want to discourage individuals
from bringing actions against big corporations, from beginning to even
bring actions against those who have deep pockets, and let me tell my
colleagues quite honestly if we go along with this and go back to the
British system of loser pay, which they are having second thoughts
about at the same time, is a very big mistake, a very serious mistake
for the future of this country.
Mr. CONYERS. Mr. Chairman, how much time remains on my side?
The CHAIRMAN. The gentleman from Michigan [Mr. Conyers] has 8 minutes
remaining.
Mr. CONYERS. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, one of the complaints that has been lodged against this
bill is the unreasonable haste with which it has been brought out of
the Committee on the Judiciary, which has five or six of the items of
the contract of America which are now being given precedence in the
House. And unfortunately the original bill provided that the losers to
any claim pay the attorney's fee of the winner. It applied to all of
the fees in the case, at least as to that claim and was not tied to any
offer whatsoever.
Then we had the modest improvement by the gentleman from Virginia,
the famous Goodlatte amendment, which made the bill less worse. It
adopted a rule 68 type settlement offer. The loser pays the winners'
fees after the date of an offer, and the losing means not doing better
than the offer. The award is limited as in the original bill to the
plaintiff's own attorney fees, and we are in a real roll of the dice in
terms of whether a person can make an
[[Page H2674]] offer based upon their outcome. All of which presumes
that plaintiffs' lawyers and defendants' lawyers know how these cases
are going to come out, which in many instances, particularly if the
case is not an open and shut one, is the last thing that any of the
parties knows. It is an improvement over the original bill.
Now I am told by the gentleman from Pennsylvania [Mr. Gekas] to look
to my own State for the Michigan-type awards where they split it down
the middle and do not get into the crap shooting deal of who made the
right offer at the right time so that they would have less attorney's
fees to pay.
What we have is an unlevel playing field where the party with more
wealth can engage in pursuing a contest against the party with less
wealth, no matter how meritorious their claim might be to bring this
matter forward and it puts plaintiffs at peril, it puts plaintiffs at
peril. It jeopardizes the civil adversarial process that we have
honored for so long.
This is yet another provision within the contract with corporate
America that we are so anxious to have raised at this time.
I will tell Members one other thing. This is going to jeopardize
civil rights lawsuits, and there has been very little said about that
at this point, but it is very, very, important that we understand that
rule XI is going to impact upon the 1983 Federal rule.
I just want my colleagues to know that the critics are claiming that
the infamous 1983 amendment to the Federal Rules of Civil Procedure has
turned into a tool for judges and defendants to punish those who pursue
unpopular causes of action. Two recent cases show how this can happen,
and a lawyer may be litigating at his or her own peril when they are
suing the government inside the Federal court, according to some of the
lawyers that have been bringing civil rights cases for a lot of time.
It is inhibiting civil rights cases which ought to be a new cause for
concern to many of us in this Chamber who remember with what difficulty
and what great sacrifice we were able to bring civil rights suits to
litigation in the first place.
Actions under civil rights based on gender, race or religious freedom
could be made infinitely more complex to bring and could further
inhibit attorneys representing plaintiffs in this very, very important
area of Federal law.
I urge my colleague to please examine this fairly. This is not a
matter of being a Republican or Democrat, this is a matter of how the
judicial system will work for ordinary people in America. I say the
time has finally come in this contract for us to do something for the
working people, for the people who will be put in peril in having to
bring these suits under the strictures that would now require them to
mortgage their home, spend their children's college fees or to make
outrageous loans in pursuit of what they consider to be a fair claim.
Please let us examine and turn back the bill and the premises
underlying H.R. 988.
Mr. Chairman, I yield back the balance of my time.
Mr. MOORHEAD. Mr. Chairman, I yield the balance of my time to the
gentleman from Minnesota [Mr. Ramstad].
Mr. RAMSTAD. Mr. Chairman, I thank the distinguished subcommittee
chairman for yielding me this time.
Mr. Chairman, I rise today in strong support of this Attorney
Accountability Act. This is truly a historic day in the life of this
body; for the first time in 40 years we have a comprehensive tort
reform bill before the House. I commend the chairman of the
subcommittee, the chairman of the full committee, the gentleman from
Illinois [Mr. Hyde], the gentleman from Virginia [Mr. Goodlatte], and
others who worked to produce this bill.
With all due respect to the distinguished ranking member who brings
the letter from the American Bar Association, the defenders of the
status quo here, and says that we are operating with unreasonable haste
by bringing this bill to the floor, Mr. Chairman, this debate has been
raging in America for 40 years. Real people in the real word are
finally getting heard in the People's House. They are saying enough is
enough with an out-of-control legal system. Last year alone 20 million
new lawsuits were filed in America. That is one lawsuit for every 10
Americans, 20 million suits in 1 year.
We have been conducting this debate for 40 years. The difference is
with the new Republican majority we are finally getting a bill heard
and getting it to the floor, and hopefully with bipartisan support as
with the other bills in the Contract With America, this bill will pass
this body.
The loser pays rule, more appropriately called the fairness rule, is
central to the bill before us today, the Attorney Accountability Act.
We are trying to restore accountability and fairness to our civil
system. We must, must, discourage the filing of frivolous lawsuits and
promote the settlement of a strong case.
The distinguished ranking member talks about those people who are
indigent, without resources, not having their day in court, and brings
the letter from the American Bar Association singing the same tune.
Well, Mr. Chairman, it is right in the bill, right in the bill; if
the court finds that requiring the payments of such costs and expenses
would be manifestly unjust, then they are waived. Then there is no
requirement that the loser pays, if there is a manifestly unjust
result. So that, Mr. Chairman, is a red herring.
Let us get down to the nitty-gritty of this debate. Why should
prevailing plaintiffs have to give up a substantial proportion of their
damage awards to pay their own attorneys? Such deserving parties,
people who are truly deserving of awards, are never, never fully or
adequately compensated for their injuries under the present system and
thus just basically wrong.
Seventy years ago, Mr. Chairman, the Massachusetts Judicial Council
criticized this inequity and they asked on what principal of justice
can a plaintiff, wrongfully run down on a public highway, recover his
doctors' bills but not his lawyers' bills, and why should defendants
who are dragged into court for unwarranted claims also have to pay
substantial legal fees? These defendants, Mr. Chairman, lose, even when
they win, and that is wrong. For many defendants, we all know the game
that is being played out there under the rule. It makes more economic
sense to settle these frivolous cases than to defend themselves in a
prolonged lawsuit despite full confidence in their legal position. This
practice hurts all of us because it motivates the filing of more
frivolous claims and we pay.
That is why, Mr. Chairman, I was so pleased that the Committee on the
Judiciary modified and improved the fairness rule that was contained in
the original H.R. 10.
I also want to thank all of those who participated in drafting this
common sense legal reforms act.
{time} 1630

Mr. Chairman, I chaired the task force which drafted this bill, and
so many people on our side of the aisle contributed to this effort, and
I want to thank all of them for crafting this important legislation,
particularly the gentleman from Virginia [Mr. Goodlatte], who crafted
the modification of the loser pays or the fairness rule.
I think the most important change in the modification is the
definition of who is the winner and who is the loser of a case that
goes to trial. That has been clearly articulated here today.
I think it is also important to emphasize, Mr. Chairman, that under
this bill before us today, H.R. 988, only a party that acts
irresponsibly by rejecting reasonable settlement offers will have to
pay the attorney's fees of the other party and, of course, H.R. 988
does more than just adopt the fairness rule.
Most of the discussion here today and, in fact, in the ensuing months
since H.R. 10 was drafted has centered on the loser-pays rule, but
there is much more to the bill before us today.
The second major provision, the honesty-in-evidence provision, will
ensure that we keep junk science out of the courtroom, too many so-
called experts peddling their biased testimony for contingency fees.
Mr. Chairman, all we are doing with this provision, this honesty-in-
evidence provision, is codifying the Daubert
[[Page H2675]] case, which requires that expert testimony rest on a
reliable foundation and that it be relevant to the task at hand.
This bill, Mr. Chairman, prevents experts from being paid a
contingency fee so as to remove incentives for their biased testimony.
If we want losing parties to accept verdicts that go against them, we
must make sure that trials are fair. The honesty-in-evidence provisions
will ensure just that, fairness.
The bill before us, H.R. 988, the Attorney Accountability Act,
restores the pre-1993 version of rule 11 as has been mentioned here
today of the civil procedure rules.
Mr. Chairman, this rule can be one of the most effective means of
curbing lawyer misconduct if we give it back its teeth.
Now, I am still amazed as a lawyer formerly in practice myself that
the rule was weakened in 1993 when the rule had the support of a strong
majority of Federal judges who were surveyed by the Federal Judicial
Center. In fact, Mr. Chairman, at that time, with respect to rule 11,
95 percent of the judges said the old rule did not impede development
of law. Seventy-two percent of the judges said the benefits of rule 11
far outweighed the expenditure of their time. Eighty-one percent of the
Federal judges said that the overall effect of rule 11 had a very
positive impact on litigation in the Federal courts. And most telling,
over 80 percent of the judges said we should retain the original rule
11. That is what we are trying to do here today is to restore that form
of rule 11.
H.R. 988, the bill before us today, will reestablish the system of
mandatory as opposed to discretionary sanctions which is very, very
important in restoring accountability on the part of lawyers in our
system.
Also, Mr. Chairman, the bill mandates the use of attorney's fees as
part of this sanction.
Third, it puts a larger emphasis on the rule's compensatory function
by clarifying the sanctions should be sufficient to deter repetition
and to
compensate the parties that were injured.

Finally, it eliminates a safe-harbor provision of the current rule
11(c) which permits a lawyer to withdraw a challenged pleading without
penalty prior to an award of sanctions. Clearly, clearly the rule
should be solicitous of the abused, not of the abuser.
Mr. Chairman, I am also pleased that this bill would return to the
pre-1993 practice of having rule 11 apply to discovery.
Mr. Chairman, in conclusion, when you look at the various elements of
the Attorney Accountability Act, I predict we are going to again have a
large bipartisan vote in favor of this important reform legislation.
Why? Because this legislation finally, finally gives us real tort
reform, finally brings us concrete steps to restore accountability,
efficiency, and fairness to our Federal civil justice system.
Mr. Chairman, in closing, I urge strong support of the Attorney
Accountability Act of 1995. Let us have this real tort reform which is
so long overdue.
Ms. HARMAN. Mr. Chairman, I rise today in support of the Goodlatte
amendment. While I had intended to offer an amendment to H.R. 988, Mr.
Goodlatte's amendment has alleviated many of my concerns about the
timing of settlement offers and the process of calculating attorneys'
fee awards under the bill. I therefore do not plan to offer my
amendment.
As reported, H.R. 988 carries with it the potential for abuse. Under
the bill, defendants may respond to lawsuits by immediately making low-
ball offers, even as low as $1.00, simply to set in motion the time
clock on which attorney fees are calculated. My amendment would have
addressed this problem by requiring only reasonable, good faith offers
to trigger the bill's fee-shifting provisions.
The Goodlatte amendment also addresses this problem by tolling the
calculation of attorneys' fees until after the date of the last offer
by a party. Since parties would not be able to use low-ball offers to
set the attorneys' fees' clock in motion, I am confident that the
Goodlatte amendment will spur good-faith bargaining rather than
procedural gamesmanship.
More good-faith settlements will cause more lawsuits to be
voluntarily dismissed and will help restore some efficiency to our
Federal legal system.
Mr. HYDE. Mr. Chairman, I rise in support of H.R. 988, the Attorney
Accountability Act of 1995. I would like to congratulate the gentleman
from California [Mr. Moorhead], chairman of the Subcommittee on Courts
and Intellectual Property, for his outstanding efforts in connection
with this legislation. H.R. 988 effectively tackles one of the
fundamental problems in our legal system today: frivolous litigation.
Mr. Chairman, the American legal system does not resolve claims as
expeditiously as it should. Why? Because some who participate in the
litigation process do not act responsibly. Parties are too quick to
bring suit because they have nothing to lose for bringing even
meritless claims. Attorneys, hoping for settlement amounts based on
nuisance value, assist in encouraging possible litigants. One need only
turn on the television late at night or turn to the lawyer section of
the yellow pages to see incentives employed by such attorneys which,
without measures to ensure accountability, serve to feed the lawsuit
frenzy which plagues our Nation.
Our system of justice has also lost some of its integrity by allowing
the consideration of invalid and unreliable scientific evidence from
so-called experts which may unfairly influence juries and other triers
of fact in their crucial roles of deciding the outcome of a case.
The legislation before us today will accomplish three goals. First,
it will lessen the incentive to litigate claims which have little or no
merit through the implementation of a loser-pays rule. Second, it will
assure the reliability and validity of scientific evidence in cases
involving such evidence. Third, it will prevent attorneys from filing
frivolous lawsuits by appropriately imposing mandatory sanctions on
those attorneys.
This legislation will infuse greater fairness into the civil justice
system--because parties and attorneys will be held accountable for
their actions and are encouraged to be reasonable within the litigation
process. It will also provide for prompt, easier, quicker access to our
court system by decreasing docket congestion and encouraging the speedy
resolution of valid claims. The result will be greater affordability
and justice for all Americans with real and viable grievances.
The loser-pays rule in section 2 reflects an amendment adopted by the
Judiciary Committee, sponsored by the gentleman from Virginia [Mr.
Goodlatte], who should be commended for his hard work. It fully
achieves the goals we promised in the Contract With America--greater
accountability, practical penalties for unreasonableness, and a
settlement-based mechanism which will serve to eliminate many suits
before they reach trial. Under H.R. 988, parties are allowed to
discover the merits of their claims, but will be required to pay the
opposing party's attorney's fees if they fail to act reasonably in
settling a lawsuit or if they continue to pursue a frivolous claim. A
litigant with a strong defense can rely on the protection of the loser-
pays rule by placing a fair offer on the table. The more reasonable the
offer, the more likely the adverse party to a claim will have to pay
the attorney's fees. A plaintiff who unreasonably maintains a meritless
claim or refuses to settle a claim who fares worse at trial or after
judgment than the offer of settlement, will incur the defendant's fees.
Likewise, an unreasonable defendant who refuses to settle or meet the
claim of a plaintiff will have to pay the plaintiff's fees if after
trial or judgment he fares worse than an offer made by the plaintiff.
This mechanism has, built within it, incentives which encourage
reasonable negotiation toward resolution along with a safety net for
cases in which it would be grossly inequitable to apply the rule.
Further, if both parties are unreasonable, the status quo is maintained
and neither side receives the benefit of the rule. It is a fair, just,
and workable loser-pays rule that is drafted to accomplish
accountability while taking into account the unique history of
negotiation which has long been a staple of American jurisprudence.
The honesty in evidence contained in section 3 of H.R. 988 will mark
a significant change in
product liability and other civil cases where scientific evidence is
frequently used. As we all know, it can be very difficult for juries to
fully gauge and evaluate the quality and validity of the scientific
evidence presented. And while we all agree that America's jury system
is by far the best method of evaluating tort claims, it is imperative
that where difficult technical and scientific proof is to be
considered, juries know such proof will be reliable, valid and
relevant. Otherwise, the risk of prejudice is too great.

Plaintiffs' attorneys have had it too easy, Mr. Chairman. The same
attorney who may implore the consensus of the scientific community for
one case will employ a so-called expert in another who, on the basis of
new or fringe scientific methods, ups the ante in a case to the
detriment of a defendant. The market for so-called expert witnesses in
this country is vast and growing, a market created by parties and
attorneys who may employ any method to reap large financial awards at a
huge cost to the American consumer. While no one wishes to deny a
plaintiff with a valid claim from proving his case, accountability
demands that cases by proven properly.
[[Page H2676]] Section 3 of H.R. 988 will disallow the admission of
scientific evidence by a judge unless such evidence is shown to be
valid, reliable, and scientifically connected to the fact it is offered
to prove in a case. This standard was established by the Supreme Court
in Daubert versus Merrill Dow Pharmaceuticals in 1993, and should serve
to weed out prejudicial evidence which could otherwise be used unfairly
to persuade triers of fact. Further, under the bill, expert witnesses
will be barred from testifying if they have any stake in the outcome of
a case. Providing for integrity in expert witnesses is another
important part of restoring accountability to litigation in American
courts.
Section 4 of H.R. 988 will impose mandatory sanctions on attorneys
who knowingly bring frivolous cases, reestablishing a significant and
necessary deterrent on attorneys who encourage the filing of such cases
in hopes of achieving financial gain on settlement value alone. The
bill will amend rule 11 of the Federal Rules of Civil Procedure to
bring back vital protections against the filing of thoughtless,
reckless and harassing pleadings which have contributed to the demise
of our civil justice system and which cause unfairness to those who are
dragged into courtrooms without proper cause. Under the new rule,
abusers who file lawsuits must be appropriately sanctioned by judges if
found to be in violation and are provided no safe harbor to withdraw
such filings. In effect, lawyers will be held accountable to do some
research in advance, to evaluate cases before adding to limitless
congestion of the courts and will face sure penalties for their
misconduct.
Mr. Chairman, it is high time that Congress make clear to a nation
fed up with inflated legal costs, long delays for viable claims and
abusive tactics by lawyers, witnesses and opportunistic litigants, that
we are ready and willing to take action to ensure that our legal system
will operate fairly and expeditiously. Judges likewise need to be
required to impose sanctions against abuse. We should no longer
tolerate frivolous filings. H.R. 988 contains fair, responsible measure
which will encourage accountability and, when necessary, sanction
misconduct. I am proud to be an original cosponsor of this measure
which will restore confidence in our civil justice system and serve as
a model to the states. It will provide to the American people what we
promised when we signed the Contract With America, real and significant
legal reform. I urge support of H.R. 988.
Mrs. COLLINS of Illinois. Mr. Chairman, this week in my GOP
colleagues' mad, frenzied dash to the 100-day finish line of the so-
called Contract With America, this body is being presented with a
series of bills that will effectively strip away the rights of average,
hard-working citizens to obtain access to our Nation's courts for the
resolution of their legitimate disputes. Today we start with H.R. 988,
the misnamed Attorney Accountability Act, which would be better titled
the ``No Money, No Status, No Justice Act of 1995.''
H.R. 988 is an absolute perversion of the ideals upon which our civil
justice system in the United States was established, Mr.Chairman.
Filled with gimmicky, feel-good phrases such as ``loser pays'' and
``honesty in evidence,'' this legislation is just another public
relations ploy thought up by the Republican leadership's spinmeisters--
as with the rest of the contract--that has little substantive, factual
evidence to support its propositions.
My friends on the opposite side of the aisle would like to have the
American people believe that H.R. 988 is absolutely necessary to stem
the tide of frivolous litigation that they purport is incapacitating
our civil justice system. They advocate this overreaching legislation
despite the fact that there are already tried and true penalties and
sanctions in place which work quite well in weeding out the relatively
few nonmeritorious lawsuits that do have occasion to find their way
into our courts.
Unfortunately the only thing the bill before us today is meant to do
and will do is further stifle the voices of America's middle and lower
income aggrieved citizens in favor of the GOP's large corporate
contributors and back-room-buddies. This is one more in a continuing
pattern of shameful assaults on the underserved and underrepresented in
our society by the majority party in the U.S. Congress, Mr. Chairman,
and the American people have a right to know the facts.
Under H.R. 988, average citizens and small business owners seeking to
bring suit against corporate wrongdoers would have to think twice about
filing a claim, no matter how much they have been harmed because of
provisions in this bill which would require, as I stated before, losing
parties to pay the legal fees of the winners in many instances. As a
result, as scholar Thomas Rowe has noted, ``the threat of having to pay
the other side's fee can loom so large in the mind of a person without
considerable disposable assets that it deters the pursuit of even a
fairly promising and substantial claim or defense.''
This is hardly what our system of justice is all about Mr. Chairman.
It is interesting that earlier this year the prominent conservative
magazine, the Economist, called for abandonment of Britain's loser-pays
rules, because in that country only the very wealthy can afford the
costs and risks of most litigation which offends one of the most basic
principles of a free society: equality before the law. Apparently the
majority sees nothing wrong with this. Well I, along with my
constituents, sure as heck do.
But wait, Mr. Chairman, that is not all. Other provisions of H.R. 988
would subvert the Supreme Court's recent carefully construed framework
for the judicial evaluation of scientific evidence, designed to curb
abuses in the use of expert testimony. Again, these changes would be
instituted for change's sake rather than because of any body of
evidence indicating the need for such revisions. This House should not
legislate just because we can Mr. Chairman, but because there is a need
to do so. The GOP has yet to show any credible need for this
legislation.
The American people do want accountability in all branches of our
Federal Government--executive, legislative, and judicial. They do want
commonsense, targeted reforms to many of our major societal
institutions such as the civil and criminal justice systems. What they
do not want and do not accept, however, is for so-called accountability
and reform to come at the expense of their basic rights as citizens.
H.R. 988, unfortunately, would do just that. Therefore, I appeal to my
colleagues on both sides of the aisle to vote ``no'' on this
legislation.
The CHAIRMAN. All time for general debate has expired.
Pursuant to the rule, the committee amendment in the nature of a
substitute now printed in the bill is considered as an original bill
for the purpose of amendment and is considered as having been read.
The text of the committee amendment in the nature of a substitute is
as follows:

H.R. 988

Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Attorney Accountability Act
of 1995''.

SEC. 2. AWARD OF COSTS AND ATTORNEY'S FEES IN FEDERAL CIVIL
DIVERSITY LITIGATION AFTER AN OFFER OF
SETTLEMENT.

Section 1332 of title 28, United States Code, is amended by
adding at the end the following:
``(e)(1) In any action over which the court has
jurisdiction under this section, any party may, at any time
not less than 10 days before trial, serve upon any adverse
party a written offer to settle a claim or claims for money
or property or to the effect specified in the offer,
including a motion to dismiss all claims, and to enter into a
stipulation dismissing the claim or claims or allowing
judgment to be entered according to the terms of the offer.
Any such offer, together with proof of service thereof, shall
be filed with the clerk of the court.
``(2) If the party receiving an offer under paragraph (1)
serves written notice on the offeror that the offer is
accepted, either party may then file with the clerk of the
court the notice of acceptance, together with proof of
service thereof.
``(3) The fact that an offer under paragraph (1) is made
but not accepted does not preclude a subsequent offer under
paragraph (1). Evidence of an offer is not admissible for any
purpose except in proceedings to enforce a settlement, or to
determine costs and expenses under this subsection.
``(4) At any time before judgment is entered, the court,
upon its own motion or upon the motion of any party, may
exempt from this subsection any claim that the court finds
presents a question of law or fact that is novel and
important and that substantially affects nonparties. If a
claim is exempted from this subsection, all offers may by any
party under paragraph (1) with respect to that claim shall be
void and have no effect.
``(5) If all offers made by a party under paragraph (1)
with respect to a claim or claims, including any motion to
dismiss all claims, are not accepted and the judgment,
verdict, or order finally issued (exclusive of costs,
expenses, and attorney's fees incurred after judgment or
trial) in the action under this section is not more favorable
to the offeree with respect to the claim or claims than the
last such offer, the offeror may file with the court, within
10 days after the final judgment, verdict, or order is
issued, a petition for payment of costs and expenses,
including attorney's fees, incurred with respect to the claim
or claims from the date the last such offer was made.
``(6) If the court finds, pursuant to a petition filed
under paragraph (5) with respect to a claim or claims, that
the judgment, verdict, or order finally obtained is not more
favorable to the offeree with respect to the claim or claims
than the last offer, the court shall order the offeree to pay
the offeror's costs and expenses, including attorneys'
fees, incurred with respect to the claim or claims from
the date the last offer was made, unless
[[Page H2677]] the court finds that requiring the payment of
such costs and expenses would be manifestly unjust.
``(7) Attorney's fees under paragraph (6) shall be a
reasonable attorney's fee attributable to the claim or claims
involved, calculated on the basis of an hourly rate which may
not exceed that which the court considers acceptable in the
community in which the attorney practices law, taking into
account the attorney's qualifications and experience and the
complexity of the case, except that the attorney's fees under
paragraph (6) may not exceed--
``(A) the actual cost incurred by the offeree for an
attorney's fee payable to an attorney for services in
connection with the claim or claims; or
``(B) if no such cost was incurred by the offeree due to a
contingency fee agreement, a reasonable cost that would have
been incurred by the offeree for an attorney's noncontingent
fee payable to an attorney for services in connection with
the claim or claims.
``(8) This subsection does not apply to any claim seeking
an equitable remedy.''.

SEC. 3. HONESTY IN EVIDENCE.

Rule 702 of the Federal Rules of Evidence (28 U.S.C. App.)
is amended--
(1) by inserting ``(a) In general.--'' before ``If'', and
(2) by adding at the end the following:
``(b) Adequate basis for opinion.--Testimony in the form of
an opinion by a witness that is based on scientific knowledge
shall be inadmissible in evidence unless the court determines
that such opinion--
``(1) is scientifically valid and reliable;
``(2) has a valid scientific connection to the fact it is
offered to prove; and
``(3) is sufficiently reliable so that the probative value
of such evidence outweighs the dangers specified in rule 403.
``(c) Disqualification.--Testimony by a witness who is
qualified as described in subdivision (a) is inadmissible in
evidence if the witness is entitled to receive any
compensation contingent on the legal disposition of any claim
with respect to which the testimony is offered.
``(d) Scope.--Subdivision (b) does not apply to criminal
proceedings.''.

SEC. 4. ATTORNEY ACCOUNTABILITY.

(a) Sanctions.--Rule 11(c) of the Federal Rules of Civil
Procedure (28 U.S.C. App.) is amended--
(1) in the matter preceding paragraph (1) by striking
``may'' and inserting ``shall'';
(2) in paragraph (1)(A)--
(A) in the second sentence by striking ``, but shall'' and
all that follows through ``corrected''; and
(B) in the third sentence by striking ``may'' and inserting
``shall''; and
(3) in paragraph (2) by striking ``A sanction imposed'' and
all that follows through ``violation.'' and inserting the
following: ``A sanction imposed for a violation of this rule
shall be sufficient to deter repetition of such conduct or
comparable conduct by others similarly situated, and to
compensate the parties that were injured by such conduct.
Subject to the limitations in subparagraphs (A) and (B), the
sanction may consist of an order to pay to the other party or
parties the amount of the reasonable expenses incurred as a
direct result of the filing of the pleading, motion, or other
paper that is the subject of the violation, including a
reasonable attorney's fee.''.
(b) Applicability to Discovery.--Rule 11 of the Federal
Rules of Civil Procedure is amended by striking subdivision
(d).

SEC. 5. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

(a) Effective Date.--Subject to subsection (b), this Act
and the amendments made by this Act shall take effect on the
first day of the first month beginning more than 180 days
after the date of the enactment of this Act.
(b) Application of Amendments.--
(1) The amendment made by section 2 shall apply only with
respect to civil actions commenced after the effective date
of this Act.
(2) The amendments made by section 3 shall apply only with
respect to cases in which a trial begins after the effective
date of this Act.

The CHAIRMAN. The bill will be considered for amendment under the 5-
minute rule for a period not to exceed 7 hours.
During consideration of the bill for amendment, the Chairman of the
Committee of the Whole may accord priority in recognition to a Member
offering an amendment that has been printed in the designated place in
the Congressional Record. Those amendments will be considered as having
been read.
Are there any amendments to the bill?

amendment offered by mr. goodlatte

Mr. GOODLATTE. Mr. Chairman, I offer an amendment.
The Clerk read as follows:

Amendment offered by Mr. Goodlatte: Page 3, line 20, insert
before the period the following: ``or, if the offeree made an
offer under this subsection, from the date the last such
offer by the offeree was made''.
Page 4, line 3, insert after ``offer was made'' the
following: ``or, if the offeree made an offer under this
subsection, from the date the last such offer by the offeree
was made''.

Mr. GOODLATTE (during the reading). Mr. Chairman, I ask unanimous
consent that the amendment be considered as read and printed in the
Record.
The CHAIRMAN. Is there objection to the request of the gentleman from
Virginia?
There was no objection.
Mr. GOODLATTE. Mr. Chairman, the purpose of this amendment is to
enhance provisions of the bill that deal with making offers of
settlement.
The way the bill currently reads, the parties can limit their
exposure to attorneys' fees by making offers of settlement. However, it
is the party that makes their own offer that can cut off the exposure
of attorneys' fees for the other side, and we want to reverse that so
that each party will have an incentive to make offers of settlement,
because the more they offer to settle, the more likely it is they will
be able to recover attorneys' fees.
So by making this contingent upon the last offer by the nonprevailing
party in a case rather than the last offer by the prevailing party, we
will have the effect of allowing each party to make offers of
settlement in order to cut off their exposure for attorneys' fees.
Now, this exposure for attorneys' fees can be limited to less than 10
days before trial through the trial itself, and, therefore there is a
limitation on how long you can make these offers which cut off at 10
days before trial for the purpose of making sure that there are some
risks attached to bringing a lawsuit which turns out to not have merit.
So I would encourage all of us who want to promote settlement of
lawsuits and want to promote reasonableness to adopt this amendment.
The effect of not changing this will be essentially to have parties
having a disincentive to make additional offers of settlement, because
if they can control when their opposing parties' attorneys' fee is cut
off, they will have to add that additional calculation as to the worth
of those attorneys' fees in determining whether or not to offer a
settlement, an increased settlement offer.
So, for example, if there is the likelihood of recovering $10,000 of
attorneys' fees in a case and a party feels they have a 75 percent
chance of winning, they may feel that they are not only making an
additional offer of settlement but they are also giving up the value,
whatever they may place on it, of those attorneys' fees. We want to
turn that around. We want the parties to have an incentive to make
settlement offers so if we allow them to cut off their own exposure for
attorneys' fees through the date of that settlement, by making a
settlement offer, we will accomplish our goal of encouraging more
settlement in these cases.
Mr. CONYERS. Mr. Chairman, I move to strike the last word.
Mr. Chairman, we began the debate and the amendment process by first
of all amending the least worst part of this bill that loser pays all.
Remember, we had an original bill. The original bill in committee
provided for the loser as to any claim to pay the attorney fees of the
winner. It applied to all fees in the case that applied to that
particular claim, was not tied to any offer.
Wonderfully, providentially, the consciences of the new majority
overcame them, and they accepted the Goodlatte amendment. The Goodlatte
amendment, as it was debated in the committee, said that the loser pays
the winner's fees after the date of the offer if they come up the short
side, and here is where the poker playing began. The person with the
greatest resources usually can win in a poker game, especially when you
are down to the last couple of chips.
Here we have the loser pays the winner's fees after the date of the
offer, and the losing means not doing better than the offer; the award
is limited to the plaintiff's own attorney fees or reasonable fee based
on the hours spent by the plaintiff's attorney.
This did make a mean spirited bill less mean-spirited. The problem
was that the unlevel playing field, if one party has more wealth than
the other, still obtains. I makes it highly risky to pursue a case
where liability is in question, and that is what we continue here.
Now, fortunately, and I say that seriously, the gentleman from
Virginia has found another error in this hastily
[[Page H2678]] tacked together provision, because now he is suggesting
that if the offeree made an offer under this subsection from the date
the last such offer by the offeree was made, if the offeree made an
offer under this subsection from the date that last such by the offeree
was made, then he would be moving, advancing his cause, which changes
considerably the plight of the offeree before this language was
inserted. I am sorry that we did not find this out before now, but the
problem is that these poker-game-like provisions in terms of
negotiating offers being made by both parties are contingent upon the
fact that one or both of the parties have some idea as to what the
actual outcome is going to be.
I suggest to you that in personal injury and tort cases the outcome
might vary widely from forum to forum. The outcome could vary very
widely depending on whether there is a jury, or whether the judge is
trying the facts and the law in the case, and now we are finding that
there were other errors made.
To me, this improvement which is necessary to the logic that was
intended by the gentleman from Virginia originally, does not cure the
basic problem to the bill. We still have a bill that is going to be
subjected to even more amendments to try to humanize it, to try to live
down the reputation that it has so wholesomely earned as being an
antiplaintiff's bill, an antiworking people's bill, an antipoor
person's attempt to get into court, that it is a way of shutting the
door down.
The whole provision is confusing. It is a trap for the unwary. I
suggest to you attorneys are going to tear their hair out trying to
figure out how they can game the system with this new Las Vegas type
offer that can and now must be made if you are to protect yourself
against being assessed the fees of the opposing party.
Ms. PRYCE. Mr. Chairman, I move to strike the requisite number of
words.
I rise in support of the Goodlatte amendment and in support of the
provisions on attorney's fees and costs which have been included in
H.R. 988 and to commend my colleague, the gentleman from Virginia [Mr.
Goodlatte], for his hard work on this very fair legislation.
During consideration of H.R. 988 by the Committee on the Judiciary an
amendment was adopted by a vote of 27 to 7. The amendment substantially
modified the language governing awards of costs and attorneys' fees in
Federal civil diversity litigation from a strict and onerous loser pays
formula to a fairer, yet much needed, version. The Goodlatte amendment
is designed to encourage settlement of legal disputes, to reduce the
burden of frivolous claims on the Federal courts, and to provide full
recovery to the prevailing party. It will not impose a barrier to
filing of meritorious lawsuits, but will simply require plaintiffs to
engage in thoughtful and deliberate consideration of the substance of
their claims before proceeding with costly, time-consuming litigation.
{time} 1645

As a former judge, I saw my fair share of frivolous lawsuits, and I
also saw my fair share of the collection of a good number of nuisance
claims, and I know from years of impartial observation in courtrooms
that this provision is evenhanded, fair, and will do the job.
I am pleased that the language has been included to provide the
courts with latitude in determining awards of attorneys' fees and cost.
Specifically, the bill stipulates that the court may decline to grant
an award where the payment of such costs and expenses would be
``manifestly unjust.'' In addition, the court is not required to make
an award in cases involving a claim for equitable relief or in cases
where the court finds that the claim presents a novel and important
question of law or fact that substantially effects nonparties.
Mr. Chairman, H.R. 988 will encourage settlement of disputed claims,
allows cases with merit to proceed more rapidly through the judicial
process, and assures that plaintiffs' concerns are addressed
appropriately.
Therefore, I urge my colleagues to support passage of this important
legislation. In it are properties that will go far in addressing abuses
we all know exist and that I have seen firsthand, yet it stops short of
denying access to fair-minded litigants.
I urge adoption.
Mr. MOORHEAD. Mr. Chairman, I move to strike the requisite number of
words.
You know, in the course of a debate on any bill, we strive to make
the legislation as good as we possibly can. Every bill is amended along
the way. This bill has changed somewhat in its form as members of the
subcommittee and the full committee and now the people on the floor
find ways that they may want to improve the legislation.
That does not mean that mistakes have been made; far from it, it
means that a very good idea has been presented to the Congress that can
be changed by many of the people that are present here.
Mr. Goodlatte has a fine amendment here. His amendment improves the
quality of the overall bill, and I certainly support it.
Mr. GOODLATTE. Mr. Chairman, will the gentleman yield?
Mr. MOORHEAD. I yield to the gentleman from Virginia.
Mr. GOODLATTE. I thank the gentleman for yielding.
Mr. Chairman, this is indeed a part of the process of refining these
bills and making them of such a nature that they try to be as fair as
possible to all parties. But the real purpose here is to encourage
settlement of lawsuits and discourage the bringing of lawsuits that do
not have merit.
The CHAIRMAN. The gentleman from California [Mr. Moorhead] has the
time, and he must remain upon his feet.
(On request of Mr. Goodlatte and by unanimous consent, Mr. Moorhead
was allowed to proceed for 5 additional minutes.)
Mr. GOODLATTE. Mr. Chairman, will the gentleman continue to yield?
Mr. MOORHEAD. I yield to the gentleman.
Mr. GOODLATTE. I thank the gentleman for yielding.
Mr. Chairman, this is, I believe, a very good model for handling the
problem we have in this country with frivolous lawsuits, fraudulent
lawsuits, and the fact that so many people are forced in the courts to
defend cases that do not have merit and have to expend a great deal of
money to do so.
The effect here will be to set a model that the State legislatures
can look at to apply in the State courts. This only applies in
diversity cases in the U.S. district courts. Earlier there was mention
by one of the parties on the other side regarding the effect on civil
right cases. This does not apply in Federal question cases, only on
diversity cases in Federal court. Diversity cases make up about 20
percent of the Federal docket, and the Federal docket amounts to about
5 percent of all the lawsuits brought in the country.
So this will be a good test of whether the Congress has come up with
a way to provide incentives for parties to be reasonable when they
bring lawsuits. We do not want anybody in this country who has a
meritorious claim not to bring that claim in a State or Federal court
as they deem appropriate. But we want them to do so after they have
fully evaluated the merits of a case. We do not want them to do so if
their purpose is fraud; we do not want them to do so if the purpose is
to be frivolous.
This will have the effect of making them think about that before they
bring the action, and it encourages reality in these cases by requiring
that the parties understand that they have an obligation to negotiate
settlement resolution of these cases in good faith; that they not tie
up our Federal court system with a case that really should be settled.
By having this mechanism whereby if a party makes an offer to settle
the case, as this amendment provides, they can have the ability to
reduce their exposure for attorneys fees by doing that up until 10 days
before trial. We will promote that settlement opportunity.
So, again, I urge my colleagues to support this amendment and to
support the underlying bill.
Mr. MOORHEAD. Mr. Chairman, as we come to the end of the debate on
this very important amendment, I cannot help but look at the clock and
see that we still have 10 minutes more to use before the 5 o'clock
period when we can have votes on the floor. So, it
[[Page H2679]] would be helpful if I can yield some additional time to
the gentleman from Virginia.
Mr. GOODLATTE. I thank the gentleman for yielding further.
In terms of looking at this provision in this bill from the
standpoint of the effect that it will have on the plaintiff in a case,
I think that it has a great deal of merit for the plaintiff as well,
because the effect will be to say that if you indeed do have merit to
your case, if you know that the defendant in this case is liable for a
harm that has been caused to you, you know there is going to be
increased pressure on that defendant to settle the case because that
defendant will then be put in the position of knowing that they will
have to pay the plantiffs' attorney's fee if the plaintiff prevails.
So, this is not something that is in favor of defendants as opposed
to plaintiffs or in favor of corporate defendants as opposed to
individual plaintiffs or individual defendants.
This will have the effect of making everybody who looks at a case,
looks at it carefully, makes a study of the case and understands that
when the defendant takes a case into court they will have to always
bear the cost of their attorneys' fees. No longer will we have a
situation where we will read in the telephone books of the country, no
recovery. If there is no fee, there is no recovery. In other words,
there is no risk for bringing a lawsuit.
There should be a risk for every party in the case. There also should
be a reward for everybody in the case if they are reasonable in their
approach. When a plaintiff has a good case and a deep-pocket defendant
is refusing to settle the case because they are a deep pocket, this
plaintiff who knows that he has the case will be able to force that
defendant to act because the defendant will know that they will
ultimately face attorneys' fees for their failure to act.
Mr. DURBIN. Mr. Chairman, will the gentleman yield?
Mr. GOODLATTE. I yield to the gentleman from Illinois.
Mr. DURBIN. I thank the gentleman for yielding.
Mr. Chairman, I would like to ask the gentleman from Virginia his
experience. Mine, In Illinois, was that 90 to 95 percent of all the
civil cases filed settled before they went to trial. That suggests to
me that if the goal is to find settlements, the system is currently
doing that in most cases.
Is the gentleman's experience different?
Mr. GOODLATTE. Well, I would say to the gentleman, the comments of a
member of his own party, George McGovern, who in 1972 was a
presidential candidate, he says in an article out this weekend calling
for a reform of our judicial system, that one out of four suits brought
in court are either frivolous or fraudulent. If that is indeed the
case, then we have a serious problem with cases that are being brought
that are not meritorious.
Mr. DURBIN. If the gentleman will further yield, I do not question
that some percentage of lawsuits are frivolous; 25 percent, if that is
accurate, is a very high percentage. I think he may overstate it, but
perhaps he has reason to believe that is the case. But that is part of
the system that we have, an open system. We really do not screen
candidates for public office. There are frivolous candidates for public
office who run too. They are put on the ballot, they are given their
day in court of the electorate, and they may be rejected. The same is
true for many of these lawsuits.
The question is whether you want to close down the democratic nature
of this process and keep the people out who really should be part of
it. This is a voice for many----
Mr. GOODLATTE. I do not think it has that effect at all because, as I
said earlier, if the plaintiff's case has merit, that is going to put
greater pressure on the defendant to settle case because they know that
if they lose the case, they are going to pay attorney's fees.
Furthermore, because of the settlement mechanism that has been added
into this bill, the effect is going to be to encourage a greater number
of settlements.
I would hope we would settle--if it is 90 percent now, I hope we get
to 99 percent. There is always a reasonable position somewhere in the
middle of these cases, and we want to have these parties to have every
pressure possible to find that reasonable ground and keep them from
tying up our courts with cases that do not need to be there if the
parties would act rationally and settle them.
Mr. DURBIN. The gentleman responded relating to frivolous lawsuits.
But back to my original question: What is the gentleman's experience on
the percentage of cases presently filed, civil cases that are settled
before they go to trial? What has been the gentleman's experience?
Mr. GOODLATTE. I do not have a figure. I would say it is a high
percentage.
Mr. DURBIN. Ninety and ninety-five percent?
Mr. GOODLATTE. It is a high percentage. The question is what
percentage of cases we have in Federal courts now that can be removed
from the court system if there is a penalty for bringing a frivolous or
fraudulent case? If that indeed is 25 percent, that is a substantial
reduction. I think it would be greater than that.
Not only will frivolous and fraudulent cases be settled, but in some
cases where there is merit in the case that the parties have not been
able to get together, they will get together because of the increased
risk involved in the case and nonmeritorious cases will be settled or
dismissed before somebody takes the risk of bringing an action all the
way through the cost of the judge, the jury, and everybody else that
has to be involved, and all the time involved in the case. We can
reduce those by encouraging settlement. I think this is a very good
vehicle to do it.
Mr. WISE. Mr. Chairman, will the gentleman yield?
Mr. GOODLATTE. I yield to the gentleman from West Virginia.
Mr. WISE. I thank the gentleman for yielding.
Mr. Chairman, the gentleman quoted Senator George McGovern. Does the
gentleman agree with George McGovern on just about anything else?
Mr. GOODLATTE. Yes. As a matter of fact, I do. This case comes from
an article that George McGovern wrote about his experiences with a
business that he started in Connecticut, a hotel. George McGovern, a
couple of years ago, was quoted as saying, ``You know, I never realized
until I was a small business owner, but regulations in this country are
beating small businesses to death and we got to do something about
it.''
Now he comes along and says not only do we have to reform the
regulatory process in this country but we also need to reform the
judicial process to discourage the lawsuit industry, as he calls it.
Mr. SOLOMON. Mr. Chairman, will the gentleman yield?
Mr. GOODLATTE. I yield to the gentleman from New York.
Mr. SOLOMON. I appreciate the gentleman yielding.
Mr. Chairman, I could also answer my friend's question because I
never thought I would ever agree with George McGovern, who was the
father of the philosophy that said big brother government knows best. I
had the opportunity to sit next to him at a dinner the other night in
which he went on to lament his former attitude about big government and
how they could solve all the problems.
The gentleman mentioned that when he became a small businessman, all
of a sudden he realized what all of these burdens do. And by tying up
all of these entrepreneurial midsize businesses in court, it means that
much less money that they can use for capital to expand businesses.
Remember, midsize and small businesses create 75 percent of every new
job in America every single year for high school kids coming out of
high school, for college grads. The gentleman is right on line, and we
certainly hope his position prevails tonight.
Mr. GOODLATTE. I thank the gentleman for his comments.
Mr. WISE. Mr. Chairman, I move to strike the requisite number of
words, and I yield to the gentleman from Michigan [Mr. Conyers].
Mr. CONYERS. I thank the gentleman for yielding.
Mr. Chairman, I think we are finally getting to the bottom of this
matter.
[[Page H2680]] We have had the gentleman from Virginia [Mr. Goodlatte]
really make it clear what he is after. First of all, he does not want
any plaintiff to ever bring a lawsuit that he does not get charged for
it, no matter what his economic circumstances. He said that.
That is, the responsibility of going into court; namely, you got to
afford to be able to go into court and if you cannot, you have no
business bringing the lawsuit. How meritorious it might be? It does not
matter. How important is it that the injury complained of in the
lawsuit is the reason that the person is impecunious and not working?
Irrelevant. How important is a case that has obvious redeeming merit to
it? Beside the point.
If the plaintiff cannot afford to pay his attorneys' fees, quote from
the gentleman from Virginia, ``He should not be in court because he is
not a responsible party.'' That is why I am against this whole bill.
The argument of the gentleman from Virginia, his most recent remarks
in attempting to repair the repair that he did to the original bill in
committee, the Committee on the Judiciary, make it clear that this bill
is an attack on the contingency fee, which you have a right to dislike
or hate as you may feel.
{time} 1700

I happen to think that it happens to be an important way for people
to get a case brought that may have merit. The contingency fee is a
primary avenue for ordinary people, for poor people, to seek a remedy
in court when they have been harmed and do not have any money, do not
have a bank account, do not have stocks or bonds, do not have a house
that they can put up as collateral to secure an attorney to prosecute
their cause of action. This bill effectively destroys the contingency
fee system because it says that the poor person or the middle class
person will have to put their savings, their home, at risk to get to
court, and if they do not get to court, they have got to involve
themselves in this great new poker game in which their attorneys will
now have to bid, negotiate, bid appropriately, as if they all know what
the outcome of a case is going to be, which in my experience has been
just the opposite has been true.
So I think that even the attempts of the gentleman from Virginia at
this late date to perfect the amendment lead me to oppose it, as I
oppose the entire bill, and I hope that the Members of this House will
reject this amendment.
Mr. WISE. Mr. Chairman, I thank the gentleman. I would like to
continue.
As I do, Mr. Chairman, I would like to preface my remarks by saying
that, yes, I did practice law before coming to the Congress. I think it
should be noted that personal injury suits of any kind were not a part
of my practice. In fact, I spent years trying to figure out what was my
practice, and I know this was not part of it, and so I do not
necessarily have a stake in this in any way except to say that it is my
observation that the only way some people are going to get to court is
on the present basis.
As the New York Times noted in an editorial several days ago, what
this bill seeks to do is to overturn 200 years of United States common
law, common law that, yes, is different from the mother country, Great
Britain, where the loser does pay, but we made a decision in this
country years ago, centuries ago, to divert from that because we felt
that there ought to be access to the courts for all.
I say to my colleagues, ``There is a very plain reality that, if
you're a middle income person, you're going to have to think twice
before you bring even a meritorious suit because your attorney, if he
or she is doing their job, is going to have to caution you and say, ``I
think you have a good case; it's a case I feel comfortable bringing,''
remembering that that attorney is not paid for the most part, that
attorney is not paid, unless there is a victory. But if you should
lose, if the jury by narrow margin should decide you lose, even though
the merits were almost equally balanced, you can end up paying, and,
yes, you can end up paying, you can end up paying the large insurance
company, the large corporation, whomever, whose lawyers are running up
a tab happily at hundreds of dollars an hour. That is an incredible
risk.
I ask, ``Do you risk your children's education? Do you risk your
home? Do you risk your car? Do you risk your job?''
Mr. Chairman, I think people misunderstand if they think that----
The CHAIRMAN. The time of the gentleman from West Virginia [Mr. Wise]
has expired.
(By unanimous consent, Mr. Wise was allowed to proceed for 3
additional minutes.)
Mr. WISE. So that is a considerable risk.
The other myth, I think, is that people enter into these suits
lightly, thinking, well, I do not have to pay anything, and, therefore,
I can just go down, retain a lawyer, and sort of like the lottery will
buy a ticket, and see if we hit. That is not the way it works. There is
a considerable amount of time, investment in effort, made, all from the
person who is having to put forward their own expenses for medical
examinations, that type of thing.
I would just urge there are some useful provisions to this
legislation. I appreciate, for instance, in later pieces what they are
trying to do to separate out in some cases of joint and several
liability, or, in some cases, dealing with whether or not accountants
should be made as liable in securities actions, but what I really just
disapprove of here is making it so much more difficult for people to
get to court in the first place.
The reality is that middle income people, poor people, are not going
to be able to go to court as they once did, and I would urge, as much
as the gentleman is trying to perfect this amendment, I urge rejection
of the amendment, and certainly the bill.
Mr. WILLIAMS. Mr. Chairman, will the gentleman yield?
Mr. WISE. I yield to the gentleman from Montana.
Mr. WILLIAMS. Mr. Chairman, the gentleman prefaced his remarks by
noting that he had practiced law before coming to Congress. I want to
preface my remarks by saying I did not do that. I am not a lawyer----
Mr. WISE. The gentleman is the best of all to speak.
Mr. WILLIAMS. I preface it because I want to say that my profession
was that of an educator, and, as a teacher, I have watched with growing
alarm at the drum beat of attacks, some of it very personal, that has
gone on, particularly this past decade and a half, against lawyers.
Attorney are, in the American system, the arbiters of our justice. It
is attorneys that develop the information which proves the guilty
guilty and proves the innocent innocent, and I want to just take a
minute of the gentleman's time to say that I believe the attack on
attorneys, particularly trial lawyers of the past decade and some, is
what drives the legislation here today, and I want to say further that
my examination of this bill shows that it is toll road justice, it is
deep pocket justice, it is means testing justice in America. It says,
``If you're not rich, don't play.''
Mr. Chairman, that is a terrible, terrible thing for this country to
bend to, and I thank the gentleman for having yielded to me.
Mr. WISE. If I could add to that, ``If you're not rich, don't play,''
that, ``If you're very poor, you'll have to pay.''
Mrs. COLLINS of Illinois. Mr. Chairman, I rise in opposition to the
Goodlatte amendment and urge a strong ``no'' vote from my colleagues.
This ill-conceived amendment effectively denies average, hard-working
citizens the right to access our Nation's courts for the resolution of
their disputes. Oppressive as this is, it does fall nicely in line with
the rest of the punitive Contract With America.
Under this amendment, average citizens and small business owners
seeking to bring suit against corporate wrongdoers would have to think
twice about filing a claim, no matter how much they're been harmed
because of its provisions which would require losing parties to pay the
legal fees of the winners in many instances. Ironically, under the
language of this amendment, the category ``loser'' would include even
those parties who won their cases, but were compensated for their
losses by the court at a level that is less than what they were offered
for a settlement.
As scholar Thomas Rowe has noted, ``the threat of having to pay the
other side's fee can loom so large in the mind of a person without
considerable disposable assets that it deters
[[Page H2681]] the pursuit of even a fairly promising and substantial
claim or defense.''
This is hardly what our system of justice is all about, Mr. Chairman.
It is interesting that earlier this year the prominent conservative
magazine, the Economist, called for abandonment of Britain's ``loser
pays'' rules, because in that country ``only the very wealthy can
afford the costs and risks of most litigation'' which ``offends one of
the most basic principles of a free society: equality before the law.''
Apparently the majority sees nothing wrong with this. Well, I along
with my constituents, sure as heck do.
Our Nation's system of justice is based on the proposition that all
Americans, regardless of income, should have access to this system. The
Goodlatte amendment turns this proposition on its head and makes a
mockery of our civil courts.
For these reasons, I urge rejection of the amendment.
The CHAIRMAN. The time of the gentleman from West Virginia [Mr. Wise]
has expired.
The question is on the amendment offered by the gentleman from
Virginia [Mr. Goodlatte].
The question was taken; and the chairman announced that the ayes
appeared to have it.

Recorded Vote

Mr. CONYERS. Mr. Chairman, I demand a recorded vote.
A recorded vote was ordered.
The vote was taken by electronic device, and there were--ayes 317,
noes 89, not voting 28, as follows:

[Roll No. 200]

AYES--317

Archer
Armey
Bachus
Baker (CA)
Baker (LA)
Baldacci
Ballenger
Barcia
Barr
Barrett (NE)
Barrett (WI)
Bartlett
Bass
Bateman
Beilenson
Bentsen
Bereuter
Berman
Bevill
Bilbray
Bilirakis
Bishop
Bliley
Blute
Boehlert
Boehner
Bonilla
Bono
Boucher
Brewster
Browder
Brownback
Bryant (TN)
Bunn
Burr
Burton
Buyer
Callahan
Calvert
Camp
Canady
Cardin
Castle
Chabot
Chambliss
Chapman
Chenoweth
Christensen
Chrysler
Clayton
Clement
Clinger
Coble
Coburn
Collins (GA)
Combest
Cooley
Cox
Cramer
Crane
Crapo
Cremeans
Cubin
Cunningham
Danner
Davis
de la Garza
Deal
DeFazio
DeLay
Diaz-Balart
Dickey
Dicks
Dixon
Doggett
Doolittle
Dornan
Doyle
Dreier
Duncan
Dunn
Edwards
Ehlers
Ehrlich
Emerson
Engel
English
Ensign
Eshoo
Everett
Ewing
Fawell
Fields (TX)
Flanagan
Foley
Forbes
Fowler
Fox
Frank (MA)
Franks (CT)
Franks (NJ)
Frelinghuysen
Frisa
Funderburk
Furse
Gallegly
Ganske
Gejdenson
Gekas
Geren
Gibbons
Gilchrest
Gilman
Goodlatte
Goodling
Gordon
Goss
Graham
Green
Greenwood
Gunderson
Gutknecht
Hall (OH)
Hall (TX)
Hamilton
Hancock
Hansen
Harman
Hastert
Hastings (WA)
Hayes
Hayworth
Heineman
Herger
Hilleary
Hobson
Hoekstra
Hoke
Holden
Horn
Hostettler
Houghton
Hoyer
Hunter
Hutchinson
Hyde
Inglis
Istook
Jackson-Lee
Johnson (CT)
Johnson, Sam
Jones
Kaptur
Kasich
Kelly
Kennedy (MA)
Kennedy (RI)
Kennelly
Kim
King
Kingston
Kleczka
Klink
Klug
Knollenberg
Kolbe
LaFalce
LaHood
Lantos
Largent
Latham
LaTourette
Laughlin
Lazio
Leach
Levin
Lewis (CA)
Lewis (KY)
Lightfoot
Lincoln
Linder
Livingston
LoBiondo
Lofgren
Longley
Lucas
Luther
Manzullo
Martinez
Martini
Mascara
McCarthy
McCollum
McCrery
McHale
McHugh
McInnis
McKeon
McNulty
Meehan
Menendez
Metcalf
Meyers
Mica
Miller (FL)
Minge
Molinari
Mollohan
Montgomery
Moorhead
Moran
Morella
Myers
Myrick
Nadler
Neal
Nethercutt
Neumann
Ney
Norwood
Nussle
Obey
Olver
Ortiz
Orton
Oxley
Packard
Pallone
Parker
Paxon
Payne (VA)
Peterson (FL)
Peterson (MN)
Pombo
Pomeroy
Porter
Pryce
Quillen
Quinn
Rahall
Ramstad
Reed
Regula
Riggs
Roberts
Roemer
Rohrabacher
Ros-Lehtinen
Royce
Salmon
Sanford
Sawyer
Saxton
Scarborough
Schroeder
Schumer
Seastrand
Sensenbrenner
Shaw
Shays
Shuster
Sisisky
Skaggs
Skeen
Smith (MI)
Smith (NJ)
Smith (TX)
Smith (WA)
Solomon
Souder
Spence
Spratt
Stearns
Stenholm
Stockman
Stump
Stupak
Talent
Tanner
Tate
Tauzin
Taylor (MS)
Taylor (NC)
Tejeda
Thomas
Thornberry
Thurman
Tiahrt
Torkildsen
Torres
Torricelli
Traficant
Upton
Vento
Volkmer
Vucanovich
Waldholtz
Walker
Walsh
Wamp
Ward
Watts (OK)
Waxman
Weldon (FL)
Weldon (PA)
Weller
White
Whitfield
Wicker
Wilson
Wolf
Woolsey
Wyden
Young (AK)
Young (FL)
Zeliff
Zimmer

NOES--89

Abercrombie
Ackerman
Allard
Andrews
Baesler
Bonior
Borski
Clay
Clyburn
Coleman
Collins (IL)
Collins (MI)
Conyers
Costello
Coyne
DeLauro
Dellums
Deutsch
Dingell
Durbin
Evans
Farr
Fattah
Fazio
Filner
Flake
Foglietta
Frost
Gephardt
Gonzalez
Gutierrez
Hastings (FL)
Hefley
Hilliard
Hinchey
Jacobs
Jefferson
Johnson (SD)
Johnson, E. B.
Kanjorski
Kildee
Lewis (GA)
Lipinski
Lowey
Manton
Markey
Matsui
McDermott
McKinney
Mineta
Mink
Moakley
Murtha
Oberstar
Owens
Pastor
Payne (NJ)
Petri
Pickett
Poshard
Reynolds
Richardson
Rivers
Rose
Roybal-Allard
Rush
Sabo
Sanders
Schaefer
Scott
Serrano
Shadegg
Skelton
Slaughter
Stark
Stokes
Studds
Thompson
Thornton
Towns
Tucker
Velazquez
Visclosky
Waters
Watt (NC)
Williams
Wise
Wynn
Yates

NOT VOTING--28

Barton
Becerra
Brown (CA)
Brown (FL)
Brown (OH)
Bryant (TX)
Bunning
Condit
Dooley
Fields (LA)
Ford
Gillmor
Hefner
Johnston
Maloney
McDade
McIntosh
Meek
Mfume
Miller (CA)
Pelosi
Portman
Radanovich
Rangel
Rogers
Roth
Roukema
Schiff
{time} 1731

The Clerk announced the following pairs:
On this vote:

Mr. Radanovich for, with Ms. Brown of Florida against.
Mr. Schiff for, Mr. Rangel against.

Messrs. BAESLER, MATSUI, and SHADEGG changed their vote
from ``aye'' to ``no.''
Ms. ESHOO, Messrs. GILCHREST, VENTO, LEVIN, GEJDENSON, MARTINEZ,
MOLLOHAN, ROEMER, FRANK of Massachusetts, MASCARA, RAHALL, BERMAN,
WAXMAN, DIXON, BEILENSON, OLVER, TANNER, MEEHAN, and TORRES changed
their vote from ``no'' to ``aye.''
So the amendment was agreed to.
The result of the vote was announced as above recorded.
personal explanation

Mr. PORTMAN. Mr. Chairman, because of a scheduling conflict, I was
unable to arrive in time for the vote on the Goodlatte amendment. Had I
been in attendance, I would have voted ``yea'' on rollcall vote No.
200.

personal explanation

Mr. MFUME. Mr. Chairman, I was, unfortunately, detained in my
congressional district in Baltimore earlier today and thus forced to
miss a record vote. Specifically, I was not present to record my vote
on rollcall vote No. 200, the amendment offered by Mr. Goodlatte of
Virginia.
Had I been here I would have voted ``nay.''
personal explanation

Mr. FIELDS of Louisiana. Mr. Chairman, I was delayed in my district
today and was not able to make rollcall vote 200 because I was doing a
briefing on school nutrition with school children and cafeteria
workers.
Had I been present, I would have voted ``no.''

{time} 1730

The CHAIRMAN. Are there further amendments to the bill, H.R. 988?
Mr. BERMAN. Mr. Chairman, I move to strike the last word.
Mr. Chairman, I would like to use my time, if I could, to ask a few
questions of either the gentleman from California, the gentleman from
Virginia, if I might.
As I understand the principle of this bill, initially, was to follow
the English rule. It has been modified somewhat. As I understand it
now, that if offers and counteroffers keep going on between the
plaintiff and defendant, the time for legal fees to be assessed against
the losing party starts conceivably as little as 10 days before the
trial and covers the duration of that trial; is that correct?
Mr. GOODLATTE. Mr. Chairman, will the gentleman yield?
Mr. BERMAN. I yield to the gentleman from Virginia.
Mr. GOODLATTE. The gentleman is correct.
[[Page H2682]] Mr. BERMAN. But as I understand the English rule, the
English rule does not apply to those civil cases brought by an indigent
plaintiff, a plaintiff represented by the legal aid society in Great
Britain. Is there any provision in this bill that keeps an indigent
plaintiff or a plaintiff who could in no way have the assets to pay the
fee of the defendent in a contingency case, let us say, for example,
from being assessed the fees that might ultimately be assessed if the
final settlement comes in, the final judgment comes in higher than or
less than the defendant had offered?
Mr. GOODLATTE. Mr. Chairman, if the gentleman will continue to yield,
in section 6, the Court cannot award attorney's fees or other costs and
expenses if they find that doing so would be manifestly unjust.
Mr. BERMAN. Section 6. My bill only has five sections.
Mr. GOODLATTE. In section 2, I guess it would be subsection (e)(6).
Mr. BERMAN. Section 2, (e)(6).
Let me just read that, ``if the court finds, pursuant to a petition
filed under paragraph (5),'' that is a petition to shift costs, as I
understand it.
Mr. GOODLATTE. That is correct.
Mr. BERMAN. ``With respect to a claim or claims, that the judgment,
verdict or order finally obtained is not more favorable to the offeree
with respect to the claim or claims than the last offer, the court
shall order the offeree,'' that is, in most cases but not all cases,
the plaintiff, ``to pay the offeror's,'' that is the defendant in most
cases, ``costs and expenses, including attorney's fees, incurred with
respect to the claim or claims from the date the last offer was made,
unless the court finds that requiring that payment of such costs and
expenses would be manifestly unjust.''
Is that a fair reading of the words?
Mr. GOODLATTE. I think the gentleman read it correctly.
Mr. BERMAN. Is it the gentleman's contention that ability to pay is
one of the criteria that the court should look to in determining
whether shifting costs would make it manifestly unjust?
Mr. GOODLATTE. I would leave that entirely to the discretion of the
court. I think that in some circumstances, it might be appropriate to
award attorney's fees regardless of those circumstances. In others, I
feel that it might not. It is not my intention to define that in that
fashion.
Mr. BERMAN. Mr. Chairman, reclaiming my time, I yield to the
gentleman from California [Mr. Moorhead].
Mr. MOORHEAD. Mr. Chairman, to begin with, if the defendant was
indigent, it would be totally uncollectable anyway. So it would be of
no value to anybody to get it. I would imagine the plaintiffs would be
willing to go along with, unless, unless it happened to be an insurance
company that was behind it.
Mr. BERMAN. Reclaiming my time, let us say the defendant had a car.
Let us say the defendant made--the plaintiff, talking about here--the
plaintiff made $20,000.
Mr. GOODLATTE. Mr. Chairman, if the gentleman will continue to yield,
it could be the defendant.
Mr. BERMAN. Let us talk about it in the context of a plaintiff who
has a legitimate case. It is not frivolous. He decides not to accept
the offer. He could have his, by virtue of this fee shifting provision,
he could have his wages garnished, his automobile attached, other
assets foreclosed on because he was not in the, he was not able to pay
the court-ordered shifted fee costs of the defendant who could be a
multimillion dollar corporation. Is that not a fair statement of
possibilities?
Mr. MOORHEAD. I do not think it is, because he would already have
obviously at that point, have a huge judgment against him to begin
with.
The CHAIRMAN. The time of the gentleman from California [Mr. Berman]
has expired.
(By unanimous consent, Mr. Berman was allowed to proceed for 5
additional minutes.)
Mr. MOORHEAD. Mr. Chairman, if the gentleman will continue to yield,
if he were indigent, as the gentleman said, and the plaintiff got a
huge judgment against him, or if it was the other way around, the
plaintiff were indigent, as the gentleman says, the judge, I am sure,
would consider the terms here that it would be totally unfair to tie
those fees to it.
Mr. BERMAN. Let us create a hypothetical here. Let us understand what
we are talking about.
A suit is brought in Federal court under the diversity statute by a
plaintiff who is making $20,000 a year, based on the negligence of an
out-of-state corporation and offers go back and forth. He decides the
last offer is not acceptable. They go to a month-long trial. And the
jury awards an amount to the plaintiff that is less than the
defendant's last offer.
In that situation, it is possible, under this statute, for the court
to decide that the cost of that entire month-long trial and all the
other costs of the 10 days prior to that trial would be shifted to the
plaintiff and that that would be an enforceable judgment, that the
defendant could than go and seek to execute through garnishment of
wages, through attaching the car and executing on it, through doing all
of the traditional devices that can be utilized to collect a sum owed.
Is that not a fair statement?
Mr. GOODLATTE. Mr. Chairman, if the gentleman will continue to yield,
that is possible just as it is possible for a poor defendant in a case
to suffer those same consequences under the American rule, the current
law that exists right now. We are equalizing the risk.
Mr. BERMAN. Well, if I may reclaim my time, that is not correct.
There are only a few specified statutes, for instance, civil rights
cases, where you automatically provide prevailing costs for the
plaintiff.
Mr. GOODLATTE. What I am saying is, if a defendant is brought into
court in a nonmeritorious, frivolous or fraudulent lawsuit and has to
defend that case, unless there are provisions that provide attorney's
fees and that defendant, win or lose, that defendant has to bear the
cost. So what I am saying is that the plaintiff right now, if they are
on a contingent fee basis, has no risk. You look in the phone book. You
will see all the people that will tell them there is no risk in the
case. The defendant always has risk.
Mr. BERMAN. I would like to reclaim my time to make a few points.
The proponents of this bill, if you keep talking about it as a way to
deal with the frivolous, nonmeritorious case or in a way that would
protect, because of this subsection 6, the indigent or almost indigent
plaintiff, then all I would ask you to do is amend your bill to put
those tests in. Do not say, this will only apply to deter the frivolous
case and provide fee shifting in the nonmeritious case when your bill
makes no effort to limit it to that.
Mr. DOGGETT. Mr. Chairman, will the gentleman yield?
Mr. BERMAN. I yield to the gentleman from Texas.
Mr. DOGGETT. If I understood that last answer, about frivolous or
fraudulent suits, you would get the impression that this only applies
to frivolous or fraudulent suits. Is it not correct that there is no
requirement to prove frivolity or to prove fraud in order to impose
these burdens and lead to the garnishment of somebody's wages.
Mr. BERMAN. The gentleman from Texas is absolutely right. Ironically,
in the one hearing we had in front of the subcommittee that is chaired
by my friend from California, the witness, the law professor testifying
in favor of the concept of loser pays, said there should be guidelines
to limit this to the frivolous and nonmeritorious cases. This is what
the proponent said, not the opposition.
Mr. DOGGETT. So they could have limited this bill to frivolous and
fraudulent cases but instead, as a way of discouraging even legitimate
suits that sometimes, of course, in a court in front of a judge and a
jury could go either way, if someone takes a chance thinking they have
got a good suit but they lose, it is not a frivolous suit, it is not a
fraudulent suit, but when the jury weighs the evidence, they conclude
that it does not have merit, that they are going to have imposed upon
them the cost of some large concern in defending that suit and they
could actually have the wages garnished, perhaps a car taken away, all
kinds of things.
Mr. BERMAN. It gets even more complicated and in a sense unfair than
[[Page H2683]] that. The gentleman could have a meritorious case where
he wins a jury award.
The CHAIRMAN. The time of the gentleman from California [Mr. Berman]
has again expired.
(By unanimous consent, Mr. Berman was allowed to proceed for 5
additional minutes.)
Mr. BERMAN. Let me respond to the gentleman. Just in response to the
gentleman from Texas, he could win, he could have a meritorious case
but perhaps against that particular defendant the award was somewhat
less than the very final offer.
{time} 1745

This would bring into play the fee shifting without regard to how
meritorious it was, or without regard to the ability of the plaintiff
to pay. The thing that galls me is it keeps being argued, the
proponents keep talking about the frivolous case, the nonmeritorious
case, but they will not put into the bill limitations that would
restrict this to the frivolous or nonmeritorious case.
This would be a very simple issue to deal with. You can set up a
standard, you can set up a guideline in here that would give the judge
the guidelines and the congressional intent to only have this apply in
the case of frivolous actions, nonmeritorious actions, refusals to
accept reasonable offers, but there is no effort to amend the bill to
do that. That gives me the problem.
Mr. CONYERS. Mr. Chairman, will the gentleman yield?
Mr. BERMAN. I yield to the gentleman from Michigan.
Mr. CONYERS. Mr. Chairman, I want to commend the gentleman from
California for bringing this point into even sharper focus than it has
been brought before. However, just in case we think that there may be a
bit of generosity in allowing the waiver of the requirement to pay fees
and costs, in the report of the majority the Republicans say ``It is
the intent of the committee that this standard,'' which is to pay
costs, ``be interpreted to be an exceptionally high one, extending well
beyond the relative wealth of the parties.''
In other words, do not give them an inch, boys. We are going to turn
this rule on its head, and it does not matter if one is wealthy and one
is poor; we were looking for a lot of other things to help you keep
this standard exceptionally high. I think it is an indication of
intent.
Mr. BERMAN. The gentleman's point is so well taken. Remember, this
was all patterned after an English rule, an English rule which, by the
way, the bastion of British conservatism, the Economist Magazine, has
said led to many unfair results, but that English rule exempts anyone
who is represented by the Legal Aid Society, anyone who needs
assistance with legal services.
Mr. DOGGETT. This is more a draconian rule.
Mr. GEKAS. Mr. Chairman, will the gentleman yield?
Mr. BERMAN. I yield to the gentleman from Pennsylvania.
Mr. GEKAS. Mr. Chairman, when the gentleman from Texas questioned the
gentleman about the situation where the jury finds no merit in the
claim, is it not the case that the jury there found no merit in the
case, which begs the question? That is what we are saying. The only
test of whether it is a nonmeritorious claim, that is, frivolous, is
when the jury brings in a verdict of zero for the plaintiff. Then, at
that point, is triggered the loser pays situation.
Mr. BERMAN. If I may reclaim my time, the gentleman from Pennsylvania
does not understand the new basic structure.
Mr. GEKAS. The gentleman does not have to tell me what I understand.
I understand.
Mr. BERMAN. The gentleman from Pennsylvania does not understand the
basic framework of this bill. This is not limited to whether you lose
the case. This bill, as it is now written, deals with you sue perhaps a
number of defendants under diversity jurisdiction. As to one defendant
who makes an offer, you come in let us say $50,000 less than that
offer, but with hundreds of thousands of dollars of jury award as to
you, because we have eliminated joint and several liability now under
this bill.
Mr. GEKAS. Mr. Chairman, if the gentleman will continue to yield, the
question the gentleman from Texas posed is different. That is what I am
saying.
Mr. BERMAN. If the gentleman will allow me to use my time, it has
nothing to do with winning or losing. If the jury award comes in $1,000
under what that particular defendant offered, then fees are shifted,
unless the court somehow, under guidelines which are incredibly onerous
and draconian, finds that it was manifestly unjust to shift the fees.
Mr. DOGGETT. If the gentleman will continue to yield, does the
gentleman mean that instead of being a loser pay rule, this is really a
winner pay rule? Somebody could go in, they could win, the jury could
decide they were perfectly justified with reference to their claim, and
they would still end up having this draconian rules applied to them?
Mr. BERMAN. Actually what I think, to reclaim my time, what I think
is this bill is a warning to plaintiffs throughout the United States:
Do not bring your case under the diversity statute, because the risks
of any award against you are so great for the shifting of attorney's
fees, whether you win or whether you lose, that you have lost.
The CHAIRMAN. The time of the gentleman from California [Mr. Berman]
has expired.
(By unanimous consent, Mr. Berman was allowed to proceed for 2
additional minutes.)
Mr. DOGGETT. Mr. Chairman, will the gentleman yield?
Mr. BERMAN. I yield to the gentleman from Texas.
Mr. DOGGETT. A further question, Mr. Chairman. The gentleman
mentioned diversity jurisdiction. Does this also apply with reference
to removal? In other words, if someone filed their action under State
law in a State court that did not have a draconian, regressive,
reactionary rule like that that is being urged tonight for adoption,
could they be removed, if they were against an out-of-State party, to
Federal court and suddenly find themselves as a winner pay, facing all
of the hardships that you have suggested will emanate from this piece
of legislation?
Mr. BERMAN. To reclaim my time, the gentleman shows that, even as a
State justice, he is quite familiar with Federal law. I actually was
too generous in my comment. We not only have limited the diversity
jurisdiction for plaintiffs by this provision, and wiped it out, but
what we have done is said ``Defendants, you have the choice. You can
stay in State court or you can take advantage of this draconian rule
and remove to Federal court.'' This is such an unjust consequence.
Mr. GOODLATTE. Will the gentleman yield on that point, Mr. Chairman?
Mr. BERMAN. I am happy to yield to the gentleman from Virginia.
Mr. GOODLATTE. I thank the gentleman for yielding.
If the gentleman from Texas would also call attention to this, what
the gentleman from Texas just described as the so-called winner pays
rule is exactly what is included under Federal law right now, because
rule 68 of the Federal Rules of Civil Procedure allows a defendant in a
case to make an offer of judgment which, if the plaintiff does not
accept it and goes into court and receives a judgment, a verdict in his
favor for an amount that is less than that offer in judgment, the
plaintiff can be required by the court to pay the attorney's fees of
the defendant, just like this in this case.
Mr. BERMAN. Reclaiming my time, that is not correct. The only thing
you can recover are court costs. That is a small, small percentage of
the potential liability that comes when you add attorney's fees.
Mr. GOODLATTE. The cost can be very substantial in some cases.
Mr. Chairman, I move to strike the requisite number of words.
Mr. Chairman, in response to the colloquy that just took place on the
other side, let me point out that this is a case of any kind of
nonmeritorious claim being exposed to a risk for attorney's fees for
the plaintiff or the defendant, so a plaintiff who is viewing their
case as having merit is not going
[[Page H2684]] to give up their Federal diversity jurisdiction. They
are going to take that diversity jurisdiction, with the intent to force
the other side to pay attorney's fees, unless they reasonably offer
settlement offers. That is what this mechanism does.
With regard to the contention that this changes the English rule, and
the gentleman from California [Mr. Berman] is somehow abhorrent of
that, I would point our that the gentleman from California voted for
this change in the Committee on the Judiciary. Therefore if he really
does not like that, I think he has contradicted himself.
The fact of the matter is that this is simply modeled after rule 68,
but it expands it. It makes it better, not worse, because under rule
68, only a defendant who is liable can avail themselves of the
mechanism of the so-called winner pays described by the gentleman from
Texas.
Under this plan, a defendant who is not liable, who says ``I didn't
do anything wrong, I should not have been dragged into court,'' they
also can avail themselves of those privileges, and the plaintiff can
avail themselves of that by making reasonable settlement offers.
Mrs. SCHROEDER. Mr. Chairman, will the gentleman yield?
Mr. GOODLATTE. I yield to the gentlewoman from Colorado.
Mrs. SCHROEDER. Mr. Chairman, does the gentleman not agree there is a
great difference between costs and court costs plus attorney's fees? It
could be hundreds of thousands of dollars. To call one winner pays when
it does not include attorney's fees is not quite the same.
Mr. GOODLATTE. Reclaiming my time, Mr. Chairman, the principle is the
same, and the amount of those court costs can vary dramatically from
case to case, as can the amount of the attorney's fees, but the same
principle applies either way, and the fact of the matter is that the
rule 68 is in the Federal Rules of Civil Procedure to encourage
settlement of cases, and this will take that one step further, make
that process not only available to defendants, but also available to
plaintiffs and also available to defendants who are not liable.
This is only available to the defendant who is at fault. Why not also
make it available to the defendant who is not at fault, and says ``I
have been dragged into court, I had no choice in this matter, I won the
lawsuit, and now I have to pay substantial attorney's fees,'' whereas
the plaintiff in a particular case may have taken no economic risk in
proceeding to court, and their case is very different than that of the
defendant, who always has to pay, win or lose.
Mrs. SCHROEDER. If the gentleman will yield again, I think we just
have to keep reminding people, there is a tremendous difference between
court costs and attorney's costs. When you are adding the two together,
the magnitude is great.
Mr. GOODLATTE. We have limited those attorney's fees so they can not
exceed the amount the plaintiff is paying, or the defendant, if the
defendant is the loser, cannot exceed the amount you are paying your
own lawyer, so you cannot have a deep pocket come in and overload the
costs by bringing in four lawyers to try the case.
Also, we have limited it to just 10 days before trial through the
trial, so a party cannot overload the other party with discovery,
whether it is necessary or unnecessary, and then collect attorney's
fees for all that discovery that was done.
This is a very reasonable way to impose some risk on the parties in
cases, to encourage settlement and reduce the number of frivolous,
fraudulent, and I would say to the gentleman from California [Mr.
Berman], nonmeritorious cases.
Mrs. SCHROEDER. Mr. Chairman, will the gentleman yield again?
Mr. GOODLATTE. I yield to the gentlewoman from Colorado.
Mrs. SCHROEDER. Earlier the gentleman from Pennsylvania [Mr. Gekas]
said, I think the way I heard him, and I hope we get a clarification,
but he defined as frivolous a case that the plaintiff lost; that if the
plaintiff lost, by definition, it would be frivolous.
Mr. GOODLATTE. I do not believe that is the gentleman's definition.
Mr. GEKAS. Mr. Chairman, will the gentleman yield?
Mr. GOODLATTE. I yield to the gentleman from Pennsylvania for a
clarification.
Mr. GEKAS. Mr. Chairman, what we are saying is that the final verdict
of the jury is, in effect, if it finds against the plaintiff, if it
finds zero, that is prima facie evidence for the late determination as
to whether or not attorney's fees and so forth should be paid, that it
was nonmeritorious. It had no merit or else it would not have resulted
in a zero judgment.
Mrs. SCHROEDER. Mr. Chairman, if the gentleman will continue to
yield, does the gentleman mean nonmeritorious meaning frivolous?
Because he is saying anyone who loses therefore was frivolous.
My concern is what do you do about the very close calls. That is why
I was so disturbed by the gentleman's comment.
Mr. CONYERS. Mr. Chairman, will the gentleman yield?
Mr. GOODLATTE. I yield to the gentleman from Michigan.
Mr. CONYERS. Mr. Chairman, I thank the gentleman for yielding. I just
wanted to join in the correction of my friend, the gentleman from
Pennsylvania, because a zero recovery from the plaintiff raises no
question whatsoever about frivolity, because the test is of the
evidence, which you could lose by a very small amount. It has nothing
to do with frivolity.
Mr. GEKAS. So what?
amendment offered by mr. mchale

Mr. McHALE. Mr. Chairman, I offer an amendment.
The Clerk read as follows:

Amendment offered by Mr. McHale: After section 4, insert
the following:

SEC. 5. FRIVOLOUS ACTIONS.

(a) General Rule.--
(1) Signing of complaint.--The signing or verification of a
complaint in all civil actions in Federal court constitutes a
certificate that to the signatory's or verifier's best
knowledge, information, and belief, formed after reasonable
inquiry, the action is not frivolous as determined under
paragraph (2).
(2) Definitions.--
(A) For purposes of this section, an action is frivolous if
the complaint is--
(i) groundless and brought in bad faith;
(ii) groundless and brought for the purpose of harassment;
or
(iii) groundless and brought for any improper purpose.
(B) For purposes of subparagraph (A), the term
``groundless'' means--
(i) no basis in fact; or
(ii) not warranted by existing law or a good faith argument
for the extension, modification, or reversal of existing law.
(b) Determination That An Action is Frivolous.--
(1) Motion for determination.--Not later than 90 days after
the date the complaint in any action in a Federal court is
filed, the defendant to the action may make a motion that the
court determine if the action is frivolous.
(2) Court action.--The court in any action in Federal court
shall on the motion of a defendant or on its own motion
determine if the action is frivolous.
(c) Considerations.--In making its determination of whether
an action is frivolous, the court shall take into account--
(1) the multiplicity of parties;
(2) the complexity of the claims and defenses;
(3) the length of time available to the party to
investigate and conduct discovery; and
(4) affidavits, depositions, and any other relevant matter.
(d) Sanction.--If the court determines that the action is
frivolous, the court shall impose an appropriate sanction on
the signatory or verifier of the complaint and the attorney
of record. The sanction shall include the following--
(1) the striking of the complaint;
(2) the dismissal of the party; and
(3) an order to pay to the defendant the amounts of the
reasonable expenses incurred because of the filing of the
action, including costs, witness fees, fees of experts,
discovery expenses, and reasonable attorney's fees calculated
on the basis of an hourly rate which may not exceed that
which the court considers acceptable in the community in
which the attorney practices law, taking into account the
attorney's qualifications and experience and the complexity
of the case, except that the amount of expenses which may be
ordered under this paragraph may not exceed--
(A) the actual expenses incurred by the plaintiff because
of the filing of the action; and
(B) to the extent that such expenses were not incurred
because of a contingency agreement, the reasonable expenses
that would have been incurred in the absence of the
contingency agreement.
(e) Construction.--For purposes of this section the amount
requested for damages in a complaint does not constitute a
frivolous action.
[[Page H2685]] Page 7, line 1, strike ``SEC. 5.'' and
insert ``SEC. 6.''.
Page 7, line 7, strike ``The'' and insert ``Section 5 and
the''.

Mr. McHALE (during the reading). Mr. Chairman, I ask unanimous
consent that the amendment be considered as read and printed in the
Record.
The CHAIRMAN. Is there objection to the request of the gentleman from
Pennsylvania?
There was no objection.
Mr. McHALE. Mr. Chairman, I first of all want to thank the leadership
on both sides of the aisle for their cooperation in allowing me to
bring this amendment to the floor. I particularly want to thank my
colleague, the gentleman from California [Mr. Berman] who spoke a few
minutes ago, and who inadvertently described exactly the contents of my
amendment.
The gentleman from California, when he was at the microphone, said we
should have an amendment that is strictly limited to frivolous
lawsuits, we should have an amendment that is based on clear standards,
we should have an amendment where the determination is made by the
judge in the case as to whether or not there is a frivolous suit,
whether or not those standards have been met, and whether or not
appropriate sanctions should be imposed.
Mr. Chairman, that is precisely what is contained in my amendment.
Let me summarize briefly the contents of what I propose. First of all,
the amendment now at the desk supplements but does not replace the
language contained in the Goodlatte settlement amendment.
The language of my colleague, the gentleman from Virginia [Mr.
Goodlatte], inserted in the bill remains intact.
Second, my amendment covers statutory as well as diversity cases.
Third, it directly addresses the issue of frivolous suites, as
requested by my colleague, the gentleman from California [Mr. Berman].
It allows for the early dismissal potentially within the first 90 days
of a case of those privileges claims which have been brought before the
court. This allows for dismissal before extensive discovery costs and
legal fees have been incurred.
My amendment is fully compatible with the analogous language in H.R.
956, the products liability bill that we will take up later this week.
In summary, Mr. Chairman, what my amendment requires is this: After a
judicial finding that the suit is indeed frivolous, this amendment
requires that the court enter an order compelling the losing plaintiff
or his attorney to pay those expenses unnecessarily incurred by the
winning defendant, including court costs, attorney's fees, and
discovery expenses.
Mr. Chairman, as someone who opposes the English rule, and
ironically, this proposal was originally drafted in opposition to the
English rule, a matter no longer before us, and who is concerned that
the settlement procedures in the bill itself may be somewhat
complicated, I offer this amendment as a clear and straightforward
solution to the real, if rare, problems of frivolous suits.
Mr. Chairman, it was ironic, as I sat here a few moments ago I
listened to the gentleman from California [Mr. Berman] raise very
legitimate concerns. What he said into this very microphone was that we
need to limit the applicability of sanctions to truly frivolous suits,
those motions need to be based on clear standards, and we should allow
the judge under those circumstances to make a determination.
I turned to Mr. Berman a moment ago and said ``I have the amendment
and I now offer it to the House.''

{time} 1800

Mrs. SCHROEDER. Mr. Chairman, will the gentleman yield?
Mr. McHALE. I yield to the gentlewoman form Colorado.
Mrs. SCHROEDER. I thank the gentleman from Pennsylvania for yielding.
Let me ask a few questions about your amendment, because I really
think this amendment goes much further than the bill, if I am reading
it correctly. The way I read the sanctions section on page 2 is that
you oppose the sanction on the verifier of the complaint and the
attorney of record, and it says ``shall.'' So my understanding is you
are putting them both in the loop for a frivolous lawsuit; is that
correct?
Mr. McHALE. The gentlewoman is correct, and I think that is entirely
fair and appropriate. Remember, the sanction is not to be imposed
unless the judge has previously determined that this is truly a
frivolous suit. This then empowers the judge to enter an appropriate
sanction order where, if necessary, costs can be imposed, where
appropriate, on both the litigant and the litigant's attorney.
When a frivolous case has been filed and has been knowingly filed by
an attorney, I believe that is a relatively rare circumstance, but when
that happens, I do trust to the trial judge to enter an appropriate
order of sanctions potentially on the party and the party's attorney.
Mrs. SCHROEDER. If the gentleman will yield further, I must say I am
a little concerned about this amendment because it does that, because
it is bringing in a whole other level. When we look at the core bill
that this amendment is being offered to, we are not saying if the loser
cannot pay, the loser's attorney must pay, or the loser and the loser's
attorney must both pay. So you are adding another whole standard.
Furthermore, what about frivolous defenses?
Mr. McHALE. Reclaiming my time, that is current law. Under current
law when an attorney acts improperly under Federal rule 11 or when a
truly frivolous claim has been filed, a judge, usually at a much later
stage in the proceedings, may enter an appropriate sanction order.
All we are saying here is that when a truly frivolous suit has been
filed, and we define that very carefully in the amendment, under
circumstances where I think we would have consensus----
The CHAIRMAN. The time of the gentleman from Pennsylvania [Mr.
McHale] has expired.
(By unanimous consent, Mr. McHale was allowed to proceed for 2
additional minutes.)
Mr. McHALE. Mr. Chairman, where we have the matter brought before a
judge and the judge who is hearing the case concludes that the matter
is truly frivolous, it seems to me that under that circumstance, it is
entirely correct and appropriate that the judge in the case be allowed
to sanction both the party and the party's attorney, the purpose being
to deter frivolous actions.
Mrs. SCHROEDER. If the gentleman would yield further, your amendment
is not in lieu of the Goodlatte language.
Mr. McHALE. It is not.
Mrs. SCHROEDER. So the issue that was going around that the gentleman
from California [Mr. Berman] was talking about, about frivolous
lawsuits, this is on top of the Goodlatte amendment, is that correct?
Mr. McHALE. This is in addition to it. Frankly, and I mean to be
absolutely candid here, I do have some concerns about the
unpredictability of the settlement procedures now in the bill, but I do
not touch those procedures. My amendment offers a much earlier, much
more expedited and efficient means by which we can screen from the
judicial system those truly egregious cases where within the first 90
days the judge can conclude that the case is totally without merit,
that it has been brought frivolously and that a sanction order is
appropriate both for the party and the party's attorney who should
never have dragged the defendant into court.
Mr. BERMAN. Mr. Chairman, will the gentleman yield?
Mr. McHALE. I yield to the gentleman from California.
Mr. BERMAN. I think the gentlewoman from Colorado makes a good point.
My initial excitement and positive interest in your amendment----
Mr. McHALE. Do not lose it now.
Mr. BERMAN. Is waning because it does not replace section 2, it is in
addition to section 2. So all of the problems of meritorious cases
brought by relative poor plaintiffs in situations where maybe they even
win----
Mr. McHALE. Reclaiming my time if I may, that determination of what
is frivolous is based on the standard in the amendment where the judge
has to conclude before sanctioning anyone that the case was brought in
bad faith, for purposes of harassment or for other improper purposes.
And when that is the prior judicial determination, sanctions would seem
to be appropriate.
[[Page H2686]] Mr. CONYERS. Mr. Chairman, I move to strike the
requisite number of words.
Mr. Chairman, I have been listening carefully to the gentleman from
Pennsylvania's proposed amendment. What he is doing is creating an
entire new rule out of whole cloth without ever going to the Rules
Enabling Act, the procedure through which we devise new rules.
He is saying that after complaint is filed, the defendant has 30 days
to answer, there is discovery proceedings, and before a summary
judgment, there would be this frivolous motion that would be permitted
to be entertained.
This moves right out of nowhere and has the Congress intrude upon a
50-year procedure that has been working relatively well.
I would urge great caution in the Congress now moving directly to the
rules-making capacity as opposed to going through a system that has
been carefully provided over the years in terms of how these rules come
into being.
This is a motion that would come to pass before there has been an
examination of the facts. The summary judgment would occur after a
frivolous motion which would make no sense at all in a procedural way
to move a Federal case along. It would be a travesty to have this
motion weigh in before there have been the facts brought before the
curt to even issue a summary judgment.
I would hope that the gentleman would carefully consider what he has
in mind in that regard.
Mrs. SCHROEDER. Mr. Chairman, I move to strike the requisite number
of words, and I rise in opposition to the amendment.
Mr. Chairman, I am very concerned about this, because I think we are
creating a whole new motion here, and I think when you create new
motions in the court, you are causing all sorts of problems.
I must also say to Members, the DSG reports this amendment as being
in lieu of, and so what I understand from the gentleman from
Pennsylvania is not in lieu of, it is alongside of. Therefore, the
Democratic study group is wrong.
Mr. McHALE. Mr. Chairman, will the gentlewoman yield on that point?
Mrs. SCHROEDER. I yield to the gentleman from Pennsylvania.
Mr. McHALE. The gentlewoman does accurately quote from the DSG report
and for whatever reason, and it may emanate from my office, the DSG
report is inaccurate. The language of my amendment is an alternative
but not in replacement of the language offered by the gentleman from
Virginia [Mr. Goodlatte]. Mr. Goodlatte's language would normally apply
up to within 10 days of trial. My language which does not touch his
would come into play at a much earlier stage in the process where the
purpose really is to screen the most egregious cases before extensive
legal fees and discovery costs are incurred.
Mrs. SCHROEDER. Reclaiming my time, I must say I am very concerned
about the amendment, then, because it leaves the core of the loser pay
things which I am concerned about, then it adds this other whole motion
to this process, and I think there are a lot of questions that bubble
around in my head.
I realize you cannot make this motion until 90 days after it has been
filed, but what if discovery is not done? Can you keep filing this
motion?
Then also I think it is also one way. The defendants do not have a
way to fight back if the plaintiffs start throwing out frivolous
countercomplaints, or whatever, that they could possibly be doing or
frivolous defenses that are raised.
So I think you are giving the hammer to only one side, you are
throwing attorneys into it. I do not know how many times you could be
making this motion after the 90 days, and I can also see attorneys
saying if you have made the motion in the first 90 days and the judge
did not rule it was frivolous, then they might say you could not apply
loser pays later on. I just think there are a whole lot of real
confusing things here that I do not understand.
Mr. BRYANT of Texas. Mr. Chairman, will the gentlewoman yield?
Mrs. SCHROEDER. I yield to the gentleman from Texas.
Mr. BRYANT of Texas. I would first like to thank you for pointing out
that the DSG report inaccurately reported this. Second, I would like to
raise a question. Why would the effect which the gentleman from
Pennsylvania [Mr. McHale] is after not be obtained today with simply
filing a motion to dismiss and asking for rule 11 sanctions?
Mr. McHALE. Mr. Chairman, will the gentlewoman yield?
Mrs. SCHROEDER. I yield to the gentleman from Pennsylvania.
Mr. McHALE. It is entirely possible by cobbling together the existing
rules of civil procedure, you could end up with a kind of process that
we spell out explicitly in the contents of my amendment.
This amendment simply says that if a truly frivolous case comes
through the courthouse door and if it is recognized as such by the
judge, then upon the dismissal of the case at that early stage within
the first 90 days, sanctions may be imposed.
The gentleman from Texas [Mr. Bryant] is correct. If a judge wanted
to reach into the rules of civil procedure and cobble together several
different rules, the same result could be achieved. This is a much more
straightforward process.
Mr. BRYANT of Texas. Mr. Chairman, will the gentlewoman yield?
Mrs. SCHROEDER. I yield to the gentleman from Texas.
Mr. BRYANT of Texas. I would just like to make a point. I would
strongly oppose the gentleman's amendment now that I learn that it is
in addition to rather than in place of, for the simple reason that as
you have constructed it now, first the plaintiff who has no resources
and is obviously frightened by the situation in the beginning files a
lawsuit, then they first have got to get past the potential of having a
judge force them to pay attorneys fees based upon your provision, and
if they get past that, then they are faced with at the end of the case
having to pay attorneys fees based upon what the Republicans have come
up with.
It is doubly bad, rather than an improvement, and I would strongly
urge Members to vote against this amendment.
Mr. CONYERS. Mr. Chairman, will the gentlewoman yield?
Mrs. SCHROEDER. I yield to the gentleman from Michigan.
Mr. CONYERS. I would just like to refer our friend from Pennsylvania
to the Federal Rules of Civil Procedure, rule 11-1, by motion, a motion
for sanctions under this rule can be made separately from other
motions.
The remedy that the gentleman seeks is already well ensconced in the
rules.
Mrs. SCHROEDER. I think that the gentleman from Michigan is making an
excellent point. We have rule 11, we are not sure what we are devising
here with a whole new motion and what is going on around it, and I
understand what the gentleman is trying to do, I think there are very
good intentions, but they are missing the core of what everybody was
complaining about.
Mr. McHALE. Mr. Chairman, will the gentlewoman yield?
Mrs. SCHROEDER. I yield to the gentleman from Pennsylvania.
Mr. McHALE. I thank the gentlewoman for yielding. If what we are
talking about here is a redundant situation, and I do not think it is,
why is there such vehement opposition?
What we are talking about here is a situation where there are no
clear procedures for the removal, the dismissal and the imposition of
sanctions where a case is truly frivolous.
Please, let's start with the premise of this argument. The judge must
conclude that there is bad faith, that this is brought for purposes of
harassment, and only thereafter may sanctions be considered.
The CHAIRMAN. The time of the gentleman from Colorado [Mrs.
Schroeder] has expired.
(By unanimous consent, Mrs. Schroeder was allowed to proceed for 1
additional minute.)
Mrs. SCHROEDER. Let me just answer what the gentleman said.
Reclaiming my time, I think it is very important to point out that it
sounds so simple, but we are creating a whole new motion. There is rule
11, there is a process that is already there. We are adding something
all new and that is also holding the attorney accountable, and there is
a lot of discretion in there
[[Page H2687]] as to what a judge might hold frivolous, and we do not
know how many times this motion can be made after 90 days. It could
become a harassment motion. Plus you do not have anything on the
plaintiff's side that is equal. So you just keep giving more and more
hammers to one side and I do not think it levels the playing field at
all.
Mr. Chairman, I would urge Members to please vote against this
amendment, because I really think the way it is written now, it is
going to just cause more problems.
(At the request of Mr. Conyers and by unanimous consent, Mrs.
Schroeder was allowed to proceed for 2 additional minutes.)
Mrs. SCHROEDER. I yield to the gentleman from Michigan.
Mr. CONYERS. It just occurred to me as the gentleman asked what is
the sweat if it is just redundant. We cannot make the rules for Federal
court procedure in the United States redundant when we are now going
outside of the Rules Enabling Act which has a process set up for making
rules.
The gentleman rushes to the floor with an idea that the DSG report
got wrong, we are trying to help straighten it out, we point out to him
that there is adequate coverage of this, but think of the problem with
frivolous lawsuits. Frequently they are not discovered in the first
weeks or months of the suit. It sometimes is determined in the course
of the case as witnesses and evidence are produced that this is
not a well-founded lawsuit. So having this motion intervene before
summary judgment within 90 days is yet another reason for us to, as
unexcitedly as we can, point out we do not need this amendment.

(At the request of Mr. McHale and by unanimous consent, Mrs.
Schroeder was allowed to proceed for 2 additional minutes.)
Mrs. SCHROEDER. I yield to the gentleman from Pennsylvania.
Mr. McHALE. I thank the gentlewoman for yielding, and I apologize, I
would not have requested the time had I known that.
I thank my colleagues for their contributions to the debate, but let
us not allow a smokescreen to be raised here. This matter is very
straightforward. The fact is when the suit cannot be shown to be
frivolous in the first 90 days, the motion will not be granted. Where
this motion will be granted and should be granted is when it can be
established within the first 90 days that the case has been brought for
purposes of harassment or bad faith.

{time} 1815

When it can be shown in the first 90 days that it is truly frivolous
because of bad faith or harassment, why do we want to incur the
expenses of discovery? Why not allow the trial court to dismiss the
case and impose appropriate sanctions?
Mr. CONYERS. Mr. Chairman, will the gentlewoman yield?
Mrs. SCHROEDER. I yield to the gentleman from Michigan.
Mr. CONYERS. For us to suggest we do not have a remedy for frivolity
that is discovered within the first 90 days is to misread seriously the
Federal Rules of Civil Procedure. We have such a rule. What I am saying
to the gentleman is we do not need to worry about the first 90 days
because most frivolously brought suits are discovered later than that.
It is very hard to determine whether it would emerge.
Mr. McHALE. Mr. Chairman, will the gentlewoman yield on that very
point?
Mr. CONYERS. What the gentleman is doing is ignoring that we have a
way for modifications to be worked out between the court and the
Congress. It is called the Rules Enabling Act, and this is a very
extraordinary provision that the gentleman is making. Very few Members
get on the floor and move to directly amend the Federal Rules of Civil
Procedure without so much as a hearing, discussion, witnesses or
anything, explain to us DSG did not get it right, and we keep trying to
point out to the gentleman that this problem that he is addressing is
already covered.
Mr. McHALE. Mr. Chairman, will the gentlewoman yield?
Mrs. SCHROEDER. I yield to the gentleman from Pennsylvania.
The CHAIRMAN. The time of the gentlewoman from Colorado [Mrs.
Schroeder] has expired.
(At the request of Mr. McHale and by unanimous consent, Mrs.
Schroeder was allowed to proceed for 1 additional minute.)
Mrs. SCHROEDER. I yield to the gentleman from Pennsylvania.
Mr. McHALE. Mr. Chairman, this debate has taken a turn I did not
anticipate and without in any way challenging the sincerity of the
arguments, we have heard every smokescreen in the world within the last
few minutes.
This amendment simply says in conformity with the
existing bill where you have a bad suit, one that is clearly
frivolous and brought in bad faith, we are empowering with this
procedure a Federal judge to recognize that the suit is frivolous and
impose appropriate sanctions. That is a power that could conceivably be
cobbled together under existing law but it is nowhere spelled out
nearly as clearly or appropriately as it is in this amendment.

Why are we so frightened that frivolous suits will be dismissed from
court in an expeditious manner and appropriate court costs flowing from
bad faith be imposed on litigants and lawyers who in that rare case
file such frivolous suits?
Mr. BRYANT of Texas. Mr. Chairman, I move to strike the requisite
number of words.
Mr. Chairman, I think it is extremely important that we focus on the
fact that the McHale amendment is not an amendment to this bill that
would make the bill deal with frivolous suits. It is an amendment to
the bill which adds another step in this process.
Were it an amendment which converted this bill into one that would
screen out frivolous suits I would wholeheartedly support it and I
think nearly all of us would. What it does is add to this draconian and
unprecedented in 200 years notion of loser pays, a provision that says
that little person who does not have very many resources and is not
going to be able to get a lawyer to work for them to bring a case
against a big person or institution, whether that be the government or
a major company of some kind faces an additional hurdle, and that is
that a local judge perhaps friendly and philosophically inclined in the
way of a defendant might slap him with a dismissal under the McHale
amendment and make him pay attorney's fees, but if he can get past that
and then he has the outcome that is foreseen in the Republican bill, he
then faces once again the possibility of having to pay attorney's fees,
costs, and be flatly bankrupt for simply trying to pursue what might
have been a meritorious case.
I would urge Members to look carefully at this. If we can take the
McHale language and convert it into the main purpose of bill, that is
to say we made the McHale language as it is the DSG report made us
think he was going to do, I would vote for that. I understand there is
going to be an amendment offered in just a moment to do that, and I
urge Members to move strongly in the direction of converting the McHale
amendment into that and do not support the McHale amendment as a simple
addition of another dangerous step for a middle-class person who has a
meritorious case and cannot get a lawyer to handle it for the fear he
may be hit not once but perhaps even twice.

amendment offered by mr. berman to the amendment offered by mr. mchale

Mr. BERMAN. Mr. Chairman, I offer an amendment to the amendment.
The Clerk read as follows:

Amendment offered by Mr. Berman to the amendment offered by
Mr. McHale: Strike section 2 and insert the following:

SEC. 2. FRIVOLOUS ACTIONS.

(a) General Rule.--
(1) Signing of complaint.--The signing or verification of a
complaint in all civil actions in Federal court constitutes a
certificate that to the signatory's or verifier's best
knowledge, information, and belief, formed after reasonable
inquiry, the action is not frivolous as determined under
paragraph (2).
(2) Definitions.--
(A) For purposes of this section, an action is frivolous if
the complaint is--
(i) groundless and brought in bad faith;
(ii) groundless and brought for the purpose of harassment;
or
(iii) groundless and brought for any improper purpose.
(B) For purposes of subparagraph (A), the term
``groundless'' means--
(i) no basis in fact; or
(ii) not warranted by existing law or a good faith argument
for the extension, modification, or reversal of existing law.
(b) Determination That an Action Is Frivolous.--
[[Page H2688]] (1) Motion for determination.--Not later
than 90 days after the date the complaint in any action in a
Federal court is filed, the defendant to the action may make
a motion that the court determine if the action is frivolous.
(2) Court action.--The court in any action in Federal court
shall on the motion of a defendant or on its own motion
determine if the action is frivolous.
(c) Considerations.--In making its determination of whether
an action is frivolous, the court shall take into account--
(1) the multiplicity of parties;
(2) the complexity of the claims and defenses;
(3) the length of time available to the party to
investigate and conduct discovery; and
(4) affidavits, depositions, and any other relevant matter.
(d) Sanction.--If the court determines that the action is
frivolous, the court shall impose an appropriate sanction on
the signatory or verifier of the complaint and the attorney
of record. The sanction shall include the following--
(1) the striking of the complaint;
(2) the dismissal of the party; and
(3) an order to pay to the defendant the amounts of the
reasonable expenses incurred because of the filing of the
action, including costs, witness fees, fees of experts,
discovery expenses, and reasonable attorney's fees calculated
on the basis of an hourly rate which may not exceed that
which the court considers acceptable in the community in
which the attorney practices law, taking into account the
attorney's qualifications and experience and the complexity
of the case, except that the amount of expenses which may be
ordered under this paragraph may not exceed--
(A) the actual expenses incurred by the plaintiff because
of the filing of the action; and
(B) to the extent that such expenses were not incurred
because of a contingency agreement, the reasonable expenses
that would have been incurred in the absence of the
contingency agreement.
(e) Construction.--For purposes of this section the amount
requested for damages in a complaint does not constitute a
frivolous action.
Page 7, line 7, strike ``The amendment made by section''
and insert ``Section''.

Mr. BERMAN (during the reading). Mr. Chairman, I ask unanimous
consent that the amendment to the amendment be considered as read and
printed in the Record.
The CHAIRMAN. Is there objection to the request of the gentleman from
California?
Mr. MOORHEAD. Mr. Chairman, reserving the right to object, we do not
have a copy of the amendment yet.
Mr. BERMAN. Mr. Chairman, will the gentleman yield on his
reservation?
Mr. MOORHEAD. I yield to the gentleman from California.
Mr. BERMAN. Mr. Chairman, all this amendment does is take the
amendment offered by the gentleman from Pennsylvania and replace
section 2 with his amendment. In other words, makes his amendment into
the base, the core of the bill. In other words, going from the offer,
the counteroffer, loser pays notion to the frivolous action notion.
Mr. MOORHEAD. Mr. Chairman, I withdraw my reservation of objection.
The CHAIRMAN. Is there objection to the request of the gentleman from
California?
There was no objection.
Mr. BERMAN. Mr. Chairman, the debate which preceded the introduction
of the amendment by the gentleman from Pennsylvania [Mr. McHale]
discussed the unwillingness of the proponents to have their language
meet their rhetoric, to deal with the non-meritorious frivolous claims.
The gentleman from Pennsylvania [Mr. McHale] has come up with an
amendment which seeks to do that. White I have some concerns about the
entire structure of the amendment and to what extent it moves in place
of the Federal Rules of Civil Procedure or might have other provisions
which are inconsistent with rule XI, the fact is the amendment of the
gentleman from Pennsylvania [Mr. McHale] does deal with the rhetorical
arguments in favor of the sponsors, that the sponsors of this bill have
been using.
Therefore, I thought the appropriate thing to do in this case was
offer an amendment which simply makes the McHale amendment to deal with
actions in the case of frivolous lawsuits the core of this bill. Let
us, if we want to address the issue of frivolous cases, an explosion of
frivolous cases, the cases which have no merit and the ability of the
court to deal with that effectively, let us not punish the poor
plaintiff, let us not punish the plaintiff who has a decent case and
believes in good faith that he or she can win that case. Let us not
punish the plaintiff who receives a judgment that is $1,000 less than
the last offer happens to be against that particular defendant by
making massive shifts of legal fees from the defendant to the plaintiff
without regard to the plaintiff's ability to pay.
That is, let us take the McHale amendment and let us move that ahead
as the core part of this bill.
Mr. MOORHEAD. Mr. Chairman, will the gentleman yield?
Mr. BERMAN. I am happy to yield to the gentleman from California.
Mr. MOORHEAD. Mr. Chairman, does this strike Goodlatte? Does it
strike section 2?
Mr. BERMAN. I will say to the gentleman, yes, it does.
Mr. MOORHEAD. So it strikes Goodlatte.
Mr. BERMAN. It substitutes the McHale language for the Goodlatte
language; yes.
Mr. MOORHEAD. And does it attempt to restrict it only to the
diversity cases.
Mr. BERMAN. This amendment, as I understand it, is not restricted to
diversity cases; and what is the logic of restricting it to diversity
cases if a case is frivolous?
Mr. MOORHEAD. I am trying to find out what it does.
Mr. BERMAN. It does not restrict to diversity cases. It is the exact
terms, word for word, of the McHale amendment, only in section 2
instead of as an addition to the what I view as very unfortunate loser
pays concept that is in the base bill.
I urge an aye vote on this amendment.
Mr. McHALE. Mr. Chairman, I move to strike the last word.
Mr. Chairman, I appreciate where the gentleman is coming from in his
argument. As a matter of fact, the position he is now taking is one I
had originally considered taking myself in the drafting of my
amendment. I had originally considered it as a substitute for the
Goodlatte language and then both logically and practically I decided
against it. Let me tell Members why I changed my position with regard
to the logic of the Berman substitute amendment.
The proposal of the gentleman from Virginia [Mr. Goodlatte] has to do
with settlement language, settlement negotiations that may occur at the
end of the pipeline, up to within 10 days of the time of trial. He
makes a good faith effort in his language to encourage settlement at
that point in order to preclude unnecessary jury determinations, the
costs, the expense and the delay of the actual trial.
My amendment logically moves to the opposite end of the pipeline, and
frankly I would respectfully suggest it is the end of the pipeline
where the American people are demanding reform. It says early on in the
process, before discovery costs have been incurred, before legal fees
have been run through the ceiling early on in the process when it is
clear to the trial judge that there has been bad faith, that the suit
is being brought for the purposes of harassment or some other improper
purpose, within those first 90 days before judicial resources have been
unnecessarily consumed, the case may be dismissed. It may be determined
to have been brought frivolously, and sanctions can be imposed.
Now, whether or not Members support the Goodlatte language regarding
settlement negotiations, perhaps 3 years into the litigation, my
amendment clearly improves the bill by allowing a release of those
cases from the judicial process when at the front end of litigations it
is clear to the trial judge the suit is being frivolously brought for
improper purposes.
Second, in the event that the Berman amendment were to carry, even if
it were to be substituted for the Goodlatte language, that would in
fact kill the bill. And I think that is perhaps the purpose of some who
might argue for that position.
My amendment is a logical, reasonable alternative that cuts to the
heart of this issue, the prompt, efficient dismissal of frivolous
claims when that fact is clear during the first the 90 days of
litigations. At a later point in time it may be determined, in this
body or the other body, that the Goodlatte language should be amended
or perhaps deleted. But at this point there is absolutely no
inconsistency in arguing for
[[Page H2689]] reform both at the beginning of the pipeline and at the
end.
Mr. BERMAN. Mr. Chairman, will the gentleman yield?
Mr. McHALE. I certainly will yield to the gentleman from California.
Mr. BERMAN. Mr. Chairman, the gentleman`s amendment is focused on the
frivolous, nonmeritorious case and trying to deal early on in the
process to avoid massive expenses that come when a frivolous case is
brought.
Mr. McHALE. The gentleman is correct.
Mr. BERMAN. Mr. Chairman, it is the rhetoric and the arguments of the
proponents of the basic bill, all fit into the context of frivolous
actions, desire to deter frivolous actions. The gentleman's amendment
strikes at that; their amendment does not. Let me give an example.
Mr. McHALE. If the gentleman will yield, the gentleman's analysis is
absolutely correct. I would therefore suggest to him that he vote for
my amendment and if that does not sufficiently improve the bill, vote
against the bill.
Mr. BERMAN. Mr. Chairman, I appreciate the gentleman's suggestion. If
he will continue to yield, I think I can improve the bill by taking the
gentleman's effort to address the issue of frivolous litigations, which
I keep hearing from the sponsors of the bill and the proponents of the
contract was the purpose of their amendment, and in the belief that the
gentleman's amendment comes closer to achieving that goal than their
amendment, without the negative impacts on the meritorious case brought
by the plaintiff who might not have the resources to cover attorneys'
fees, and who has every good intention in bringing that action, I think
the gentleman's amendment meets the objectives much more clearly than
the bill does with the present system, and so I want to see the
gentleman's amendment become the basic heart of the bill.

{time} 1830

And that is the purpose, if I may just use your time to illustrate
the problem, under the Goodlatte amendment, it you accept that the next
bill coming down the pike, the product liability bill, eliminates joint
and several liability, you get into a situation where a plaintiff
brings a case against, say, three defendant corporations, and one of
the defendant corporations he is suing, let us say, for $1 million, and
one of the defendant corporations says, ``I will give you $200,000.''
Mr. McHALE. Reclaiming my time, the gentleman and I may be in total
agreement as to some of the potential deficiencies in the current
language in the bill. My amendment is before the House subjected to
your amendment as a substitute which deals totally with the other end
of the pipeline. Whatever reservations the gentleman might have
regarding the Goodlatte language, surely we can come together with a
consensus opinion that a frivolous case ought to be dismissed within
the first 90 days.
Mr. GOODLATTE. Mr. Chairman, I move to strike the requisite number of
words.
Mr. Chairman, I rise in strong opposition to the Berman amendment to
the McHale amendment.
This would have the effect of eliminating all of the effort that has
been made in putting into this case incentives for parties to settle
the case, incentives the gentleman from California himself voted for in
the committee on this bill.
And if we were to adopt this in the manner that the gentleman from
California [Mr. Berman] suggests, that is all we will accomplish. We
will go back to having a situation where we have rule 11 and only rule
11 with a mechanism added by the gentleman from Pennsylvania who is
acting, I think, in very good faith to provide an additional mechanism
to act within 90 days of a suit being brought, but you will still have
the situation where it will always be in the hands of the judge to
decide what a frivolous case is, what a nonmeritorious case is, what a
fraudulent case is, and only in those cases will there be any
recompense to the prevailing party.
The result of that will be the same that we have right now with rule
11 of the Federal rules of civil
procedure. It is seldom imposed on any of the parties in the cases.

We are attempting here to say that when somebody brings an action in
Federal court under the diversity law that they will understand that it
is not a risk-free proposition. They should make sure that they have
confidence in their case and understand that if they do not offer to
settle the case in good faith that the case will result in their being
forced to pay attorneys' fees to the party that was forced to defend
the case, or in the case of a defendant who is defending the case in
bad faith, they will be forced to pay attorneys' fees to the plaintiff
who brought a good case that should have been settled before it ever
got to trial.
If the gentleman from California is successful in his motion, we will
not have any provisions in the bill which say that the loser of the
lawsuit based upon the merits of the case and the loser not having any
merits, because the jury found his claim to be nonmeritorious, or he
did not negotiate reasonably in the case and, therefore, an award was
granted below what the defendant last offered in the case and,
therefore, the plaintiff should have taken that award, under those
circumstances, we will not have any of those incentives for settling
the case if this amendment were adopted.
Now, the gentleman from Pennsylvania has, I think, a good proposal to
expedite bringing to the attention of the court frivolous cases, but he
does not have any way of defining what a frivolous case is or defining
what a nonmeritorious case is or defining what a fraudulent case is,
and the mechanism that we have in the bill now does define what a
nonmeritorious or lesser, if you want to accept the gentleman's
contention that there are cases that are not frivolous but are close
calls, the jury finds them nonmeritorious, as the other gentleman from
Texas described them earlier. Under those circumstances, there is a
risk of paying attorneys' fees.
That will be gone if the amendment offered by the gentleman from
California to the amendment offered by the gentleman from Pennsylvania
[Mr. McHale] is adopted.
Mr. BRYANT of Texas. Mr. Chairman, will the gentleman yield?
Mr. GOODLATTE. I yield to the gentleman from Texas.
Mr. BRYANT of Texas. I thank the gentleman for yielding.
I want to point out that you have acknowledged that we have a
mechanism in place now to get rid of frivolous lawsuits.
Mr. GOODLATTE. Absolutely. I acknowledge it is there. I would hope
the gentleman from Texas would acknowledge that it is used very, very
seldom.
Mr. BRYANT of Texas. I would like to ask the gentleman to express his
opinion about why it is used very, very seldom, if that is the case.
Mr. GOODLATTE. In my opinion it is used very, very seldom because
judges are former attorneys and they say, ``There but for the grace of
God go I.'' They do not want to put an attorney under rule 11 sanctions
in an embarrassing situation with their client.
The fact of the matter is there are far more frivolous and fraudulent
cases. George McGovern says there are one out of four cases that are
frivolous and fraudulent. Surely rule 11 does not apply in one out of
four cases.
Mr. BRYANT of Texas. I am interested to hear the gentleman express
his faith in George McGovern's judgment.
Mr. GOODLATTE. I was hoping you would place some faith in George
McGovern's judgment.
Mr. BRYANT of Texas. Neither he or Kemp are high on my list, but I
would say to the gentleman that the people in court are former lawyers,
the judges are former lawyers. Yes, the judge is most likely a former
defense lawyer. They are the ones that come here and say, ``Oh, all of
these frivolous lawsuits are being filed.'' Why do not these defense
lawyer judges dismiss them under rule 11? Now, the point I am making is
this, we have a mechanism for getting rid of frivolous cases.
The gentleman from Pennsylvania [Mr. McHale] proposed an amendment to
make it more explicit. We thought that was going to be a substitute for
your bill. If it was, it would be a good idea.
Vote for the Berman amendment and it will be.
Mr. CONYERS. Mr. Chairman, I move to strike the requisite number of
words.
[[Page H2690]] Mr. Chairman, it is with some trepidation that I join
the gentleman from California [Mr. Berman], and the reason that I join
him now, even though I was not originally for McHale, is that it is
what he is doing to the whole bill is what makes this important. We are
finally debating what is, I think, at the center of the issue, what to
do about frivolous, malicious, or fraudulent lawsuits, and this is the
core of the issue, not whether the loser should pay through a wonderful
gaming device that stacks it up against the leveraged defense.
This is a much more salutary way for us to proceed, and if there is
any problem, it is not the good faith of the plaintiffs bringing suit
which, under the current bill, will be intimated through the gambling
creed behind the current H.R. 988.
What I want to see is a little person able to bring a suit in good
faith that may not have the ability to pay, who may not have the
ability to even pay his lawyer's fees at the end of the case, win or
lose.
Mr. McHALE. Mr. Chairman, will the gentleman yield?
Mr. CONYERS. I yield to the gentleman from Pennsylvania.
Mr. McHALE. In the interests of full disclosure, let me say to the
gentleman and to the House, I used to be a plaintiff's lawyer. I
represented many of those persons of modest financial resources.
The language in my amendment would not harm those persons in any way,
and I have to smile and say to the gentleman that it is heartening to
see that the wisdom of my amendment has now become apparent in light of
the fact that it is being offered as a substitute for the earlier
Republican language.
Mr. CONYERS. Exactly. That is the redeeming part of the whole thing,
as far as I am concerned, but, you know, we are in a situation of
relative improvement.
What we are trying to do now is a lot different from cutting out some
of your clients in earlier years who would not have been able to bring
a suit unless you were going to have contingent fees or you took the
case, or someone took the case, on the basis that it had merit. You
could not look in the crystal ball and predict you would win or lose
the suit. You could not tell what the jury was going to do.
You did not know what the judge is going to do. You did not know if
you were going to get shot into a different forum, all of which has a
tremendous impact on the outcome of a case. And what we are doing now,
what we are doing now is saying let us look at whether it is malicious,
frivolous, or fraudulent, and with that, I can agree.
Mr. McHALE. If the gentleman will yield further, the gentleman and I
agree, which is why I oppose the English rule. Ironically, my proposal
was drafted originally not as a substitute for Goodlatte but as a
substitute for the English rule on which he gentleman from Michigan and
I are in full agreement.
Mr. CONYERS. The base underlying the bill is worse than that English
rule, because at least the English rule let people who had lawyers
appointed be free of being assessed costs. This rule does not take that
into consideration.
I urge the Berman amendment be agreed to.
Mr. BRYANT of Texas. Mr. Chairman, I move to strike the requisite
number of words.
Mr. Chairman, I would just like to say very briefly if you vote for
the Berman amendment what you will get is what the DSG reported the
McHale amendment was to amend. We now learned it was inaccurate. The
report was inaccurate. If the Berman amendment is adopted, we will be
voting for a system that gets rid of frivolous lawsuits early in the
case but not one that makes it so frightening for a middle-class or
lower middle-class person to bring a lawsuit that they just flat cannot
afford to come forward and bring one.
The point is we are told the problem that exists is frivolous
lawsuits that cost defendants money unfairly, even though we cannot
find any data to support this, we cannot get any studies brought
forward that this is going on, we cannot get any kind of an economic
study. We do not have any evidence of it at all. We are told the
problem is frivolous cases.
We respond to that by saying there is rule 11 right now that gets rid
of frivolous cases early in the case. The other side comes back and
says, ``Yes, but the judges do not use it enough.''
Well, the fact of the matter is what they are most really deeply
concerned about is they do not want middle-class and lower middle-class
people to be able to file a lawsuit against defendants with whom they
sympathize. That is simply what it boils down to.
Now, the Berman amendment, if adopted, will mean we will have the
first 90 days of the case in the system for getting rid of what they
say they are concerned about, frivolous lawsuits, but we would not have
a system that said that an average person who brought a case and
happened to lose. and everybody knows you can lose a case
serendipitously from time to time, would not lose all of their life's
savings, lose all of their personal assets and, therefore, be afraid to
bring the case in the first place.
Mr. BERMAN. Mr. Chairman, will the gentleman yield?
Mr. BRYANT of Texas. I yield to the gentleman from California.
Mr. BERMAN. It is not simply the losing of the case. You can lose by
winning under the Goodlatte scenario. That is why I prefer the McHale
approach instead of the Goodlatte scenario, and let me explain why.
A situation, a diversity case, four or five corporate defendants, a
plaintiff brings an action, he seeks, based on medical injuries and
loss of wages and pain and suffering, to collect a million dollars.
Defendant three of the five defendants offers $80,000. He has no other
offers. He thinks $80,000 will not even cover reimbursement for one-
third of his medical bills. He refuses that offer. The case goes to
trial. He gets a judgment; he gets a judgment for $1 million, exactly
what he sought in his initial pleadings.
However, under the elimination of join liability, that is coming in
the very next bill, the judge apportions, and the jury apportions,
liability where the one defendant who made an $80,000 offer is found
only to be 7.5 percent liable and, therefore, only obligated to pay
$75,000. Now, a huge amount of that particular defendant's attorneys'
fees are shifted to the plaintiff even though he got exactly what he
wanted, because it was not until the time of trial that he had a sense
of how the different negligent defendants would be apportioned. You
lose when you win under the Goodlatte scenario. It is not even about
frivolous cases, not about nonmeritorious cases. It is about
meritorious cases where the apportionment of damages is slightly
different as it almost always will be than the plaintiff originally
thought.
Mr. BRYANT of Texas. That is an example.
Mr. GOODLATTE. Mr. Chairman, will the gentleman yield?
Mr. BRYANT of Texas. I yield to the gentleman from Virginia.
Mr. GOODLATTE. I thank the gentleman for yielding.
This does not just deal with frivolous cases. This is intended to
encourage settlement in all cases by imposing risk on all parties. We
talk all the time here about somebody risking loss, but nobody talks
about the fact that if you are the defendant in a lawsuit and you are
an individual or you are a small businessperson and you have to spend a
fortune in attorneys' fees, that happens to you whether you win the
case or lose the case under our current law.
All we are doing is saying we are making the risk equal between the
plaintiffs and defendants.
Mr. BRYANT of Texas. The same thing happens to the plaintiff.
Mr. GOODLATTE. Not if it is a contingent case.
Mr. BRYANT of Texas. Somebody is paying those costs.
Mr. GOODLATTE. Not the plaintiff.
Mr. BRYANT of Texas. You have got the same drag on the plaintiff as
there is on the defendants, because the lawyer has to carry the burden.
He is not going to do it unless he thinks he has a good chance of
winning. That is the whole point of this.
I would simply conclude by pointing out the argument, at bottom, on
your side of the aisle is we do not have any faith in the judges, most
of whom were appointed by Republican Presidents, and we do not have any
faith in the American people when you take them 12 at a time and put
them in the jury
[[Page H2691]] box and show them facts, so we are going to try to write
the rules in a way to make sure nobody ever files a case unless it is
an absolute slam dunk winner. I do not think that is fair to the middle
class.
I think you should vote for the Berman amendment.
The CHAIRMAN. The time of the gentleman from Texas [Mr. Bryant] has
expired.
(At the request of Mr. Berman and by unanimous consent, Mr. Bryant of
Texas was allowed to proceed for 2 additional minutes.)
Mr. BRYANT of Texas. Mr. Chairman, I would like to say in conclusion
if you vote for the Berman amendment, what you get is a system which
the gentleman from Pennsylvania [Mr. McHale] had planned to add on to
the Goodlatte amendment that would instead be the bill that would say
we are going to get rid of these frivolous cases in the first 90 days,
but you would not leave us in the situation if you voted for the Berman
amendment, you would not have the situation of going through the 90-day
process and then facing losing your life's savings because you brought
a meritorious case but for some reason or other you happened to lose
that.
Mr. McHALE. If the gentleman will yield, Mr. Chairman, I appreciate
the kind, if belated, comments my amendment is now receiving, and in
the event that in the vote on the Berman amendment, the Berman
amendment is unsuccessful, I hope those kind words of praise are
remembered when the McHale amendment on its merits is brought to a
vote.

{time} 1845

Mr. BRYANT of Texas. Let me make the point that the kind words for
the gentleman from Pennsylvania [Mr. McHale], as reported to us, in the
DSG report, indicated it was an amendment to replace the Goodlatte
language. But if it is an add-on, it makes the bill twice as bad rather
than good.
The CHAIRMAN. The time of the gentleman from Texas [Mr. Bryant] has
expired.
(On request of Mr. Berman and by unanimous consent, Mr. Bryant was
allowed to proceed for 2 additional minutes.)
Mr. BRYANT of Texas I yield to the gentleman from California.
Mr. BERMAN. I thank the gentleman from Texas for yielding to me.
First of all, the gentleman from Virginia [Mr. Goodlatte] says what
we are trying to do is encourage settlements, avoid going to jury
trials and the expense of that. So we are trying to put some risk on
both parties. But nowhere in this bill is there any effort on to equate
the risks. The middle-class plaintiff or middle-class defendant or
small business man is treated exactly the same as the multibillion-
dollar corporation.
Shifting fees, shifting fees from General Motors to a plaintiff is
not a massive deterrent to General Motors aggressively litigating and
seeking to throw whatever smoke it can up to defeat a legitimate claim.
Shifting fees from the average plaintiff to General Motors means that
case will never be brought, that is what this is about.
This means no case will be brought under the Federal diversity
jurisdiction, and so the problem with the McHale amendment, in addition
to the Goodlatte amendment, is, as long as the Goodlatte language stays
in this bill, plaintiffs are not going to utilize their rights under
the Federal diversity statute.
It would have been better to repeal it because this way you are
saying plaintiffs cannot utilize it but if a defendant thinks he can
gain from it, he can remove it. You do not even have the fairness in
your language to eliminate the ability to remove if it is not in the
Federal court. It is all defendant-oriented. It does not deal with the
frivolous case. The McHale amendment at least focuses on that. That is
why I think that should be in place instead of the Goodlatte amendment.
Mr. MOORHEAD. Mr. Chairman, I rise to oppose the Berman amendment to
the McHale amendment and to oppose the McHale amendment.
Mr. Chairman, the Berman amendment really destroys all the loser-pays
provisions, and particularly the Goodlatte amendment, which we have
been working on for several days, in fact for a couple of weeks. The
original amendment, Mr. McHale's amendment, is much broader than the
bill itself, and we have not had an opportunity in committee or in
hearings or anything else to go over this broad an amendment.
I think that it destroys the possibility of the bill passing. I think
it weakens the bill. In that respect I would, as chairman of the
subcommittee, be willing to have hearings on the subject later on.
Mr. CONYERS. Mr. Chairman, will the gentleman yield?
Mr. MOORHEAD. I yield to the gentleman from Michigan.
Mr. CONYERS. I thank the gentleman for yielding to me.
Does not the gentleman concede that this moves the measure out of the
draconian nature of punishing people for bringing lawsuits to dealing
with lawsuits that may in fact be frivolous, malicious, or fraudulent?
Is that not a good thing?
Mr. MOORHEAD. One thing in this argument today, we have come up with
the idea that plaintiffs are always poor and defendants are always
rich. That is far from the truth. A plaintiff can pick a forum, he can
file in the Federal court if there is diversity, he can bring the
defendant where the defendant never wants to go.
There are lots of defendants who are worth modest sums of money who
could be totally destroyed by the action itself being filed against
him. Then to say that he does not have a right in frivolous cases or
under circumstances where there is no good cause to get his attorneys'
fees back, he is left penniless anyway.
Mr. CONYERS. Let me ask the gentleman one thing. When was the last
time the gentleman heard a corporation look on television and see an ad
for a plaintiff's law firm saying, ``No payment if we don't win''? Has
the gentleman ever heard of a corporation going to a lawyer like that?
I don't think so. Has the gentleman ever heard, before the time that we
could use television--and he may have been a plaintiff's lawyer once--
did you not normally get people who could not afford a lawsuit?
Mr. MOORHEAD. A lot of lawsuits.
Mr. GOODLATTE. Mr. Chairman, will the gentleman yield?
Mr. MOORHEAD. I yield to the gentleman from Virginia.
Mr. GOODLATTE. I thank the gentleman for yielding.
Mr. Chairman, what is being overlooked here is we are talking about a
mechanism that encourages reasonable settlements of lawsuits by
imposing risks on all the parties in the case. And we limit that risk
for those who talk about the deep pockets. Nobody has to pay the other
side's attorneys' fees whether the other side is the very poor person
or the other side is General Motors or whoever. No one has to pay them
any more than they pay their own attorney.
What we are doing here is creating incentives for parties to settle
cases that should be settled by letting them know that there is a risk
to not settling it and creating reasonable behavior on the part of
parties.
If we accept the Berman amendment, we will have lost all that effort
to discourage lawsuits from going to trial in cases and adding to the
cost of litigation in this country.
I urge opposition to this amendment.
Mr. CONYERS. Mr. Chairman, will the gentleman yield?
Mr. MOORHEAD. I am happy to yield to the gentleman from Michigan.
Mr. CONYERS. I thank the gentleman once again.
Mr. Chairman, I always like to hear the gentleman from Virginia [Mr.
Goodlatte] tell us what he is trying to do because it is totally
unvarnished and it is straight on the table. He is trying to end
lawsuits for people who may not be able to afford them regardless of
whether they have merit or not. Thankfully, he said it repeatedly
during the course of this debate, and that is precisely my objection to
this whole bill.
A person can be injured and not have any money and have a totally
meritorious lawsuit, and he should not be held accountable to pay for
the attorneys' fees whether he wins or loses. The test is the
preponderance of the evidence. That is 51 percent to 49 percent.
The plaintiff is not a lawyer or a judge, he does not know what is
happening.
[[Page H2692]] So I am saying that is the unfairness that the
gentleman from Virginia [Mr. Goodlatte] keeps putting on the table that
underscores more and more peoples' objections to this bill.
The CHAIRMAN. The time of the gentleman from California [Mr.
Moorhead] has expired.
(By unanimous consent, Mr. Moorhead was allowed to proceed for 2
additional minutes.)
Mr. MOORHEAD. I yield further to the gentleman from Virginia.
Mr. GOODLATTE. I thank the gentleman for yielding.
Mr. Chairman, yes, I will freely confess that I want to encourage
settlement of lawsuits. The fewer of them brought into court the
better. Every lawsuit has a solution to it. We want the parties to find
that solution before they get into court. And the best way to do that
is to give the parties incentives to find those solutions on their own
before they get into court.
The defendant always faces that incentive because a defendant always
has to pay their attorneys on a hourly basis. That does not happen in
contingent fee cases for plaintiffs, where, as I have said before, you
look in the phone book and you will find ad after ad or watch
television, ``No fee if no recovery.'' That is what is driving
litigation.
I am in favor of contingent fees because it helps a lower-income
person get into court. But the problem is that we should never ever say
there is no risk attached to bringing the case in court. That is what
this does.
Mr. BRYANT of Texas. Mr. Chairman, will the gentleman yield?
Mr. MOORHEAD. I yield to the gentleman from Texas.
Mr. BRYANT of Texas. I thank the gentleman for yielding to me.
Mr. Chairman, I point out to the gentleman: that there is no risk
attached? That is absolutely preposterous. Anyone who has ever been
close to the courthouse knows that. A lawyer who starts the case and
has to finance it, he is not going to prosecute a case he cannot win.
Mr. GOODLATTE. We are not talking about the plaintiff----
Mr. BRYANT of Texas. He is not going to go through months and years
of work; that is preposterous to assume that that is going on. It is
not going on. That is why you have the rule of sanctions that the
gentleman and I discussed. It has not been used very much. There are
not very many cases in which it ought to be used.
I think it is very interesting how the gentleman shifted the
discussion from stopping frivolous cases to some kind of an incentive
to settle. What you have here is a prohibition on an average person
getting into a courthouse.
Mr. MOORHEAD. Reclaiming my time, the gentleman is probably right,
there are cases that are filed that they intend to get something out
of. But in many, many of these personal injury cases or others, they
file a suit, hopeful to make a settlement.
Mr. ABERCROMBIE. Mr. Chairman, I move to strike the requisite number
of words.
Mr. Chairman, I hope we can bring some sanity to all this. I am
opposed to this, I am opposed to this bill. If you think about it, I
cannot imagine why some of my friends on this side are for this.
We have been looking at working on this for several days, and in fact
the past several weeks. We are getting rid of several centuries of
people fighting against the king to be able to sue.
You cannot say that something is groundless or frivolous. If a man or
woman says this is in their interest and they can find a lawyer to take
it, they should be able to do it. Let us get to the bottom line here. I
have done that. I have been on that side. I was libeled once, and I
went to a lawyer and, thank God, I was able to find an attorney who
took my case when I did not have any money. I was a student in college.
He took that case and it helped set law in the State of Hawaii because
we drove the State of Hawaii back. They had all their attorneys working
against me. Anybody who is tuning in across this country, this bill is
against you.
There are three things that define a free people: the right to have a
jury trial; the right to vote; and the right to sue. The commoner can
sue the king. The king in this country, the executive in this country,
the big people, corporations, whoever it is, they have to stand in
court against a small person. That is what this is all about.
I saw the Speaker today. He says he is somewhat of a historian. Well,
he is a little loose with the facts. He got on television today and
said, ``Look through your rolodex and see who you have not sued
today.'' What a sorry spectacle that is and what a sorry spectacle this
is today.
I went down to take the law boards, and I walked out before I left--I
took a look at the people in the room and decided I did not want to be
with them. Walked out before it was over.
This is not a conservative position. I do not understand this
position that is being taken by our Republican friends and, sad to say,
some of my Democratic friends.
We should be defending the individual's right to sue the king. That
is what this is all about. You can have all of the discussion back and
forth when most of the country could not even understand what you were
talking about. There is a bottom line to be drawn on all of this: Can
the average American take someone else into court and see who is right?
You have no business telling me that my views and my desires are
groundless, that they are brought in bad faith, that they are brought
for the purpose of harassment.
I was the one who was harassed in the case. I had a State senator who
libeled me, who knew that he libeled me. It was during the Vietnam war
situation, and if you do not think that can reoccur here, you are
making a sad mistake. He libeled me, and he knew it.
What they ended up doing it in order not to have to pay my lawyer,
thank God I was able to find somebody who was willing to take my case,
and he absorbed all the costs. I did not have any money. He took it on.
I was glad to have him. That is what this is all about. Think about it.
This bill, H.R. 988, I do not care what you do--I day to the
gentleman from Pennsylvania [Mr. McHale]--it is nothing against him
individually, I say to the gentleman from California [Mr. Berman] it is
not against him.
I realize they are trying to go against the tide. Do you know what
this is? This is trying to dull the guillotine as it comes down to chop
off your neck. We are trying to see if we cannot make the car break
down on the way to your execution so you have to arrive on 4 rims
instead of 4 wheels.
Think about this. There is not a lot of people on the floor, but if I
get the chance on another amendment, I am going to come up further. The
whole history of freedom is what is at stake with this. You do not have
a contract to uproot the Constitution and the history of the
Constitution and what brought us to this stage in America. The average
person, the every-day man and woman, has a right to do down and say to
somebody who is an attorney, willing to take their case, ``Will you
help me? I have nothing. I don't know if I have got a case that you can
win, but I feel I have been injured, I feel I have been done harm. Will
you take my case, will you step up to the plate for me?''
That attorney has to think long and hard, Mr. Chairman, because that
attorney does not know whether he or she can afford to do that, does
not know that they can take them on.
And as for settling cases, let me tell you I have been a member of a
city council, and I have been a member who had to decide when we were
the deep pocket with only 1 percent, and I voted every time that we
were at fault to do that because that is what protected the system so
the individual man and woman in this country knows that they are going
to get a recourse of action that will result in justice for them.
{time} 1900

Mr. WATT of North Carolina. Mr. Chairman, I move to strike the
requisite number of words.
Mr. Chairman, I will not take 5 minutes. I just want to say ``Amen''
to my friend, the gentleman from Hawaii [Mr. Abercrombie], and rise
immediately after him so that everybody will quit thinking that I am
the least mild-mannered fellow in this body. It is always nice to speak
after the gentleman from Hawaii because then I do not sound like I am
the ranting, raving guy in the body. But what he says is absolutely
correct, and it goes back to what we discussed in the general debate,
and
[[Page H2693]] that is that we have a problem in our judicial system
that ought to be attacked as if it were a gnat, and we are using a
sledgehammer to attack it, and we have come in with a solution that
swings the pendulum all the way to the other extreme and, in the
process, does an injustice to a system of justice and a system of
addressing grievances in this country that has been in place for
centuries and centuries.
Mr. Chairman, we started by saying that our objective is to deal with
lawsuits that have no merit, that are frivolous lawsuits. I say to my
colleagues, ``The problem is you can't deal with those lawsuits with
this bill without throwing out the baby with the bath water, and so you
come in with a piece of legislation that is designed to revamp and
reshape the entire system of justice in civil cases just so we can deal
with one, or two, or even a handful of, or a thousand frivolous
lawsuits or abuses of the process, and that is not the way we ought to
be proceeding.''
The amendment that has been offered by the gentleman from California
[Mr. Berman] would limit this bill to frivolous lawsuits, which we were
told was the primary motivating factor for coming forward with this
bill in the first place, and, as we get further and further into it,
now we find that we are not dealing just with frivolous lawsuits, but
we are putting in place a whole a new system that encourages, demands,
forces people to resolve litigation whether they want to do it or not,
and in the process disadvantaging people who need access to the justice
system and makes it impossible for them to come into the court without
substantial fear of risking all of their assets.
I think we ought to step back from this, as the gentleman from
California [Mr. Berman] has encouraged us to do, and put this system
into place, limit it to frivolous lawsuits, which is the primary
motivating factor and the factor that it should be applicable to and
bring some sanity back to this process.
I say to my colleagues, ``Don't throw out our whole system of
judicial works just to get a few bad apples out of the system.''
Mr. SCOTT. Mr. Chairman, will the gentleman yield?
Mr. WATT of North Carolina. I yield to the gentleman from Virginia.
Mr. SCOTT. Mr. Chairman, I say to the gentleman, ``We ought to point
out, if we don't adopt the Berman-McHale amendment, it not only will
apply to frivolous lawsuits, it will also apply to meritorious
lawsuits, those that are not--but not as meritorious as you thought
they were. You can win your suit. You can win, essentially prevail, but
if you come in essentially just under the offer, then you will be beset
with these draconian provisions. That is not right.''
Mr. WATT of North Carolina. That is correct, and I think the best
analysis we heard of it is, ``You win and lose cases in the real world.
The burden of proof is on one side or the other, but you win a case
with a 51 percent versus a 49 percent.''
Every case that gets filed, most cases that get filed, 90 percent, 95
percent of the cases that get filed, are close questions. They are not
slam dunks, as we say in basketball lingo, and that is what this bill
is designed to discourage----
The CHAIRMAN. The time of the gentleman from North Carolina [Mr.
Watt] has expired.
Mr. INGLIS of South Carolina. Mr. Chairman, I move to strike the
requisite number of words.
Mr. Chairman, I rise for two reasons: First, to correct something
that I said in the Committee on the Judiciary and, second, to engage
the gentleman from Virginia [Mr. Goodlatte] in a colloquy, but first as
to the correction:
In committee I was very concerned about the amendment of the
gentleman from Virginia [Mr. Goodlatte]. Now I am much more convinced
of the rectitude of the amendment in that it does improve the bill, and
so I apologize to the gentleman for misunderstanding it at the
Committee on the Judiciary and feel that he did make a significant
improvement to the bill. That is my first observation.
The second:
My reason for engaging the gentleman in a colloquy just briefly, Mr.
Chairman, is to ask whether at some point--I am, along with the
gentleman from Pennsylvania [Mr. Gekas], a little bit interested in the
Michigan rule that would possibly sharpen up loser pays. We are not
going to offer that at this juncture, but I guess I am asking the
gentleman from Virginia if possibly somewhere down the road we might
look at that if this does not work as well as we think it is going to
work. I am concerned about that middle ground and hoping that we can
push the parties even closer towards settlement and sharpen it up a
little bit, but maybe the gentleman would have some thoughts about----
Mr. GOODLATTE. Mr. Chairman will the gentleman yield?
Mr. INGLIS of South Carolina. I yield to the gentleman from Virginia.
Mr. GOODLATTE. Mr. Chairman, I am also interested in finding ways to
encourage more reasonableness in litigation and to encourage more
settlement of cases. I think that is the intent of the amendment of the
gentleman from Pennsylvania [Mr. Gekas], but quite frankly--and also
let me say that we will find out, if this passes and becomes law, and
despite all the apocalyptic statements of many on the other side, this
applies to about 1 or 2 percent of all the civil litigation in this
country, so we are going to find out, without endangering all those
rights, whether or not this does work. But if it does, then I think we
answer one of the objections they have by not taking the Gekas
procedure and splitting the difference between the two parties,
wherever they end up, and saying that, for example, the plaintiff last
offered $100,000, and the defendant last offered $50,000, putting it at
$75,000, so that if the plaintiff gets $75,001, the plaintiff wins and
pays--the defendant pays attorney fees. If the plaintiff gets $74,999,
the plaintiff wins but pays the defendant's attorney fees. Their
objection to that is that that is not fair that the winner pays.
Mr. CONYERS. Mr. Chairman, will the gentleman yield?
Mr. GOODLATTE. Let me finish that point.
They are correct that there are circumstances where a plaintiff in a
case could get a judgment under these circumstances and wind up paying
attorney fees for the defendant, but under the current bill, as it is
formulated, that only occurs if they are way off in their settlement
negotiations.
So, for example, if that plaintiff is at $100,000 in the case, and
the defendant is offering $50,000, and they do not get any further,
under the current rule in this bill only if the plaintiff recovers more
than $100,000 will the defendant pay the plaintiff's attorney fees;
only if the plaintiff gets less than $50,000, or $50,000 less than the
plaintiff's last offer, would the plaintiff pay the defendant's
attorney fees because the plaintiff was not reasonable in negotiations.
The proof of the reasonableness is in the jury's final award, and that
is the basis of this mechanism. It will push parties together to settle
cases.
I think that the amendment offered by the gentleman from Pennsylvania
[Mr. Gekas] is well intentioned, but I think it may be too razor sharp
for the comfort of some on the other side.
Mr. INGLIS of South Carolina. Reclaiming my time, I point out to the
gentleman from Virginia I think that he has well stated that he is in a
middle position here, between the position I might take and the
position the gentleman from Michigan might take and, therefore, shows
the reasonableness of the gentleman from Virginia's point of view.
I think that in the future I hope that we can come back and revisit
to figure out whether we need to tighten it up a little bit and move it
toward this direction.
Mr. GOODLATTE. Mr. Chairman, would the gentleman yield further?
Mr. INGLIS of South Carolina. I yield to the gentleman from Virginia.
Mr. GOODLATTE. Mr. Chairman, what I am neglecting to say here is that
the American rule that is championed by some on the other side applies
in that example that I just gave where the jury comes back with an
award between $100,000 and $50,000. Neither party pays the other
party's attorney fees because neither of them has a claim that they
made an offer better than what the other party finally achieved in the
case.
Mr. CONYERS. Mr. Chairman, will the gentleman yield?
Mr. INGLIS of South Carolina. I yield to the gentleman from Michigan.

[[Page H2694]]

Mr. CONYERS. Mr. Chairman, I would hope we all support the American
rule rather than one side, but let me point out to my colleagues that
the whole notion that there is some superior method enforcing
settlement of cases as opposed to having them tried is one that I find
undermines the whole basis of loser pays.
The fact of the matter is that of course everybody would love to
settlement. But where the weight and the power is more on one side that
on the other, settlement becomes a very unfair tool, and that is why we
go to trial.
The judges are trying to get the parties to settle, the parties
themselves frequently want to settle, and now here comes the Congress,
``You will settle these cases or you will be penalized,'' and that is
the underlying part of it that I cannot agree with.
Mr. INGLIS of South Carolina. Reclaiming my time, Mr. Chairman, I say
to the gentleman from Michigan the problem is that I think he is
overlooking the fact that in many of these cases the plaintiff would
not have much risk. Talking about contingency fee arrangement. The
defendant is the one at risk, who is hanging out to dry as a small
business person. They are hanging out to dry while the plaintiff has
very little risk.
The Chairman. The time of the gentleman from South Carolina [Mr.
Inglis] has expired.
Mr. BURTON of Indiana. Mr. Chairman, I move to strike the requisite
number of words.
Mr. Chairman, I would like to have a hypothetical story, and then I
would like to ask a question of the gentleman from Virginia [Mr.
Goodlatte].
Fellow is driving across the Ohio State-Indiana border, and
interstate trucking company has a trucker who loses control of the
vehicle through his own negligence, and he hits this car, and he puts
this fellow in the hospital, and the fellow has a major shoulder
injury, and he goes through several surgeries, and after several
surgeries it is evident that he is going to be physically impaired
probably for the rest of his life. So he goes to the trucker, trucking
company, or to his insurer, and he says, ``Look, I'm going to be
impaired the rest of my life. I'd like, to have a $500,000 damage
settlement,'' his attorney does.
And they say, ``Well, I tell you what. We've looked at your case, and
we think we'll give you $50,000.''
And so they come back, and they go through the preliminaries, and the
plaintiff says, ``OK, I'll go to $400,000,'' and the defendant says,
``We'll go up to $100,000,'' and there they hit the loggerhead, and
they go to a trial, and the trial goes on for--this process drags out
for about 2 or 3 months, and during the trial the jury does not like
the way the defendant--or the plaintiff looks, or they do not like some
of the things that his attorney says, and they decide to give him
$75,000 instead of the $100,000, which is lower than the last best
offer, and, because they settle on $75,000, he is liable for all of the
defense's legal fees, as I understand it.
Mr. GOODLATTE. Mr. Chairman, will the gentleman yield?
Mr. BURTON of Indiana. I yield to the gentleman from Virginia.
Mr. GOODLATTE. He is only liable with the defense's legal fees to the
extent that they do not exceed his own legal fees. He cannot pay any
more than he pays his own lawyer.
Mr. BURTON of Indiana. So his lawyer, if he was on a 40-percent
contingency basis, and he got a----
Mr. GOODLATTE. The bill provides a mechanism for calculating a
reasonable value for those attorney fees if the case was brought on----
Mr. BURTON of Indiana. OK; well, let us say it is a 40-percent
contingency basis; OK? So 40 percent of $75,000 is what, $30,000?
Mr. GOODLATTE. The bill does not work based on percentage. It bases
on a reasonable value and the hourly rate of----
Mr. BURTON of Indiana. Let us say that it is a reasonable value and
that it comes out to $25,000.
Mr. GOODLATTE. Right.
Mr. BURTON of Indiana. OK; so he has to pay $25,000 of the defense's
legal fees?
Mr. GOODLATTE. That is correct.
Mr. BURTON of Indiana. So that would be a total of $50,000 that he
would be out as far as legal obligations.
{time} 1915

For his shoulder injury, that is a permanent impairment, he now is
going to get a $25,000 settlement in reality.
Mr. GOODLATTE. The fact of the matter is he turned down a $100,000
settlement offer. His $300,000 last offer was four times what the jury
finally gave him.
Mr. BURTON of Indiana. Reclaiming my time, the man has a permanent
disability. Because of the jury's decision, he is going to end up with
$25,000, and he has a lifetime of pain and suffering. It just seems to
me there ought to be some balance in this. For the plaintiff to pay 100
percent of the legal fees of the defendant is exorbitant. I think there
ought to be some compromise. There ought to be a penalty, but I do not
think the penalty should be 100 percent. It seems to me that something
like 25 percent would be a more realistic figure. There is a penalty
involved, he knows he is going to have to pay, but 100 percent loser-
pays makes absolutely no sense to me.
Mr. GOODLATTE. If the gentleman will yield further, the gentleman
makes a good point that the further away from the settlement and the
further away from the defendant's last offer the plaintiff is perhaps
the less reasonable he is and that the percentage might vary.
If the gentleman has some kind of a sliding scale for that type of
case, I would be happy to work with the gentleman to do that. I am not
sure that a flat percentage would be applicable in every case, because
what about the case where he asks for $100,000, the defendant offers
$50,000, and the jury awards him $2,000 because there is some minor
aspect of the case he is right about. But he should not have brought
the whole case into court, and left $50,000 on the table to get $2,000.
Mr. BURTON of Indiana. Reclaiming my time, I do not know how you
would work out a sliding scale. It would be very difficult. I do
believe there ought to be a penalty for a lawsuit where they are way
out of kilter, but 100 percent just does not seem fair to me. So I will
be proposing an amendment, and, in the interim, if we could talk and
maybe figure out some kind of a compromise that would be fine. I will
propose an amendment that says loser pays 25 percent of the defendant's
legal fees, and not 100 percent.
Mr. GOODLATTE. If the gentleman will yield further, I would like to
point out to the gentleman that attorneys fees are limited not only in
respect to not paying more than you pay your own attorney's fee or the
value of what you would have paid based on an hourly rate, it is also
limited to not more than 10 days before trial through the trial. So all
the earlier discovery in the case and that sort of thing, you are not
exposed to paying for that either, so long as you are making a good
faith settlement offer, which essentially can be any settlement offer
up to 10 days before the trial.
Mr. BURTON of Indiana. Everything before 10 days before the trial is
not included?
Mr. GOODLATTE. That is correct. You can limit your exposure
substantially the way we designed this bill now, compared to the
original loser-pays provision in the original bill.
The CHAIRMAN. The time of the gentleman from Indiana [Mr. Burton] has
expired.
(By unanimous consent, Mr. Burton of Indiana was allowed to proceed
for 1 additional minute.)
Mr. BURTON of Indiana. Mr. Chairman, 10 days before the trial, this
is a very contentious case, the defense has two attorneys working on it
at 10 hours a day, 20 hours a day at $100 an hour, that is $2,000 a
day, but I think that is a low fee for some of these attorneys. Say it
is $2,000 a day plus clerical and everything else. In 10 days you are
looking at $25,000 or $30,000 in legal fees.
Mr. GOODLATTE. That could arise.
Mr. BURTON of Indiana. Or more, if you have a really involved case.
Mr. GOODLATTE. If the gentleman will yield, that is limited by the
amount that the plaintiff is paying their own attorney's fees in this
case. Do not forget this is also applying to a defendant and also
applies not just to tort cases. In fact, the vast majority of the
cases, diversity cases, are going to be contract actions between people
suing each other for debt, and there
[[Page H2695]] will be plenty of times when the plaintiff will want to
recover attorney fees from the defendant.
Mr. BURTON of Indiana. I really believe we should take a hard look at
having a lower percentage than 100 percent. I think 25 percent sounds
reasonable.
Mr. HASTINGS of Florida. Mr. Chairman, I move to strike the requisite
number of words.
I would like to engage in a colloquy with the gentleman from Virginia
[Mr. Goodlatte].
Am I to understand that the objective is to encourage settlement of
cases in Federal court?
Mr. GOODLATTE. Mr. Chairman, will the gentleman yield?
Mr. HASTINGS of Florida. I yield to the gentleman from Virginia.
Mr. GOODLATTE. Mr. Chairman, there are two objectives of this
provision in the bill. One is to discourage the bringing of frivolous,
fraudulent, and nonmeritorious claims. The other is to encourage
settlement of cases. That is correct.
Mr. HASTINGS of Florida. Is the gentleman aware that for the last
decade, 92 percent of all cases that were filed as civil cases were
ultimately settled in Federal Court?
Mr. GOODLATTE. I am aware of that fact.
Mr. HASTINGS of Florida. It is the 8 percent you are worried about?
Mr. GOODLATTE. It is the overload in the courts and the fact that a
lot of those cases that were settled were settled for nominal sums of
money where one party or the other feels the other party was not acting
reasonably. This gives a defendant in a case the opportunity to say I
am not liable, I am not going to offer settlement, and if I go to
court, I am entitled to bring something from somebody who brought a
suit against me, made me go to great expense, and they are not having
to pay anything because they may or may not have the case on a
contingent fee basis.
Mr. HASTINGS of Florida. How do you arrive at that objectively? I
heard you say a moment ago it was based on what the jury ultimately
decides as to whether or not there was ultimate merit. Do you not
contemplate excellent litigants being on the defense side or
plaintiff's side being more persuasive or jurors that are quirky or
judges who are stupid, or do you not contemplate any of those things?
Mr. GOODLATTE. All of those things play a role in the case, and all
of those things need to be taken into account, as they are taken into
account right now when you look at determining whether or not you make
a settlement offer in a case. The same thing is true right now. If you
know that the judge generally tends to favor the plaintiff or the judge
generally tends to favor the defendant, you are going to structure your
settlement offer differently as a result of that. If you think you have
a good jury in a case, you are going to make a good settlement offer
than otherwise.
All of those factors are true right now. What we are saying is right
now there should not be the atmosphere that says there are some
litigants in court who are approaching it from the standpoint that it
is risk free, either because they are claiming fraud or have a
frivolous suit.
Mr. HASTINGS of Florida. Mr. Chairman, reclaiming my time, do you not
think that rule XI with the sanctions enforcement has been utilized
such that lawyers are mindful of the existence of that rule and have
avoided bringing frivolous litigation to court, and are you not also
mindful that judges pick up real quickly on frivolous litigation and
that normally it is dismissed? You are talking, I believe, about the
exception to the rule.
Mr. GOODLATTE. Rule XI is on average applied in each district court
system in this country, the Western District of Virginia, for example,
where I practiced, very, very rarely, maybe once or twice or three
times on average in a year out of all the cases that are filed.
Mr. HASTINGS of Florida. Mr. Chairman, reclaiming my time, that is
not true for every district. I presided in the Southern District and
used it more than four times in a year as a presiding judge, as did
countless other judges. Maybe we had the kinds of litigants that would
come forward and we had to sanction them.
Mr. GOODLATTE. If the gentleman would yield further on that
interesting point, the testimony we heard during the hearing was that
before rule XI was amended and weakened a couple of years ago, during
the 10-year time frame before that, there were a total of 3,000 cases.
That is 300 each year for 10 years, divided into 100 different district
court systems in the Federal District Court system in the country. So
on average, it is not being used very often.
Mr. BERMAN. Mr. Chairman, will the gentleman yield?
Mr. HASTINGS of Florida. I yield to the gentleman from California.
Mr. BERMAN. Just noting in the hope that the debate on this amendment
and the amendment to the amendment are winding down, I would just like
to use the gentleman's time if I might to restate the purpose of the
Berman amendment.
The base bill and the Goodlatte amendment do not take into account
the merits of the case or the ability of either party. It does not seek
to spread the risks equally. It essentially punishes the person who has
less resources vis-a-vis the person or corporation who has greater
resources.
The McHale substitute has the benefit of actually getting at what the
proponents of this bill have been talking about, which is weeding out
the frivolous case.
So because the McHale substitute seeks to get at the frivolous
lawsuit, even though it is cast in a fashion that is different than I
would have drafted it, I think it makes a better proposal than the
Goodlatte proposal. So the Berman amendment simply says McHale in place
of Goodlatte, not McHale in addition to Goodlatte.
The CHAIRMAN. The question is on the amendment offered by the
gentleman from California [Mr. Berman] to the amendment offered by the
gentleman from Pennsylvania [Mr. McHale].
The question was taken; and the Chairman announced that the noes
appeared to have it.

recorded vote

Mr. GOODLATTE. Mr. Chairman, I demand a recorded vote.
A recorded vote was ordered.
The CHAIRMAN. Pursuant to clause 2(c) of rule XXIII, the Chair may
reduce to 5 minutes the minimum time for electronic voting on the
underlying McHale amendment, if ordered, without intervening business
or debate.
The vote was taken by electronic device, and there were--ayes 186,
noes 235, not voting 13, as follows:
[Roll No 201]

AYES--186

Ackerman
Andrews
Baesler
Baldacci
Barcia
Barrett (WI)
Bateman
Beilenson
Bentsen
Berman
Bevill
Bishop
Bonior
Borski
Boucher
Browder
Brown (CA)
Brown (FL)
Brown (OH)
Bryant (TX)
Cardin
Clay
Clayton
Clement
Clyburn
Collins (IL)
Collins (MI)
Conyers
Costello
Coyne
Cramer
DeFazio
DeLauro
Dellums
Deutsch
Diaz-Balart
Dicks
Dingell
Dixon
Doggett
Dooley
Doyle
Duncan
Durbin
Edwards
Ehrlich
Engel
English
Eshoo
Evans
Farr
Fattah
Fazio
Fields (LA)
Filner
Flake
Foglietta
Ford
Fox
Frank (MA)
Frost
Furse
Gejdenson
Gephardt
Gilman
Gonzalez
Gordon
Green
Gutierrez
Hall (OH)
Hamilton
Harman
Hastings (FL)
Hayes
Hilliard
Hinchey
Holden
Hoyer
Jackson-Lee
Jacobs
Jefferson
Johnson (SD)
Johnson, E. B.
Johnston
Kanjorski
Kaptur
Kennedy (MA)
Kennedy (RI)
Kennelly
Kildee
Kleczka
Klink
LaFalce
Lantos
Laughlin
Levin
Lewis (GA)
Lincoln
Lipinski
Lofgren
Longley
Lowey
Luther
Maloney
Manton
Markey
Martinez
Mascara
Matsui
McCarthy
McDermott
McKinney
Meehan
Meek
Menendez
Mfume
Minge
Mink
Moakley
Mollohan
Moran
Morella
Murtha
Nadler
Neal
Oberstar
Obey
Olver
Orton
Owens
Pallone
Pastor
Payne (NJ)
Peterson (FL)
Peterson (MN)
Pomeroy
Poshard
Rahall
Reed
Reynolds
Richardson
Rivers
Roemer
Rose
Roybal-Allard
Rush
Sabo
Sanders
Sawyer
Schroeder
Schumer
Scott
Serrano
Sisisky
Skaggs
Skelton
Slaughter
Spratt
Stark
Stokes
Studds
Stupak
Tanner
Thompson
Thornton
Thurman
Torres
Torricelli
Towns
Tucker
Velazquez
Vento
Visclosky
Volkmer
Ward
Waters
Watt (NC)
Waxman
Weldon (PA)
Williams
[[Page H2696]] Wilson
Wise
Woolsey
Wyden
Wynn
Yates

NOES--235

Abercrombie
Allard
Archer
Armey
Bachus
Baker (CA)
Baker (LA)
Ballenger
Barr
Barrett (NE)
Bartlett
Barton
Bass
Bereuter
Bilbray
Bilirakis
Bliley
Blute
Boehlert
Boehner
Bonilla
Bono
Brewster
Brownback
Bryant (TN)
Bunn
Burr
Burton
Buyer
Callahan
Calvert
Camp
Canady
Castle
Chabot
Chambliss
Chapman
Chenoweth
Christensen
Chrysler
Clinger
Coble
Collins (GA)
Combest
Cooley
Cox
Crane
Crapo
Cremeans
Cubin
Cunningham
Danner
Davis
de la Garza
Deal
DeLay
Dickey
Doolittle
Dornan
Dreier
Dunn
Ehlers
Emerson
Ensign
Everett
Ewing
Fawell
Fields (TX)
Flanagan
Foley
Forbes
Fowler
Franks (CT)
Franks (NJ)
Frelinghuysen
Frisa
Funderburk
Gallegly
Ganske
Gekas
Geren
Gilchrest
Gillmor
Goodlatte
Goodling
Goss
Graham
Greenwood
Gunderson
Gutknecht
Hall (TX)
Hancock
Hansen
Hastert
Hastings (WA)
Hayworth
Hefley
Heineman
Herger
Hilleary
Hobson
Hoekstra
Hoke
Horn
Hostettler
Houghton
Hunter
Hutchinson
Hyde
Inglis
Istook
Johnson (CT)
Johnson, Sam
Jones
Kasich
Kelly
Kim
King
Kingston
Klug
Knollenberg
Kolbe
LaHood
Largent
Latham
LaTourette
Lazio
Leach
Lewis (CA)
Lewis (KY)
Lightfoot
Linder
Livingston
LoBiondo
Lucas
Manzullo
Martini
McCollum
McCrery
McHale
McHugh
McInnis
McKeon
McNulty
Metcalf
Meyers
Mica
Miller (FL)
Mineta
Molinari
Montgomery
Moorhead
Myers
Myrick
Nethercutt
Neumann
Ney
Norwood
Nussle
Ortiz
Oxley
Packard
Parker
Paxon
Payne (VA)
Petri
Pickett
Pombo
Porter
Portman
Pryce
Quillen
Quinn
Radanovich
Ramstad
Regula
Riggs
Roberts
Rogers
Rohrabacher
Ros-Lehtinen
Roukema
Royce
Salmon
Sanford
Saxton
Scarborough
Schaefer
Schiff
Seastrand
Sensenbrenner
Shadegg
Shaw
Shays
Shuster
Skeen
Smith (MI)
Smith (NJ)
Smith (TX)
Smith (WA)
Solomon
Souder
Spence
Stearns
Stenholm
Stockman
Stump
Talent
Tate
Tauzin
Taylor (MS)
Taylor (NC)
Tejeda
Thomas
Thornberry
Tiahrt
Torkildsen
Traficant
Upton
Vucanovich
Waldholtz
Walker
Walsh
Wamp
Watts (OK)
Weldon (FL)
Weller
White
Whitfield
Wicker
Wolf
Young (AK)
Young (FL)
Zeliff
Zimmer

NOT VOTING--13

Becerra
Bunning
Coburn
Coleman
Condit
Gibbons
Hefner
McDade
McIntosh
Miller (CA)
Pelosi
Rangel
Roth

{time} 1943

Mrs. KENNELLY and Mr. TORRICELLI changed their vote from ``no'' to
``aye.''
Mrs. JOHNSON of Connecticut and Mr. MINETA changed their vote from
``aye'' to ``no.''
So the amendment to the amendment was rejected.
The result of vote was announced as above recorded.
{time} 1945

The CHAIRMAN. The question is on the amendment offered by the
gentleman from Pennsylvania [Mr. McHale].
The question was taken; and the Chairman announced that the noes
appeared to have it.

recorded vote

Mr. McHALE. Mr. Chairman, I demand a recorded vote.
A recorded vote was ordered.
The CHAIRMAN. This will be a 5-minute vote.
The vote was taken by electronic device, and there were--ayes 115,
noes 306, not voting 13, as follows:

[Roll No 202]

AYES--115

Andrews
Baker (CA)
Barrett (WI)
Bateman
Beilenson
Bentsen
Bevill
Bilbray
Bishop
Blute
Boucher
Brown (OH)
Chenoweth
Combest
Coyne
Cramer
Crapo
Davis
DeLay
Deutsch
Diaz-Balart
Dingell
Dooley
Doolittle
Doyle
Duncan
Engel
English
Ensign
Fazio
Foglietta
Forbes
Fowler
Fox
Frank (MA)
Franks (NJ)
Gejdenson
Gephardt
Gilchrest
Gilman
Gonzalez
Goodlatte
Gordon
Goss
Green
Greenwood
Gutknecht
Hall (OH)
Harman
Herger
Hoke
Holden
Horn
Inglis
Jefferson
Johnston
Kanjorski
Kaptur
Kelly
Klink
Kolbe
Latham
Lazio
Levin
Lincoln
Luther
Manton
Mascara
McCollum
McHale
McKinney
Meek
Meyers
Mineta
Mollohan
Montgomery
Moran
Murtha
Obey
Orton
Pallone
Parker
Peterson (FL)
Petri
Pomeroy
Porter
Rahall
Ros-Lehtinen
Rush
Sanford
Sawyer
Scarborough
Schumer
Shadegg
Sisisky
Smith (MI)
Souder
Spence
Stark
Stenholm
Studds
Taylor (MS)
Torkildsen
Torricelli
Traficant
Tucker
Upton
Visclosky
Vucanovich
Waldholtz
Weldon (FL)
Weldon (PA)
Wicker
Wise
Zimmer

NOES--306

Abercrombie
Ackerman
Allard
Archer
Armey
Bachus
Baesler
Baker (LA)
Baldacci
Ballenger
Barcia
Barr
Barrett (NE)
Bartlett
Barton
Bass
Bereuter
Berman
Bilirakis
Bliley
Boehlert
Boehner
Bonilla
Bonior
Bono
Borski
Brewster
Browder
Brown (CA)
Brown (FL)
Brownback
Bryant (TN)
Bryant (TX)
Bunn
Burr
Burton
Buyer
Callahan
Calvert
Camp
Canady
Cardin
Castle
Chabot
Chambliss
Chapman
Christensen
Chrysler
Clay
Clayton
Clement
Clinger
Clyburn
Coble
Collins (GA)
Collins (IL)
Collins (MI)
Conyers
Cooley
Costello
Cox
Crane
Cremeans
Cubin
Cunningham
Danner
de la Garza
Deal
DeFazio
DeLauro
Dellums
Dickey
Dicks
Dixon
Doggett
Dornan
Dreier
Dunn
Durbin
Edwards
Ehlers
Ehrlich
Emerson
Eshoo
Evans
Everett
Ewing
Farr
Fattah
Fawell
Fields (LA)
Fields (TX)
Filner
Flake
Flanagan
Foley
Ford
Franks (CT)
Frelinghuysen
Frisa
Frost
Funderburk
Furse
Gallegly
Ganske
Gekas
Geren
Gillmor
Goodling
Graham
Gunderson
Gutierrez
Hall (TX)
Hamilton
Hancock
Hansen
Hastert
Hastings (FL)
Hastings (WA)
Hayes
Hayworth
Hefley
Heineman
Hilleary
Hilliard
Hinchey
Hobson
Hoekstra
Hostettler
Houghton
Hoyer
Hunter
Hutchinson
Hyde
Istook
Jackson-Lee
Jacobs
Johnson (CT)
Johnson (SD)
Johnson, E. B.
Johnson, Sam
Jones
Kasich
Kennedy (MA)
Kennedy (RI)
Kennelly
Kildee
Kim
King
Kingston
Kleczka
Klug
Knollenberg
LaFalce
LaHood
Lantos
Largent
LaTourette
Laughlin
Leach
Lewis (CA)
Lewis (GA)
Lewis (KY)
Lightfoot
Linder
Lipinski
Livingston
LoBiondo
Lofgren
Longley
Lowey
Lucas
Maloney
Manzullo
Markey
Martinez
Martini
Matsui
McCarthy
McCrery
McDermott
McHugh
McInnis
McKeon
McNulty
Meehan
Menendez
Metcalf
Mfume
Mica
Miller (FL)
Minge
Mink
Moakley
Molinari
Moorhead
Morella
Myers
Myrick
Nadler
Neal
Nethercutt
Neumann
Ney
Norwood
Nussle
Oberstar
Olver
Ortiz
Owens
Oxley
Packard
Pastor
Paxon
Payne (NJ)
Payne (VA)
Peterson (MN)
Pickett
Pombo
Portman
Poshard
Pryce
Quillen
Quinn
Radanovich
Ramstad
Reed
Regula
Reynolds
Richardson
Riggs
Rivers
Roberts
Roemer
Rogers
Rohrabacher
Rose
Roukema
Roybal-Allard
Royce
Sabo
Salmon
Sanders
Saxton
Schaefer
Schiff
Schroeder
Scott
Seastrand
Sensenbrenner
Serrano
Shaw
Shays
Shuster
Skaggs
Skeen
Skelton
Slaughter
Smith (NJ)
Smith (TX)
Smith (WA)
Solomon
Spratt
Stearns
Stockman
Stokes
Stump
Stupak
Talent
Tanner
Tate
Tauzin
Taylor (NC)
Tejeda
Thomas
Thompson
Thornberry
Thornton
Thurman
Tiahrt
Torres
Towns
Velazquez
Vento
Volkmer
Walker
Walsh
Wamp
Ward
Waters
Watt (NC)
Watts (OK)
Waxman
Weller
White
Whitfield
Williams
Wilson
Wolf
Woolsey
Wyden
Wynn
Yates
Young (AK)
Young (FL)
Zeliff

NOT VOTING--13

Becerra
Bunning
Coburn
Coleman
Condit
Gibbons
Hefner
McDade
McIntosh
Miller (CA)
Pelosi
Rangel
Roth

{time} 1954

The CHAIRMAN and Ms. EDDIE BERNICE JOHNSON of Texas changed their
vote from ``aye'' to ``no.''
Messrs. FAZIO, SHADEGG, GUTKNECHT, FOX of Pennsylvania, and HERGER
changed their vote from ``no'' to ``aye.''
So the amendment was rejected.
[[Page H2697]] The result of the vote was announced as above
recorded.
Mr. CARDIN. Mr. Chairman, I move to strike the last word.
Mr. Chairman, I wonder whether the subcommittee chairman would
respond to a colloquy.
Mr. MOORHEAD. Mr. Chairman, will the gentleman yield?
Mr. CARDIN. I yield to the gentleman from California.
Mr. MOORHEAD. I will be glad to engage in a colloquy with the
gentleman, Mr. Chairman.
Mr. CARDIN. Mr. Chairman, I am concerned that attorneys representing
the Federal Government or any of its entities or instrumentalities in
Federal courts not be held to a different standard under rule XI(c)
than other attorneys.
Is it the intention of the subcommittee chairman that the sanctions
in rule XI(c) for filing frivolous claims be applied with equal force?
Mr. MOORHEAD. Mr. Chairman, if the gentleman will continue to yield,
I share the concern of the gentleman from Maryland. It is our intention
that rule XI(c) be applied equally to all litigants, and that the
Federal judges exercise no special restraint when dealing with the
Federal Government.
Mr. CARDIN. I thank the subcommittee chairman, Mr. Chairman.

amendment offered by mr. hoke

Mr. HOKE. Mr. Chairman, I offer an amendment.
The Chairman. The Clerk will designate the amendment.
The text of the amendment is as follows:

Amendment offered by Mr. Hoke: Page 6, after line 24 (after
section 4) insert the following:

SEC. 5. CONTINGENT FEES OF ATTORNEYS.

(a) In General.--Part III of title 28, United States Code,
is amended by adding at the end the following new chapter:

``CHAPTER 80--CONTINGENT FEES OF ATTORNEYS
``1051. Limitations on contingent fees.
``1052. Definition of qualifying settlement offer.
``Sec. 1051. Limitations on contingent fees

``(a) Effect of Qualifying Settlement Offer.--In any
Federal civil action (except an action for the protection of
civil rights, including the right to vote) in which a
monetary recovery is sought, the compensation to the attorney
representing a plaintiff--
``(1) shall, if a qualifying settlement offer is made to
and accepted by that plaintiff not exceed the lesser of--
``(A) the sum of--
``(i) a reasonable hourly rate, previously agreed upon by
the attorney and the plaintiff, for legal work actually
performed; and
``(ii) actual expenses of the attorney in the action; or
``(B) 10 percent of the amount of the accepted qualifying
settlement offer; and
``(2) shall, if no qualifying settlement offer is accepted
by that plaintiff, not exceed the sum of--
``(A) that portion not greater than 33 percent, agreed upon
by the attorney and the plaintiff before trial, of the amount
by which the final recovery in the action exceeds the amount
of the final qualifying settlement offer;
``(B) a reasonable hourly rate, previously agreed upon by
the attorney and the plaintiff, for legal work actually
performed before the final qualifying settlement offer is
made; and
``(C) actual expenses of the attorney in the action.

``Sec. 1052. Definition of qualifying settlement offer

``For the purposes of this chapter a qualifying settlement
offer is an offer by all defendants--
``(1) to settle all claims against the defendants in the
pending action; and
``(2) made not later than 60 days after the date of initial
contact in writing between the attorneys for the parties
notifying the defendant of the claim against the
defendant.''.
(b) Clerical Amendment.--The table of chapters for part III
of title 28, United States Code, is amended by adding at the
end the following new item:

``80. Contingent Fees of Attorneys..........................1051''.....

Redesignate succeeding sections accordingly.

Mr. CONYERS. Mr. Chairman, I reserve a point of order on the
amendment.
Mr. HOKE. Mr. Chairman, what this piece of legislation does with this
amendment to H.R. 988 is essentially to codify in Federal law what is
already the legal code of just about every State bar association in all
of the United States.
Here is the problem. What it does essentially is it says there will
not be a contingent fee allowed when there is no contingency. Over the
last several decades it has become increasingly easier to successfully
prosecute a tort claim; that is, to seek and receive compensation for
injury or damages to one's property.
During that same period the risks of an attorney representing a
client under a contingent fee agreement have likewise decreased, and
the attorney's compensation has increased dramatically. The purpose of
this legislation is to ensure that contingent fees are earned only when
there is a real contingency; that there be the potential of a large
reward only when there is a proportionate risk.
A number of other good results will flow from this legislation.
First, where there is no question of liability, which, as I have said,
is in most of the cases where you have personal injury lawsuits, the
injured consumer will end up with substantially more of the
compensation, not the attorney. It is very pro-consumer.
{time} 2000

Second, because this amendment strongly encourages realistic early
offers from defendants, injured parties would be compensated much
quicker.
Third, defendants also will save, again because this proposal cuts
down substantial and protracted lengthy disputes.
Finally, the proposal reduces frivolous lawsuits because it modifies
some of the hit-the-lottery type temptations that exist for plaintiff's
lawyers today, and it does all of this without in any way restricting
access to the courts for anyone.
Here is how it works. A plaintiff seeking damages in a tort case
would notify each defendant of the claim. The defendant would then have
up to 60 days to make a settlement offer. If this early offer is
accepted, the plaintiff's lawyer, having done whatever work was
involved, would be limited to his or her hourly fees. If on the other
hand the early offer was rejected, the plaintiff's lawyer could collect
a percentage contingent fee but only to the extent that any eventual
recovery exceeds the rejected offer.
The basic idea is to induce defendants to make realistic early
settlement offers with the assurance that the plaintiff knows he will
get most of the money in all of those cases where the defendant
eventually expects to be held responsible and go give plaintiffs and
their lawyers incentives to accept these early offers unless they are
convinced they can win substantially higher amounts through litigation.
The net result is to increase plaintiffs' net recoveries while
slashing both sides' legal fees.
The contingent fee agreement has a long and somewhat tortured place
in American legal history. Many lawyers and legal scholars have been
troubled by it. Their discomfort mainly centers around the tension that
exists between the clear benefit of contingent fees which allows
greater access to the courts for low- and middle-income individuals on
the one hand and the obvious potential for exploitation and abuse of
unsophisticated clients in cases where there is no question of
liability.
Bar associations and the courts have struggled to ensure fairness in
contingent fee systems by either setting caps or sliding scales as has
been done in States such as Florida, Illinois, New Jersey, California,
and New York, or by purporting to flatly bar the use of contingent fees
in certain classes of cases where the risks of client nonrecovery are
negligible.
For example, the Virginia State Bar Association in a 1992 ethics
opinion barred contingent fees in claims against Virginia's form of
nonfault or no-fault automobile insurance contracts, saying one purpose
of a contingent fee arrangement is to encourage a lawyer to accept a
case which carries inherent risks of nonpayment of legal fees.
Conversely, matters which carry no such risk to the lawyer are not
usually matters in which a contingent fee arrangement is appropriate.
Or as was stated in a typical State court decision, where the risk of
uncertainty of recovery is low, it would be the rare case where the
attorney could properly resort to a contingent fee.
Unfortunately, these ethical pronouncements notwithstanding, the fact
is that contingent fee arrangements are practically the exclusive
method of
[[Page H2698]] compensating lawyers in personal injury cases, which is
why this amendment is such an attractive solution. It is based on a
proposal coauthored by Michael Horowitz of the Hudson Institute; Lester
Brickman, a law professor at Cardozo School of Law; and Jeffrey
O'Connell, professor of law at the University of Virginia. It has the
enthusiastic support of an extraordinary and exceptional group of
lawyers and legal scholars, including Derek Bok, former dean of Harvard
Law School; Norman Dorsen, the former president of the American Civil
Liberties Union; former Federal judge Robert Bork; Bob Pitofsky, soon-
to-be Chairman of the Federal Trade Commission; and former Attorney
General under President Bush, William Barr.

The fact is that there is a massive gap between legal ethical rules
and legal ethical reality. What this amendment does is find a way to
begin to close that gap.

amendment offered by mr. conyers to the amendment offered by mr. hoke.

Mr. CONYERS. Mr. Chairman, I offer a perfecting amendment to the
amendment.
The CHAIRMAN. Does the gentleman insist upon his point of order?
Mr. CONYERS. No, I do not. I withdraw the point of order; Mr.
Chairman.
The CHAIRMAN. The gentleman withdraws his point of order. The Clerk
will report the amendment.
The Clerk read as follows:

Amendment offered by Mr. Conyers to the amendment offered
by Mr. Hoke:
Page 1, line 8, strike ``plaintiff'' and insert ``party''.
Page 1, line 10, strike ``that'' and insert ``a''.
Page 2, lines 3, 13, and 17, strike ``plaintiff'' and
insert ``party''.

Mr. CONYERS (during the reading). Mr. Chairman, I ask unanimous
consent that the amendment to the amendment be considered as read and
printed in the Record.
The CHAIRMAN. Is there objection to the request of the gentleman from
Michigan?
There was no objection.
Mr. CONYERS. Mr. Chairman, the gentleman from Ohio's amendment
presents a number of important and potentially troubling issues. Most
significant, it avoids even the semblance of evenhandedness by only
limiting the fees plaintiff's attorneys could receive. What about the
defendant counsel's fees? What about making this apply to plaintiff's
attorneys as well as defense attorneys?
The amendment creates a new set of controls on lawyers. It discards
our Nation's long-cherished notion of freedom of contract, and instead
imposes a set of Government-controlled fee schedules. I think this is
100 percent at odds with the free market beliefs of many of my friends
on the other side of the aisle.
The gentleman from Ohio's amendment would also create a potentially
significant conflict of interest before the attorney and his client. It
would also discourage settlements, because attorneys could not receive
the fee that he or she had bargained for if the case settles.
Perhaps the most serious problem is that the Hoke amendment would
limit a plaintiff's right to pay his attorney while imposing no similar
limitation on the defendant's right to pay his attorney. As a result,
this perfecting amendment would specify that defense counsel are
subject to the same limitations as are imposed on plaintiff's counsel.
My perfecting amendment would specify that defense counsel are subject
to the same limitations as are the plaintiff's counsel.
Would the gentleman consider accepting the amendment?
Mr. HOKE. Mr. Chairman, will the gentleman yield?
Mr. CONYERS. I yield to the gentleman from Ohio.
Mr. HOKE. Basically what you are saying is that it would apply when a
defense counsel is contracting with his or her client pursuant to a
contingent fee arrangement; is that correct?
Mr. CONYERS. Well, there are contingent fees, but there are other
ways that a defense counsel can be reimbursed as the gentleman knows.
For example, when a case settles, there can be a bonus or some kind of
contractual stipulation for increased remuneration.
Mr. HOKE. My amendment specifically deals with cases of early offers
of settlement in contingent fee cases. To the extent that defense
counsels have entered into contingent fee arrangements with their
clients, I cannot see that it would be a problem. But I think that the
number of cases where that would apply would be extraordinarily rare.
Perhaps you are contemplating something else.
Mr. CONYERS. May I respond to my colleague on the Committee on the
Judiciary by saying that there are relatively rare instances where a
defense counsel is paid on a contingency basis except that the way that
they are paid is contingent upon an outcome as well. So in the larger
sense, I want to just make sure that we have everybody wearing the same
restriction, to the extent that that is possible.
By the way, I want to commend the gentleman, I understand that civil
rights litigation is excluded from this provision. I think that is a
very thoughtful provision. I would hope that the gentleman would accept
this perfecting amendment.
Mr. ZIMMER. Mr. Chairman, will the gentleman yield?
Mr. CONYERS. I yield to the gentleman from New Jersey.
Mr. ZIMMER. This amendment assumes that the plaintiff gets the
recovery and the plaintiff's attorney gets a piece of the action. Your
amendment to the amendment would anticipate a situation where the
defendant in fact would have a recovery? Or are you going to measure
the defendant's lawyer's fee in terms of the recovery received by the
plaintiff?
Mr. CONYERS. No, I did not mean to complicate the relationship of the
defendant with his client. His recovery would be in a sense, even if it
is hourly, which is frequently the case for defense counsel, it would
be contingent on the number of hours that he worked. It would be
contingent on what part of the trial the case was settled in.
All I was doing was just letting what fits the goose fit the gander
as well.
Mr. HOKE. If the gentleman would yield, I am assuming that this also
will perfect the amendment in such a way that you will be wanting to
give it your unqualified support and in that spirit, I certainly accept
the gentleman's perfecting amendment.
Mr. CONYERS. Yes, I would be delighted to support this amendment. I
thank the gentleman for accepting it.
The CHAIRMAN. Is there further discussion on the amendment offered by
the gentleman from Michigan [Mr. Conyers]?

parliamentary inquiry

Mr. BRYANT of Texas. Mr. Chairman, I have a parliamentary inquiry.
The CHAIRMAN. The gentleman will state his parliamentary inquiry.
Mr. BRYANT of Texas. Mr. Chairman, is it the case that the Conyers
amendment to the Hoke amendment has already been accepted, or is that
not the case?
The CHAIRMAN. No, it still has to be voted upon.
Is there further discussion on the Conyers amendment?
Mr. MOORHEAD. Mr. Chairman, I rise in opposition to the Conyers
amendment.
I believe that the amendment that is being offered is making a bad
amendment worse. I do not see how you can possibly limit the amount of
money that can be paid to a defendant's attorney in a case. We are
getting into price controls for counsel. H.R. 988 does not deal with
the capping of lawyer's fees, it deals with who pays attorney's fees,
it deals with the quality of scientific testimony that can be
introduced during a trial, and it deals with a lawyer's misconduct in
the filing of frivolous claims.
Section 3 of H.R. 988 would make expert testimony inadmissible if the
witness is entitled to receive any compensation contingent on the
outcome of the case. The reason for this is that an expert witness who
received a contingency fee is thus less likely to furnish reliable
testimony than one who receives a flat or hourly fee since he or she
has a vested interest in the outcome of the litigation.
All of this was in the Contract With America. A cap on lawyer fees
was not a part of that contract. The Contract as we have heard from the
debate so far is having a difficult time at least on the other side of
the aisle traveling through Congress as it is, and to add this very
controversial baggage would
[[Page H2699]] make it almost impossible to get to final passage.
Much more work needs to be done on the original amendment before this
committee recommends it to the House. Certainly I do not recommend the
perfecting amendment that has been offered by the gentleman from
Michigan [Mr. Conyers].
The CHAIRMAN. The question is on the amendment offered by the
gentleman from Michigan [Mr. Conyers] to the amendment offered by the
gentleman from Ohio [Mr. Hoke].
The amendment to the amendment was rejected.
Mr. BRYANT of Texas. Mr. Chairman, I rise in opposition to the Hoke
amendment.
Mr. Chairman, the Hoke amendment to some extent places really in, I
think, very stark relief what we are doing with this bill and with the
bills that are to follow.
First, we are in the process of rewriting the rules in such a way
that no no plaintiff can afford to bring a case because under the bill
pending before the House at the present time, the result would be that
they would lose their life savings, they would lose everything they had
ever had, ever saved, ever earned for them or their children if
somebody on the jury did not like the color of their skin or the way
they parted their hair.

{time} 2015

So they are making it impossible for anyone to bring the case.
The subsequent bills that are going to come up behind this one are
going to rewrite the rules so even if you bring it, you have no hope of
winning the case because these bills are going to rewrite all of the
rules in such a way that the middle-class person who comes forward with
it cannot have any chance whatsoever of winning the case, because all
of the standards are going to be rewritten.
But the Hoke amendment now goes one step further. It says you no
longer can even really hire a lawyer because now you are going to be
saddled with a new, untested, untried and unstudied system of
compensating a lawyer. Now when a middle-class person has to hire a
lawyer for a case and he has no money, he cannot contract to pay a huge
hourly fee, he has to sign a contingency fee contract, and the harder
the case is to win, the more likely the victory, obviously the higher
the contingency fee will be. That is all that he has to bargain with.
The gentleman from Ohio [Mr. Hoke] removes the ability of the
plaintiff to be flexible in negotiating with his lawyer to try to
induce the lawyer to take his case. I submit that the last thing we
need to do is either under the Contract With America or under our tried
and true principles of capitalism and free marketing rights in this
country or under our hoped for priority of letting average people get
into the courthouse represented by a fine lawyer, that we should not be
voting for the Hoke amendment today. I urge Members to vote no and to
turn away an effort to interfere with the right of people to contract a
person they would like to have come to work for them to pursue a case.
Mr. ARMEY. Mr. Chairman, I move to strike the requisite number of
words.
Mr. Chairman, I rise in support of the Hoke contingency fee reform
amendment to H.R. 988, the Attorney Accountability Act.
This amendment goes a long way toward getting to the root of our
litigation crisis. Thirty-one percent of all Americans regard lawyers
as less honest than the average citizen. Among those who have actually
used a lawyer, less than half believe they were charged a reasonable
fee.
Much of this sentiment is attributable to the contingency fee
arrangement. Plaintiffs' lawyers working on contingent fees often
receive a large amount of money for very little work when the defendant
offers to settle immediately for an ample sum.
While contingency fee arrangements were originally designed for cases
where there was not a clear indication of fault, they are now
practically the exclusive method of compensating attorneys in personal
injury cases: As witness the attorneys' ads on your late night
television shows.
Let me give one example of this. In 1989, a delivery truck smashed
into a school bus in my own State of Texas 21 children. There was never
any question of liability. The only question was how much the families
of the victims would receive. After a few months of negotiations, the
families settled for about $122 million. For a few hours' work, a
handful of lawyers carved up a $40 million-plus fee, about a $25,000
hourly rate.
Mr. Chairman, that is why the Hoke amendment is so important. It
means that in those cases in which a defendant expects to be held
liable and to pay, the plaintiff, not the plaintiff's lawyer, will
receive much more of the award.
This amendment merely puts into Federal law that which is already
into the ethical rules, but universally ignored by all of the States.
I strongly urge my colleagues to support this amendment.
Mr. ZIMMER. Mr. Chairman, will the gentleman yield?
Mr. ARMEY. I yield to the gentleman from New Jersey.
Mr. ZIMMER. Mr. Chairman, I thank the gentleman for yielding and for
creating this A to Z statement.
Mr. Chairman, I rise in support of the Hoke contingency fee reform
amendment to H.R. 988. I believe that whether or not Members agree with
the concept of loser pays, or whether or not they agree with a monetary
cap on damages, this is an elegant way to deal with an important
problem in the law. It encourages both plaintiffs and defendants to
settle disputes quickly, and it eliminates the awarding of outrageously
inflated fees where they are not earned, that is, when there is no
dispute about liability.
But it does so in a way that places no restrictions on access to the
courts. Indigent, low-income and middle-income individuals will still
have unlimited access to the courts through a contingency fee
arrangement, and they will only pay their lawyer's hourly rate when the
case settles quickly. Thus there is plenty of incentive to settle early
for both plaintiffs and defendants.
Under this amendment, everyone wins, except maybe the lawyers, and
frankly the lawyers win too because this amendment goes a long way to
restoring fairness to the way the contingencies are handled, and that
will go a long way to restoring the public's confidence in lawyers and
the courts, the lack of which my colleague from Texas has referred to.
That is probably why so many highly regarded lawyers and judges and
law professors and legal scholars have lined up behind this reform.
From Derek Bok, former president of Harvard University and dean of
Harvard Law School to Judge Robert Bork one of our country's most
distinguished legal scholars; from William Barr, Attorney General in
the Bush administration, to Robert Pitofsky, soon to be chairman of the
Federal Trade Commission under the Clinton administration. They all
know that confidence in our legal system, and ultimately that means
confidence in lawyers, is essential to our form of government. And they
have all written in support of the idea that lawyers have an ethical
obligation to solicit early offers and not charge contingent fees
against such offers.
In fact, what the Hoke amendment really does is put into Federal law
that which is already in the ethical rules of all of the States but is
universally ignored.
I strongly urge support of this amendment.
Mr. ARMEY. I thank the gentleman.
Mr. Chairman, I would like to make a final observation before I
surrender my time.
Mr. Chairman, I am not a lawyer, but I profoundly believe that the
practice of law is an honorable profession and that the vast majority
of the people who practice law in America are honorable people.
However, it is the excesses so publicly displayed, so crassly
displayed of the contingency fee plaintiff lawyers that has given the
law profession such a terrible reputation. And I support this amendment
on behalf of the plaintiffs and the legal profession.

The CHAIRMAN. The time of the gentleman from Texas [Mr. Armey] has
expired.
Mr. BRYANT of Texas. Mr. Chairman, I ask unanimous consent that the
gentleman from Texas [Mr. Armey] have 2 more minutes.
[[Page H2700]] The CHAIRMAN. Is there objection to the request of the
gentleman from Texas?
Mr. ARMEY. Mr. Chairman, I object.
The CHAIRMAN. Objection is heard.
Mr. CONYERS. Mr. Chairman, I move to strike the requisite number of
words, and I rise in opposition to the amendment.
Mr. Chairman, this is the final insult upon those who may depend on
attorneys with contingency fees, who may not be able to afford an
attorney, and we are now saying that somehow we have got to regulate
the relationship between a plaintiff and his or her attorney. We are
now into wage and price controls. What we are trying to do now is
unilaterally tell plaintiffs that we are now going to have not through
the rules of procedure that control the conference, the judicial
conference, the Supreme Court where these kind of rules normally travel
and then come to the Congress for disposition, we are now ruling on the
floor how we are going to deal with these kinds of questions. And I
think that this is a very, very discouraging circumstance for
plaintiffs' attorneys to now be prescribed what they will get
regardless of what the contract between the plaintiff and his attorney
may be.
Mr. BRYANT of Texas. Mr. Chairman, will the gentleman yield?
Mr. CONYERS. I yield to the gentleman from Texas.
Mr. BRYANT of Texas. Mr. Chairman, I thank the gentleman for
yielding. I regret very much that the majority leader came down here
and read a statement and then walked off. I got him more time so that
he could yield to me so that I could examine the anecdote but he said
he would not take the time, and he walked off the floor. What he did
was a tried and true method that has been used by the proponents of
this amendment. They stand up here, and they talk about an anecdote,
and before you can ask them any questions about the anecdote they
disappear.
The fact of the matter is the gentleman was talking about a very well
known, highly publicized lawsuit in Texas in which many children lost
their lives, and fortunately, because they were poor children, had very
poor parents, using the contingency system they were able to hire the
best lawyers in the State of Texas, and they got a big settlement,
which is what was supposed to happen.
The gentleman talked about how they only worked for a few hours, and
he has no idea how many hours, the attorneys did work or how much work
they did for the fee, although he could find it out if he would to to
the records, and if he really wanted to he could go to the case file,
or have one of his assistants go to the case file, or have the tort
reform group or somebody go to the case file and find out how many
hours were really worked in this case and find out what was really
done. We will never know what the truth of that is in that anecdote,
nor do we ever seem to ever get to the bottom of any of the other
anecdotes.
The fact of the matter is that the contingency fee has been studied
and studied and studied, and the advocates of this had an adequate
opportunity to ask for hearings on this question. We had no hearings on
the question of contingency fees. And they had an adequate opportunity
to bring forth studies that will tell us something about the effect of
contingency fees, but they come up here at the last minute and say not
only are we not going to let you file a case, not only are we not going
to let you win a case, we are not even going to let you hire a lawyer.
That is the bottom line of the Hoke amendment, and I strongly urge
Members to vote against the Hoke amendment.
Mr. SCOTT. Mr. Chairman, will the gentleman yield?
Mr. CONYERS. I yield to the gentleman from Virginia.
Mr. SCOTT. Mr. Chairman, I thank the gentleman for yielding.
Mr. Chairman, I just would point out, listening to the debate one
would think that there was a requirement of plaintiffs to hire lawyers
only with a contingency fee. You can hire lawyers on an hourly fee if
you want to pay it. The plaintiff makes that choice.
The plaintiffs are not complaining about their right to use a
contingency fee or an hourly rate. Innocent defendants are not
complaining because a contingency fee means those lawyers are not going
to get paid at all. The only ones who are complaining are the
defendants who are guilty of what they are charged.
Ms. JACKSON-LEE. Mr. Chairman, will the gentleman yield?
Mr. CONYERS. I yield to the gentleman from Texas.
Ms. JACKSON-LEE. Mr. Chairman, I thank the gentleman for yielding.
Mr. Chairman, let me provide just another spin or another look-see at
this particular amendment, because I think certainly the gentleman from
Ohio [Mr. Hoke], has good intentions. But allow me to raise an issue,
if you would.
My city of Houston, and I come with deep experience serving as a
council member dealing with litigation against the city, we retained an
attorney on a contingency fee basis, saving firsthand taxes to the
citizens of Houston, and that contingency fee relationship resulted in
a multimillion-dollar settlement or result for the city of Houston and
the citizens of Houston.
I think when we label contingency fees as negative across the board,
we fail to realize the value of such resources for a myriad of
litigants, including a local government.
Mr. WYNN. Mr. Chairman, I move to strike the requisite number of
words.
Mr. Chairman, I would like to ask the sponsor a question if he would
be willing to respond.
Mr. Chairman, if there is no settlement in the first 2 months, what
occurs?
Mr. HOKE. Mr. Chairman, will the gentleman yield?
Mr. WYNN. I yield to the gentleman from Ohio.
Mr. HOKE. Mr. Chairman, the contingency fee then occurs. I wanted to
say something in regard to that.
Mr. WYNN. That is fine, Mr. Chairman. Reclaiming my time, that is the
point I wanted to make, that in one instance, according to the answer
provided by the sponsor, nothing would occur because if the offer is
rejected the attorney would simply proceed on a contingency fee basis
as is current practice.
Mr. GOODLATTE. Mr. Chairman, will the gentleman yield?
Mr. WYNN. I yield to the gentleman from Virginia.
Mr. GOODLATTE. Mr. Chairman, I thank the gentleman for yielding. It
is actually worse than he described, because what happens is the
contingent fee is limited to only the additional amount that is added
to the case when a final verdict comes in.
Mr. WYNN. Reclaiming my time, that is bad. But what he just said may
be even worse if he is in fact correct, because the attorney would just
reject a settleman offer, therefore putting into effect a contingency
fee.
I want to make a couple of other quick points. Mr. Chairman, the
point is this, the contingency fees are being portrayed as the villain
of the legal system. That is emphatically not true. The contingency
fees are a mechanism by which the average America, the person that the
Republicans love to cite, gets access to the judicial system. Without
contingency fees the fact is a lot of cases would not be brought.
I want to tell my colleagues something else. Without contingency
fees, we do not have a control on frivolous lawsuits, because
contingency fees are in fact the initial screening mechanism, and as an
attorney I can tell you that if a case comes in that is frivolous, I am
not going to take it on a contingency basis because in all probability
I will lose. So a lot of cases that would otherwise be brought are in
fact not brought because the initial attorney says this case is a bad
case.
Let me point out in the second instance this bill does not stop
contingency fees. As the gentleman from Virginia [Mr. Goodlatte], I
believe, indicated, after the 10 percent you are still able to collect
a contingency fee. So let us suggest that you are offered in a $100,000
case a $10,000 settlement. You reject the settlement offer. You then
win $100,000. You collect a contingency of $30,000.

{time} 2030

I think contingency fees are good. If my colleagues think it is bad,
certainly this amendment will not prohibit it.

[[Page H2701]]

I suggest that we reject the amendment offered by the gentleman from
Ohio [Mr. Hoke].
Mr. HYDE. Mr. Chairman, I move to strike the requisite number of
words.
(Mr. HYDE asked and was given permission to revise and extend his
remarks.)
Mr. HYDE. Mr. Chairman, I rise in opposition to the amendment offered
by the gentleman from Ohio [Mr. Hoke].
Mr. Chairman, this is the week to bash lawyers, and next week it is
the week to bash politicians, and frankly, as one of each, I feel
beleaguered.
I want to say a kind word for contingency fees.
I say to my colleagues, They are the way poor people get access to
darn good lawyers, and you don't just walk into a lawyer's office, and
he says, ``Sign the contract.'' There may be investigations. In fact,
if the lawyer is worth his salt, he'll have to hire and send out
investigators to get statements from witnesses, pictures of
intersections, hospital records, the police report. There is a lot of
work, there is a lot of expense, involved, and the lawyer does that on
the if come. Maybe he'll collect it, and maybe he won't, but he has
every incentive to work hard to maximize the settlement because his
contingency fee depends on that. But people who cannot afford an hourly
rate, people who have cases where the injury is bad but the liability
is thin, all sorts of situations arise, but you get access to good
lawyers in the contingency arrangement.
Now we get excited about how many hours were spent on this case. They
tell a great story about the bank that opened up one morning, and they
could not get the vault door open, and they called the locksmith. It
took him about 6 minutes, and he sent them a bill for about $2,000, and
the bank president said, You only spent 6 minutes.
He said, Yeah, but I went to school for 6 years to learn what to do.
Many times a lawyer spends very little time, but because this lawyer
has a great reputation in this field, the insurance company gets
sensitized to the fact that it is cheaper to settle at a fair figure
than to horse around and get clobbered later on.
So I just suggest I know the gentleman from Ohio [Mr. Hoke], who is
one of the most useful members of our committee, he has an idea here
that has some merit to it because contingency fees can be abused,
clients can be abused, judges can be abusive, all kinds of wrong things
can happen, but in the grand scheme of things a poor person can retain
a very good lawyer on a contingency fee basis, and the client will make
a good settlement; the lawyer, it is worth his while, and justice is
served.
So, Mr. Chairman, with deep regret I must oppose the amendment
offered by the gentleman from Ohio [Mr. Hoke] and say a kind word for
those good lawyers that I have encountered in my lifetime.
Mr. COX of California. Mr. Chairman, I move to strike the requisite
number of words.
Mr. Chairman, I think we can all agree that there are meritorious
arguments on both sides of this debate. But it is interesting to note,
having weighed the arguments on both sides, who agrees that the
gentleman from Ohio [Mr. Hoke] is offering a sound amendment, that Mr.
Hoke has a good idea.
I confess that I am myself a recovering lawyer. I practiced for about
10 years before I came to the Congress, and I was trained in Harvard
Law School. The president of Harvard, Derrick Bok, is in favor of this
amendment. Harvard is not a conservative place as far as I know. I had
a teacher there whose name is Petovsky. He is about to be nominated and
confirmed by the Senate to be Bill Clinton's head of the FTC, and
Professor Petovsky thinks this is a good idea.
The head of the ACLU, last time I checked a left wing organization,
thinks this is a good idea. ACLU president Norman Dorsen has endorsed
the idea behind the amendment offered by the gentleman from Ohio [Mr.
Hoke].
Now, whenever the head of ACLU and Judge Bork agree, Mr. Chairman, I
think we ought to take a look and find out why it is that they think
this is a good idea, and it turns out that this is not at all an attack
on contingency fees, which just about everybody that I just named
thinks ought to remain as part of our legal system. Rather it is an
attack, and I will be delighted to yield in just a moment, as soon as I
make my few points--rather this is an attack on the use of the
contingency fee arrangement when there is not any real contingency. It
is thought to be in, I believe, all 50 States under the bar rules a
matter of ethics that you should not try and seek to obtain a
contingency fee when they, the lawyer, know that there is really no
authentic risk, and the Hoke amendment gets to that very point in a
very useful way. He says, if somebody, 60 days after the start of the
dispute, offers to settle the case for a particular amount of money,
that that amount of money is no longer a contingency because they get
that if they settle.
Now it was said, If you reject that settlement and go on and only get
a contingency fee on the amount in excess of the settlement, that that
is somehow unfair, and I agree that is unfair, but the amendment, as
offered by the gentleman from Ohio [Mr. Hoke] does not limit the lawyer
to a contingency on what is really at risk. It also gives him, on top
of that, 100 percent of his reasonable hourly rate, which is agreed
upon objectively. In that circumstance I think we should all agree that
it is consumers who are being protected.
I say to my colleagues, ``When you go to the garage, and you ask the
mechanic if there is something wrong with your transmission, you depend
rather heavily on that garage mechanic to tell you the truth.'' That is
why, in fact, we regulate that industry for the benefit of the
consumers, so that consumers do not get ripped off because they,
frankly, do not know what is going on in the drive train under the hood
nine times out of ten. They are experts at some other part of life.
Likewise, Mr. Chairman, the lawyer is in a unique position to assess
the contingency, and the client is taking the lawyer's word for it. If
it turns out there is nothing at risk, which is clearly the case if the
other side in 60 days offered to pay that full amount of money, is it
not unfair to collect a contingency fee against it? The contingency fee
runs 30 to 40 percent, sometimes higher, if it is not limited, of the
settlement amount or of the eventual verdict. That is taking away from
the consumer the amount that the court or the jury has just awarded to
him. It is grossly unfair.
Ultimately two things are at stake here, ethics and consumer
protection. it is consumers that we are supposed to be protecting here,
and it is the ethics of the profession, in my view, in need of some
ethical regulation that this amendment would get after.
Mr. CONYERS. Mr. Chairman, will the gentleman yield?
Mr. COX of California. I yield to the gentleman from Michigan.
Mr. CONYERS. I say to the gentleman, ``Mr. Cox, this issue didn't
come up before our Committee on the Judiciary, and if there are as many
good arguments as you suggest there are, couldn't we take this back?
Chairman Hyde would be, I'm sure, willing to hold hearings on it. But
here we are regulating an incredibly important matter, normally one
that's left to the Judicial Conference, and the Supreme Court, and then
to the Congress, and here tonight late, rather late in hour, we're
going to just decide to alter this subject matter.''
Mr. Chairman, I would hope that we can send it, if we reject the
amendment, we can send it back to----
The CHAIRMAN. The time of the gentleman from California [Mr. Cox] has
expired.
Mr. GOODLATTE. Mr. Chairman, I move to strike the requisite number of
words.
Mr. Chairman, I rise in opposition to this amendment. I do so with
some reluctance because I appreciate the gentleman's efforts, but I
think that this is pure and simple price controls, and the problem with
price controls is this:
``Whenever you have them, there are all kinds of unintended
consequences that emanate from those price controls. For example, what
happens to the defendant in a case where because the insurance company
representing the defendant, let's say it's a doctor accused of medical
malpractice wants to go ahead and settle the case in the 60-
[[Page H2702]] day time period to take advantage of this early offer
mechanism, and the doctor said, `I don't want any offer made at all
because I didn't commit malpractice. I wanted to have my day in
court.'''
Mr. Chairman, I would ask the gentleman from Ohio what does that
doctor do when that insurance company sends him a letter advising him
that he is not negotiating in good faith and that, if he does not
accept the offer, he will be responsible for any additional amounts
that are recovered?
The same thing happens on the plaintiff's side. What happens when the
plaintiff turns down the settlement offer, and he wants to go on to
court, but his attorney said, ``Well, the original contingency fee will
justify the cost, but now the case is only worth an additional $25,000
above the $50,000 offered. I don't think he should go ahead.''
He says, ``I don't care. I want to go ahead with the case.''
The attorney does not want to go ahead.
What happens in the case of fraud where you have an incentive now for
people to go out and create an accident by running in front of a
vehicle, getting it in, making that early--making the demand upon the
defendant, and the insurance company has 60 days to rush in and make a
settlement.
This is going to encourage all kinds of behavior that does not make
sense. It will encourage fraud. It will encourage poor representation
of clients. It will drive a wedge between plaintiffs and their
attorneys. It will drive a wedge between defendants and their insurance
companies.
I believe that there is also a problem here in that the matter does
not require that the defendant admit liability when they make this
offer so that when the defendant makes the offer and the plaintiff
turns it down because he low-balls it, the result of the thing is that
then the plaintiff's attorney will have a limited contingent fees only
on the amount they improve the case, but the plaintiff's attorney still
has to not just improve the value of the case and the damages and get a
contingency fee on that, but also has to prove liability, and that is
where the contingency is founded. It is founded on the principle that
you take a risk. Some cases you prove liability. Some cases you won't.
Just because the defendant makes a settlement offer and does not
concede liability does not mean there is not a risk of proving
liability in the case.
Finally, the provisions of this amendment are flawed in this respect.
It says 60 days after the date of the initial contact by the plaintiff.
Well, at that point most cases have not been filed in court. The
initial demand is made before suit is filed, and we do not know whether
this was in State court or Federal court as to whether or not this
provision would even apply.
Mr. BARRETT of Wisconsin. Mr. Chairman, will the gentleman yield?
Mr. GOODLATTE. I yield to the gentleman from Wisconsin.
Mr. BARRETT of Wisconsin. I would like to follow up very quickly on
what the gentleman is saying. By the language of this amendment, Mr.
Chairman, the 60 days begins to run on the first contact between the
plaintiff's attorney and the insurance company, but the bill itself,
the amendment itself, does not kick in until there is a Federal
diversity suit. There is not going to be a Federal diversity suit until
an action is filed, so we are going to have the unusual effect of the
plaintiff's attorney making the demand, waiting 60 days. There is no
lawsuit. It does not kick in.
By its own terms, Mr. Chairman, this amendment does not work, it does
not fit together, because it will not kick in until after the
plaintiff's attorney waits the 60 days.
Mr. GOODLATTE. The gentleman is correct.
While the idea underlying this has a good purpose of attempting to
encourage settlement, it is an unfair situation to impose upon the
parties to lawsuits because of the fact that it has many unintended
consequences and, finally, because of the fact that, when an attorney
has somebody walk in the door, they do not know whether it is a good
case or not. They have to conduct a lot of investigation in these
cases, and, when they do that, they never get compensated for the cases
that do not have any merit. They are taking a risk in practicing that
type of law, and I think that we want the people to take risks. This is
counter to the purpose of the loser pays amendment in that respect, but
it is separate and apart.
I would not say it does anything to loser pays. It creates a separate
mechanism, but one that, I think, is fraught with a lot of unintended
consequences, and I would urge my colleagues to vote against it.

{time} 2045

Mr. BONO. Mr. Chairman, I move to strike the requisite number of
words.
Mr. Chairman, I stand here in support of the amendment.
Mr. Chairman, I yield to the gentleman from Ohio [Mr. Hoke].
Mr. HOKE. Mr. Chairman, I appreciate the words of my friend from
Virginia, but I have to say three things and then ask for a vote.
No. 1, this does not eliminate contingent fees. It does not restrict
access to the courts. In fact, it maintains or increases it. And it
does not in any way restrict attorneys compensation for the time that
they put in. What it does do is it merely says that lawyers will be
paid their hourly rate where there is no question of liability, where
there is an early offer on settlement between the two parties.
The CHAIRMAN. The question is on the amendment offered by the
gentleman from Ohio [Mr. Hoke].
The question was taken; and the Chairman announced that the noes
appeared to have it.

recorded vote

Mr. HOKE. Mr. Chairman, I demand a recorded vote.
A recorded vote was ordered.
The vote was taken by electronic device, and there were--ayes 71,
noes 347, not voting 16, as follows:

[Roll No 203]

AYES--71

Allard
Armey
Baker (CA)
Ballenger
Barton
Bereuter
Bilbray
Boehner
Bonilla
Bono
Brownback
Bryant (TN)
Burr
Christensen
Chrysler
Coburn
Collins (GA)
Combest
Cox
Cremeans
Cubin
DeLay
Dornan
Dunn
Flanagan
Gunderson
Gutknecht
Hancock
Hayworth
Hefley
Herger
Hoke
Horn
Inglis
Jacobs
Kelly
Kolbe
Lewis (KY)
Lightfoot
Martinez
McHugh
McInnis
McIntosh
Metcalf
Mica
Myrick
Norwood
Parker
Paxon
Petri
Pombo
Riggs
Rohrabacher
Royce
Salmon
Saxton
Scarborough
Schaefer
Shadegg
Shays
Smith (WA)
Solomon
Stenholm
Stockman
Stump
Tate
Taylor (NC)
Thornberry
Walker
Zeliff
Zimmer

NOES--347

Abercrombie
Ackerman
Andrews
Archer
Bachus
Baesler
Baker (LA)
Baldacci
Barcia
Barr
Barrett (NE)
Barrett (WI)
Bartlett
Bass
Bateman
Beilenson
Bentsen
Berman
Bevill
Bilirakis
Bishop
Bliley
Blute
Boehlert
Bonior
Borski
Boucher
Brewster
Browder
Brown (CA)
Brown (FL)
Brown (OH)
Bryant (TX)
Bunn
Burton
Buyer
Callahan
Calvert
Camp
Canady
Cardin
Castle
Chabot
Chambliss
Chenoweth
Clay
Clayton
Clement
Clinger
Clyburn
Coble
Collins (IL)
Collins (MI)
Conyers
Cooley
Costello
Coyne
Cramer
Crane
Crapo
Cunningham
Danner
Davis
de la Garza
Deal
DeFazio
DeLauro
Dellums
Deutsch
Diaz-Balart
Dickey
Dingell
Dixon
Doggett
Dooley
Doolittle
Doyle
Dreier
Duncan
Durbin
Edwards
Ehlers
Ehrlich
Emerson
Engel
English
Ensign
Eshoo
Evans
Everett
Ewing
Farr
Fattah
Fawell
Fazio
Fields (LA)
Fields (TX)
Filner
Flake
Foglietta
Foley
Forbes
Ford
Fowler
Fox
Frank (MA)
Franks (CT)
Franks (NJ)
Frelinghuysen
Frisa
Frost
Funderburk
Furse
Gallegly
Ganske
Gejdenson
Gekas
Gephardt
Geren
Gilchrest
Gillmor
Gilman
Gonzalez
Goodlatte
Goodling
Gordon
Goss
Graham
Green
Greenwood
Gutierrez
Hall (OH)
Hall (TX)
Hamilton
Harman
Hastert
Hastings (FL)
Hastings (WA)
Hayes
Heineman
Hilleary
Hilliard
Hinchey
Hobson
Hoekstra
Holden
Hostettler
Houghton
Hoyer
Hunter
Hutchinson
Hyde
Istook
Jackson-Lee
Jefferson
Johnson (CT)
Johnson (SD)
Johnson, E. B.
Johnson, Sam
Johnston
Jones
Kanjorski
Kaptur
Kasich
Kennedy (MA)
Kennedy (RI)
Kennelly
Kildee
Kim
King
Kingston
[[Page H2703]] Kleczka
Klink
Klug
Knollenberg
LaFalce
LaHood
Lantos
Largent
Latham
LaTourette
Laughlin
Lazio
Leach
Levin
Lewis (CA)
Lewis (GA)
Lincoln
Linder
Lipinski
Livingston
LoBiondo
Lofgren
Longley
Lowey
Lucas
Luther
Maloney
Manton
Manzullo
Markey
Martini
Mascara
Matsui
McCarthy
McCollum
McCrery
McDermott
McHale
McKeon
McKinney
McNulty
Meehan
Meek
Menendez
Meyers
Mfume
Miller (FL)
Mineta
Minge
Mink
Moakley
Molinari
Mollohan
Montgomery
Moorhead
Moran
Morella
Murtha
Myers
Nadler
Neal
Nethercutt
Neumann
Ney
Nussle
Oberstar
Obey
Olver
Ortiz
Orton
Owens
Oxley
Packard
Pallone
Pastor
Payne (NJ)
Payne (VA)
Peterson (FL)
Peterson (MN)
Pickett
Pomeroy
Porter
Portman
Poshard
Pryce
Quillen
Quinn
Radanovich
Rahall
Ramstad
Reed
Regula
Reynolds
Richardson
Rivers
Roberts
Roemer
Rogers
Ros-Lehtinen
Rose
Roukema
Roybal-Allard
Rush
Sabo
Sanders
Sanford
Sawyer
Schiff
Schroeder
Schumer
Scott
Seastrand
Sensenbrenner
Serrano
Shaw
Shuster
Sisisky
Skaggs
Skeen
Skelton
Slaughter
Smith (MI)
Smith (NJ)
Smith (TX)
Souder
Spence
Spratt
Stearns
Stokes
Studds
Stupak
Talent
Tanner
Tauzin
Taylor (MS)
Tejeda
Thomas
Thompson
Thornton
Thurman
Tiahrt
Torkildsen
Torres
Torricelli
Towns
Traficant
Tucker
Upton
Velazquez
Vento
Visclosky
Volkmer
Vucanovich
Waldholtz
Walsh
Wamp
Ward
Waters
Watts (OK)
Waxman
Weldon (FL)
Weldon (PA)
Weller
White
Whitfield
Wicker
Williams
Wilson
Wise
Wolf
Woolsey
Wyden
Wynn
Yates
Young (AK)
Young (FL)

NOT VOTING--16

Becerra
Bunning
Chapman
Coleman
Condit
Dicks
Gibbons
Hansen
Hefner
McDade
Miller (CA)
Pelosi
Rangel
Roth
Stark
Watt (NC)

{time} 2104

Messrs. MFUME, KASICH, and BACHUS changed their vote from ``aye'' to
``no.''
Messrs. HERGER, HORN, ROHRABACHER, and PAXON changed their vote from
``no'' to ``aye.''
So the amendment was rejected.
The result of the vote was announced as above recorded.
Mr. MOORHEAD. Mr. Chairman, I move that the Committee do now rise.
The CHAIRMAN. The question is on the motion offered by the gentleman
from California [Mr. Moorhead].
The motion was agreed to.
Accordingly, the Committee rose; and the Speaker pro tempore (Mr.
Kingston) having assumed the chair, Mr. Hobson, Chairman of the
Committee of the Whole House on the State of the Union, reported that
that Committee, having had under consideration the bill, (H.R. 988) to
reform the Federal civil justice system had come to no resolution
thereon.

____________________