[House Report 104-62]
[From the U.S. Government Publishing Office]



                                                                       
104th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                     104-62
_______________________________________________________________________


 
                  ATTORNEY ACCOUNTABILITY ACT OF 1995

_______________________________________________________________________


 March 1, 1995.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______


   Mr. Moorhead, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 988]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on the Judiciary, to whom was referred the bill 
(H.R. 988) to reform the Federal civil justice system, having 
considered the same, report favorably thereon with an amendment 
and recommend that the bill as amended do pass.
    The amendment is as follows:
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

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 made 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 attorneys' 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 attorneys' 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 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.

                          Purpose and Summary

    The bill, H.R. 988, as reported, was derived from sections 
101, Award of Attorney's Fee to prevailing party; 102, Honesty 
in Evidence; and 104, Attorney Accountability and Rule 11(c) 
sanctions against lawyers, of H.R. 10, the ``Common Sense Legal 
Reforms Act of 1995''. The purpose of H.R. 988 is to provide 
concrete steps to restore accountability, efficiency and 
fairness to our federal civil justice system. Section 2 of H.R. 
988 provides for a settlement-oriented ``loser pays'' 
attorney's fee amendment to 28 U.S.C. Sec. 1332 wherein a 
``non-prevailing'' party must pay the ``prevailing party's'' 
attorney's fees in federal civil diversity litigation where an 
offer of settlement has been made. Section 3 would limit, in 
accordance with the Supreme Court's decision in Daubert v. 
Merrell Dow Pharmaceuticals, Inc., the use of expert testimony 
and Section 4 would reinstate the pre-December 1993 Rule 11(c) 
provisions of the Federal Rules of Civil Procedure and make 
mandatory the issuance of sanctions against lawyers who file 
frivolous lawsuits or engage in abusive litigation tactics.
    The bill, as reported, will implement a more complete, fair 
and effective policy than exists at present to favor compromise 
rather than dispositive motions or trial and will consequently 
(1) lessen the incentive to litigate and consequently the 
caseload burdens faced by the federal judiciary; (2) assure 
that only meritorious and justiciable cases supported by 
scientific facts be adjudicated in federal courts, and (3) 
prevent the filing of frivolous lawsuits by attorneys. Fair and 
accountable litigation can thereby result, carried out by 
legitimate claims, accountable counsel and valid testimony.

                Background and Need for the Legislation

    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 three years 
old in Federal District Courts was 6.6%.\1\ Five years later 
that figure grew to 10.4%.\2\
    \1\ State-Federal Judicial Observer Number 6, p. 1, July, 1994.
    \2\ Id.
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    In addition to excessive costs and long delays, the 
American legal system has been hurt by an over-reliance on 
litigation. In 1989, some 18 million civil lawsuits were filed 
in state and federal courts. That's one lawsuit for every ten 
adults in America.\3\ 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.'' \4\ 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.'' \5\ 
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.
    \3\ See A Report from the President's Council on Competitiveness 
``Agenda for Civil Justice Reform in America'' Introduction, August, 
1991.
    \4\ Hearing before the Subcommittee on Intellectual Property and 
Judicial Administration of the Committee on the Judiciary, House of 
Representatives, p. 15, May 26, 1994.
    \5\ Id.
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                         Section 2. loser pays

    Addressing the above concerns, Section 2 would amend 28 
U.S.C. Sec. 1332, the provision granting diversity jurisdiction 
in U.S. district courts, by applying a loser pays provision 
that would be triggered by an offer of settlement. The intent 
of this procedure is to encourage and facilitate the early 
settlement of lawsuits and reduce protracted litigation. The 
offer of settlement procedure in Section 2 would allow a party 
to make by filing with the court in writing and serving on an 
adverse party, at any time up to 10 days before trial, a formal 
offer to settle any or all claims in a suit for a specified 
amount.\6\ If the offer of settlement is accepted, the claim or 
claims are resolved pursuant to the terms of the agreement.\7\ 
If the offer is rejected and the offeree does not obtain a 
judgment, order, or verdict more favorable than that offered on 
the applicable claims, the offeree is liable for the costs and 
attorney's fees of the offeror for those claims from the date 
the last offer was made by the adverse party.
    \6\ This section does not apply to claims seeking equitable relief. 
A specified amount may be $0.00, however, for defendants who feel no 
valid claim has been brought.
    \7\ The Act merely requires that a party file an amount of offer 
with the court in order to determine with certainty the last 
sequentially made offer by a party. Any terms or conditions of the 
offer such as confidentiality agreements, stipulations to dismiss, 
etc., need not be filed with the court and may be written, oral or 
collateral to any agreement on the amount dictated in the filed offer. 
Motions to enforce settlement agreements shall be handled in the same 
manner currently employed by district courts on a case by case basis.
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    For example, suppose a plaintiff brings a complaint for 
$100,000 on January 1. On March 1, the defendant files an offer 
of settlement for $40,000. The Plaintiff rejects the offer but 
files its own offer of $60,000 on June 1. On October 1, a 
judgment or verdict is issued for $39,000; the plaintiff, while 
victorious on the complaint, must pay the defendant's costs and 
attorney's fees from March 1 to the date of entry of judgment 
because the plaintiff should have taken the offer of $40,000 
made on March 1. On the other hand, if the plaintiff is awarded 
a judgment or verdict of $61,000, the defendant must pay the 
plaintiff's costs and attorney's fees from June 1 to the date 
of entry of judgment since the defendant should have accepted 
the settlement offer made on June 1. If the verdict, judgment 
or order is for $50,000, or anywhere in-between the last offer 
and counter-offer of settlement existing 10 days or more before 
trial, the traditional American Rule applies and each side 
bears its own costs and fees for the entire suit.\8\ This will 
effectively maintain the ``status quo'' for ``close call'' 
cases where all negotiating parties acted reasonably in their 
offers while encouraging close settlements.
    \8\ This example is simplified to pertain to an entire suit while 
the amendment is to apply to any claim or claims in a suit and their 
separate dispositions, leaving parties free to settle out individual 
claims before dispositive rulings on those claims. The 10 day rule 
pertains only to trials, however, and not to dispositive motion 
rulings.
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    The offer of settlement procedure proposed by this Act is 
an amendment to 28 U.S.C. Sec. 1332, the general diversity 
statute. Under 28 U.S.C. Sec. 1332, a suit arising under state 
law may currently be brought in federal court if there is 
complete diversity of state citizenship between the plaintiff 
and the defendant, and the amount in controversy exceeds 
$50,000. Traditionally, such cases involve tort and contract 
suits. This Section would apply the offer of settlement 
procedure to all cases brought under a federal court's 
diversity jurisdiction, including those removed by a defendant 
to federal court pursuant to 28 U.S.C. Sec. 1441 based on the 
fact that the court would otherwise have subject matter 
jurisdiction pursuant to 28 U.S.C. Sec. 1332.
    Under Section 2, as reported, a party making an offer may 
include in such offer a motion to dismiss all claims or to 
allow judgment to be entered according to the terms of the 
offer. The Committee intends for this approach to accommodate a 
defendant who believes that there is no liability in the 
lawsuit and therefore should not be forced to settle the case.
    This section requires that an offer, along with proof of 
service, be filed with the clerk of the court.\9\ This 
requirement should avoid subsequent disagreements concerning 
the amount, timeliness and manner of service of the offer. 
However, evidence of an offer is not admissible except in 
proceedings to enforce a settlement, or to determine costs and 
expenses under this provision. This section is designed to 
encourage the making of offers under the Act by assuring that 
the offeror will be protected against prejudicial use of an 
offer. This provision is consistent with Federal Rule of 
Evidence 408, which provides that offers of compromise are not 
admissible to prove liability for or invalidity of a claim or 
its amount.
    \9\ Oral offers to settle, and written offers not filed with the 
Court, except as collateral terms to an offer properly filed under 
Section 2, do not, therefore, trigger the loser pays rule.
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    Under the Act, the fact that an offer is made but not 
accepted does not preclude subsequent offers. This approach is 
designed to encourage parties to continue to negotiate a 
settlement prior to and during trial.
    If all offers made by a party with respect to a claim or 
claims are rejected and the final judgement, order or verdict 
issued isn't more favorable to the offeree with respect to the 
claim or claims than the last offer made by the adverse party, 
the offeror may file with the court, within 10 days after the 
final judgment, order or verdict,\10\ a petition for payment of 
costs and expenses, including attorney's fees incurred from the 
date the last offer was made by the adverse party. If the court 
finds that the final judgment, verdict or order obtained isn't 
more favorable to the offeree than the last offer, it is 
mandatory that the court order the offeree to pay the offeror's 
costs and expenses, and attorney's fees incurred with respect 
to the claim or claims from the date the last offer by the 
adverse party was made.
    \10\ It is intended that a petition cannot be made until appeals 
are exhausted and an order, judgment or verdict is final and binding on 
the parties to the controversy.
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    There are two exceptions to the mandatory requirement that 
a court award costs and attorney's fees under the terms of 
Section 2. The first exception would allow the court to exempt 
certain individual cases based upon express findings that the 
case presents novel and important questions of law or fact and 
that it substantially affects nonparties. It is the Committee's 
intent that this provision limit the discretion granted to the 
court and require it to carefully scrutinize each individual 
case or count consistent with the aforementioned criteria and 
not permit this exception to defeat the Rule.
    The second instance where a court would not be required to 
award costs and attorney's fees or may reduce such costs or 
fees under this Section would be when it finds that it would be 
manifestly unjust to do so. It is the intent of the Committee 
that this standard be interpreted to be an exceptionally high 
one, extending well beyond the relative wealth of the parties. 
Rather, on a case by case basis, a judge should only reduce an 
award as provided under this Section where it would be grossly 
inequitable to impose it.
    Section 2 defines ``reasonable attorney's fee'' to be one 
that is ``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''.\11\ This should serve to clarify the 
fee standard to be used in applying Section 2.
    \11\ This is the ``lodestar'' calculation used routinely by federal 
courts and applied in a great number of fee-shifting statutes.
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    Section 2 would not necessarily require an offeree to pay 
the entire amount of the offeror's attorney's fees. Rather, it 
would limit the offeree's liability for the offeror's 
attorney's fees to an amount not exceeding the amount the 
offeree paid its own attorney. If the offeree hired its 
attorney on a contingency basis (an agreement in which a 
plaintiff does not pay unless it prevails), and, because it 
lost, paid its attorney nothing, then it would be liable for 
the offeror's attorney's fees up to the amount ``that would 
have been incurred by the offeree for an attorney's 
noncontingent fee * * *.'' It is the intent of the Committee 
that this encourage accurate reporting and maintenance of 
hourly work and costs by attorneys hired under a contingency 
agreement, since a fee petition containing hours worked must be 
presented to the court within 10 days of entry of a final 
judgment, order or verdict on a claim in order to collect such 
costs and attorney's fees.

                     section 3. honesty in evidence

    Section 3 would amend Rule 702 of the Federal Rules of 
Evidence, which allows expert witnesses to testify as to their 
expert opinions with respect to ``scientific, technical, or 
other specialized knowledge.'' Such evidence may have an 
enormous impact on a jury's decision because of its nature. 
Accordingly, assuring that such evidence is valid and reliable 
is of utmost importance. With that in mind, the amendment would 
make a scientific opinion inadmissible unless it is:
          (1) scientifically valid and reliable;
          (2) has a valid scientific connection to the fact it 
        is offered to prove; and
          (3) sufficiently reliable so that the probative value 
        of such evidence outweighs the dangers specified in 
        [Federal] rule [of Evidence] 403.
    The ``dangers'' specified in Rule 403 are ``unfair 
prejudice, confusion of the issues, or misleading the jury.''
    Section 3 would further make expert testimony inadmissible 
if the ``witness is entitled to receive any compensation 
contingent on the legal disposition of any claim with respect 
to which such testimony is offered.''
    The standard for admissibility of scientific expert 
testimony was most recently addressed by the Supreme Court in 
Daubert v. Merrell Dow Pharmaceuticals, Inc., 113 S.Ct. 2786 
(1993), on remand, No. 90-55397 (9th Cir., Jan. 4, 1995, 
Kozinski, J.). In that case, the Supreme Court held that Rule 
702 does not require that scientific evidence have ``general 
acceptance'' in the relevant scientific community to be 
admissible.\12\ Rather, the Court held that the Rule requires 
that expert testimony rest on a ``reliable foundation'' (i.e., 
the methodology from which the evidence is derived must be 
based on ``scientific knowledge'') and be ``relevant to the 
task at hand'' (i.e., it must assist the trier of fact and have 
a logical scientific nexus to the subject matter of the suit or 
other admitted evidence.) This test has been read to be less 
stringent than the test originally set forth, before the 
Federal Rules of Evidence were adopted, in Frye v. United 
States, 293 F. 1013 (D.C. Cir. 1923), although not always 
applied as such. Under Frye, scientific evidence was not 
admissible unless it had been generally accepted in the 
particular scientific community to which it belonged. Until the 
Supreme Court's holding in Daubert, most circuit courts 
utilized the Frye test and developed differing sets of Frye 
jurisprudence. Daubert, enhanced and enforced by Section 3, 
will serve to evaporate the Frye test and create uniformity 
among the circuits for the admission of scientific evidence in 
civil cases.
    \12\ Scientific testimony that does not have general acceptance has 
been called ``junk science.'' Under Daubert, general acceptance is one 
of four non-exhaustive factors a judge should consider in deciding 
whether to admit scientific evidence.
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    In addition, Section 3 creates a presumption of 
inadmissibility, rather than admissibility of scientific 
evidence, which can be rebutted if the criteria of Section 3(2) 
are met. This standard will thus shift the current standard and 
force attorneys to prove to the court the validity of 
scientific evidence under standards established by the Supreme 
Court in Daubert before it can be admitted.
    Section 3(2) would serve to codify and is meant to 
complement the standards established in Daubert by the Supreme 
Court and by the Ninth Circuit on remand. Section 3 uses the 
words ``scientifically valid and reliable'' instead of the 
words ``valid scientific reasoning'': used in H.R. 10 for two 
reasons: (1) the word ``reasoning'', by itself, may be 
interpreted as requiring a judge to understand completely 
scientific principles rather than proof of their reliability 
for evidentiary purposes. While Daubert utilizes the word 
reasoning, it does not stand alone, but is used in the context 
of methodology, validity and reliability; and (2) the bill 
seeks to maintain a simple definition that will be interpreted 
in conjunction with, and not as superseding the Daubert case. 
Section 3 requires that the methodology from which scientific 
evidence is derived be based on scientific knowledge and that 
it have a logical, scientific nexus to the subject matter of 
the suit or other admitted evidence. These goals of Daubert 
would thus be enforced by requiring consideration of their 
presence, among others, to rebut a presumption of admissibility 
before allowed. These considerations should include, but are 
not limited to the ``key'' questions to be posed by a judge as 
the ``gatekeeper'' of admissibility: (1) whether a scientific 
technique or scientific knowledge has been or can be tested; 
(2) whether the theory or technique has been subject to peer 
review and publication; (3) the known or potential rate of 
error in the case of a particular technique; and (4) general 
acceptance of knowledge or a technique in the relevant 
scientific community.
    Section 3(2) would amend Rule 403 of the Federal Rules of 
Evidence as it applies to scientific evidence by making 
evidence inadmissible if its prejudicial value outweighs 
(rather than substantially outweighs as currently provided in 
Rule 403) its probative value. Reading this literally, if the 
dangers of unfair prejudice, confusion of the issues, or 
misleading the jury even in substantially outweigh the 
probative value of the scientific evidence, the evidence is 
inadmissible. Thus, the standard for judging prejudice versus 
probative value existing in Rule 403 is lowered for cases 
involving scientific evidence. This change favors the 
inadmissibility of scientific evidence that is not valid and 
reliable, since such evidence is more likely to be unfair, 
confusing or misleading.
    Section 3 would also make expert testimony inadmissible if 
the ``witness is entitled to receive any compensation 
contingent on the legal disposition of any claim with respect 
to which such testimony is offered.'' The reason for this 
provision is that an expert witness who received a contingency 
fee is 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. The provision would 
exclude evidence if the witness receives any contingency fee, 
even if such fee is not a percentage of the judgment or 
settlement, but rather is a flat fee or hourly fee the payment 
of which is contingent upon the legal disposition of the claim.
    Section 3 is intended to prevent trial lawyers from taking 
advantage of the court system. If there is a consensus in the 
scientific community that a hazard or risk (usually of a 
product) is real or substantial, the trial lawyers will implore 
that consensus to support complaints for compensatory and 
punitive damages. If the consensus in the scientific community 
is that a hazard or risk is trivial or imaginary, however, the 
same lawyers should not be able to brush that fact aside and 
find ``fringe'' experts to testify otherwise. Even in cases 
where real hazards exist, trial lawyers will attempt to stretch 
claims beyond validity in order to collect punitive damages. By 
creating a presumption of inadmissibility, rebutted by the 
standards created by the Supreme Court in Daubert, along with a 
lower standard of prejudice, an amended Rule 702 will be 
effective in weeding out ``junk science'' as evidence in our 
federal courtrooms.
    These amendments to Rule 702 would apply only to civil and 
not criminal cases. They would most frequently be used in 
product liability cases. This will prevent frustration in the 
important use of scientific evidence such as blood-type 
analysis and DNA testing in criminal proceedings.

                 section 4. sanctions against attorneys

    Section 4 of the Attorney Accountability Act would amend 
Rule 11(c) of the Federal Rules of Civil Procedure relating to 
the sanctions a federal judge may impose against lawyers for 
(plaintiffs or defendants) who file frivolous lawsuits or 
engage in abusive litigation tactics. The Committee believes 
that Rule 11, in its pre-December, 1993 form, was one of the 
most effective means of curbing lawyer misconduct.
    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.''
    Concerns about frivolous claims and defenses as well as 
dilatory or abusive tactics led in 1983 to a major revision of 
Rule 11 of the Federal Rules of Civil Procedure. Key features 
of the 1983 Rule included a requirement that pleadings be 
reasonably based on facts and law; mandatory sanctions for 
frivolous pleadings; and the explicit recognition that a 
sanction may include an order to reimburse the opposing party 
for reasonable expenses incurred because of a frivolous 
pleading.
    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:
          (1) that Rule 11 did not impede development of the 
        law (95%);
          (2) the benefits of the rule outweighed any 
        additional requirement of judicial time (71.9%);
          (3) the 1983 version of Rule 11 had a positive effect 
        on litigation in the federal courts (80.9%); and
          (4) the rule should be retained in its then-current 
        form (80.4%).\13\
    \13\ Federal Judicial Center Final Report on Rule 11 to the 
Advisory Committee on Civil Rules of the Judicial Conference of the 
United States, May 1991.
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    The tables below are based on Tables in Section 2A of the 
FJC's Report and provide further details on the judges' 
responses to the 1990 Questionnaire on Rule 11--751 judges were 
surveyed.

                                Table 7

    Has Rule 11 impeded development of the law?

                             Percentage of judges answering the question
Yes.....................................................             5.0
No......................................................            95.0

                                Table 16

    Do the benefits of Rule 11 outweigh the expenditure of 
judge time?

                         Percentage of 452 judges answering the question
Yes.....................................................            71.9
No......................................................            28.1

                                Table 17

    What has been the overall effect of Rule 11 on litigation 
in the Federal courts?

                         Percentage of 472 judges answering the question
Rule 11 has had a positive effect.......................            80.9
Rule 11 has had a negative effect.......................             8.7
Rule 11 has had no effect...............................            10.4

                                Table 18

    What should be the future of Rule 11?

                         Percentage of 526 judges answering the question
Retain in its present form (pre-Dec. 1993)..............            80.4
Return to its pre-1983 language.........................             7.0
Amend in some other way.................................            12.5

    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 of 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 grapple with the problem of litigation is 
enough to persuade me that it should not be gutted.'' After the 
proposal was forwarded to Congress, there was a seven month 
period under the Rules Enabling Act in which the Congress had 
the authority to make changes. Despite the introduction of H.R. 
2927 by Carlos J. Moorhead, Chairman of the Subcommittee on 
Courts and Intellectual Property, and a companion bill in the 
Senate, no formal action was taken, and the revisions went into 
effect on December 1, 1993.\14\
    \14\ The Judicial Conference of the United States has the 
responsibility to ``carry on a continuous study of the operation and 
effect of the general rules of practice and procedure''. It also 
recommends changes in the Federal Rules to promote a ``simplicity in 
procedure, fairness in administration, and just determination of 
litigation and the elimination of unjustifiable expense and delay.'' 28 
U.S.C. Sec. 331. All of this activity is coordinated by its Committee 
on Rules of Practice and Procedure which is presently chaired by the 
Honorable Ralph K. Winter. The Standing Committee reviews and 
coordinates the recommendations of five advisory committees.
    The Supreme Court is authorized to ``prescribe'' the general rules 
of practice and procedures. In fact it has been the general practice of 
the Supreme Court to merely act as a conduit for the rule changes and 
rely on the Judicial Conference to make the basic decisions in this 
area. Justice White believed that, as a matter of practice, the role of 
the Supreme Court is to ``* * * transmit the Judicial Conference 
recommendations without change and without careful study as long as 
there is no suggestion that the committee system has not operated with 
integrity''. Indeed Chief Justice Rehnquist's April 22, 1993 letter 
conveying the rules to the Speaker states: ``While the Court is 
satisfied that the required procedures have been observed, this 
transmittal does not necessarily indicate that the court itself would 
have proposed these amendments in the form submitted.''
    However, three of the Supreme Court Justices do not appear to 
accept this passive role, or at least in this instance they felt so 
strongly that they dissented in part to the proposed rules. Their 
observations are outlined in Justice Scalia's dissent in which he 
objected to changes in Rule 11 joined by Justice Thomas. See Chief 
Justice Rehnquist's April 22, 1993 letter conveying the rule changes to 
the Speaker of the House, Justice Scalia with whom Justice Thomas 
joined and with whom Justice Souter joined in Part II.
---------------------------------------------------------------------------
    The Committee believes that the present Rule 11 is much 
weaker than its predecessor. First, there is no longer a 
requirement for attorneys to inquire about the facts before 
filing a pleading. Second, litigants and lawyers are permitted 
to withdraw challenged pleadings in order to avoid sanctions. 
Third, the mandatory sanctions that formed an important core of 
the 1983 rules changes have been replaced with a discretionary 
sanctioning system, and the prospects for compensating 
aggrieved opposing parties are greatly reduced. Taken as a 
whole, these revisions change the dynamics of a lawsuit such 
that frivolous and abusive conduct is much harder to address 
and eliminate.
    Section 4 makes several important changes to Rule 11. 
First, it reestablishes a system of mandatory, as opposed to 
discretionary, sanctions. 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, section 4 would eliminate the so-called ``safe 
harbor'' provision of the current Rule, which permits a lawyer 
or litigant to withdraw a challenge pleading, without penalty, 
prior to the actual award of sanctions. As Justice Scalia noted 
in his dissent to the Court's transmissions 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 (the courts and the opposing party), 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.\15\ It's important to sanction 
discovery abuses just as it is important to sanction abuses at 
any stage of the litigation process.
    \15\ `` * * * discovery abuse remains a prominent reason for Rule 
11 activity and was cited as the reason for 19.2% of formal activity 
not leading to sanctions and 14.9% of actual sanctions.'' See Marshall, 
Kritzer and Zeamans, ``The Use and Impact of Rule 11,'' 86 N.W.U.L. 
Rev. 943, 951-55 (1992).
---------------------------------------------------------------------------
    Justice Scalia went on to remind the Supreme Court that the 
``safe harbor'' provision contradicts the Court's decision of 
five years ago in Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 
(1990). In that case, the Supreme Court upheld the trial 
court's jurisdiction to consider Rule 11 sanctions, despite the 
party's voluntary dismissal, and said:

          Baseless filing puts the machinery of justice in 
        motion, burdening courts and individuals alike with 
        needless expense and delay. Even if the careless 
        litigant quickly dismisses the action, the arm 
        triggering Rule 11's concerns has already occurred. 
        Therefore, a litigant who has violated Rule 11 merits 
        sanctions even after a dismissal.

    It is important that federal judges maintain the approach 
exhibited in Cooter & Gell because old Rule 11 has proven to be 
a strong tool for the bench to use and the bar to follow in 
curbing or avoiding litigation abuse. There should be a 
coordinated nationwide effort on behalf of the Judiciary to 
firmly implement Rule 11 as well as a nationwide effort on the 
part of lawyers to abide by the Rule's terms. Rule 11 sanctions 
are to be mandatory and like other types of clear penalties in 
our civil and criminal justice systems, are intended to send an 
unambiguous message that abusive conduct will not be tolerated. 
This is important in encouraging compliance with the fact-
checking requirement of the Rule. It also gives litigants and 
the public 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. As Supreme Court Justice Scalia 
has written, ``[j]udges, like other human beings, do not like 
imposing punishment when their duty does not require it, 
especially on their own acquaintances and members of their own 
profession.''

                                Hearings

    The Committee's Subcommittee on Courts and Intellectual 
Property held two days of oversight hearings related to the 
issues contained in H.R. 988. The hearings were held on 
February 6 & 10, 1995. Testimony was received from the 
following eight witnesses on February 6, 1995: the Honorable 
Jim Ramstad, U.S. Representative, 3rd district, Minnesota; the 
Honorable Christopher Cox, U.S. Representative, 47th district, 
California; Professor Thomas D. Rowe, Jr., Duke University Law 
School; Professor Herbert M. Kritzer, University of Wisconsin 
Law School; Mr. Walter K. Olson, Economist, Manhattan 
Institute; Ms. Debra T. Ballen, Senior Vice President of Policy 
& Development Research, American Insurance Association; Mr. 
John P. Frank, Attorney-at-Law, Lewis and Roca; and Mr. John 
Foster, Engineer and Chairman of Malcolm Pirnie, Inc.
    On February 10, 1995, the Subcommittee continued to receive 
testimony from the following seven witnesses: the Honorable 
Toby Roth, U.S. Representative, 3rd District, Wisconsin; Dr. 
Franklin Zweig, President, Einstein Institute for Science, 
Health and the Courts; Mr. Robert Charrow, Attorney-at-Law, 
Crowell & Moring; Mr. Anthony Z. Roisman, Attorney-at-Law, 
Cohen, Milstein, Hausfeld & Toll; Mr. David C. Weiner, 
Attorney-at-Law, Hahn, Loeser & Parks; Mr. Michael J. Horowitz, 
Attorney-at-Law, Hudson Institute; and Mr. Bill Fry, Executive 
Director, HALT, with additional material submitted by Robert D. 
Evans, Director of Government Affairs, American Bar 
Association; Mr. L. Ralph Mecham, Director, Administrative 
Office of the United States Courts; Judge William W. Schwarzer, 
Director, The Federal Judicial Center; Judge Ralph K. Winter, 
Jr., Chairman, Committee on Rules of Practice and Procedure, 
Judicial Conference of the United States; Stuart Z. Grossman, 
Chairman, Civil Justice Committee, American Board of Trial 
Advocates, Arthur D. Wolf, Professor of Law, Western New 
England College School of Law, and Sheila F. Anthony, Assistant 
Attorney General, Office of Legislative Affairs, U.S. 
Department of Justice.

                        Committee Consideration

    On February 23, 1995 the Committee met to consider H.R. 
988. During its consideration, the Committee adopted three 
amendments. The first amendment was offered by Mr. Goodlatte to 
strike section 2 and insert new language. That amendment passed 
on a record of 27 in favor and 7 opposed. The next two 
amendments passed on voice vote, one offered by Mr. McCollum to 
strike section 5 ``Notice Before Commencement of Lawsuit'' and 
the other by Mr. Barr to strike the ``Sense of Congress'' 
provision in section 4.
    The Committee then favorably reported H.R. 988 on a record 
vote of 19 in favor and 12 opposed, a quorum being present. Ms. 
Lofgren moved to reconsider the vote on the motion to favorably 
report H.R. 988 to the House. The motion failed on a record 
vote of 14 in favor and 19 opposed.
    The recorded votes occurred as follows:
    1. An amendment offered by Mr. Goodlatte to strike section 
2 and replace it with language that sets up a mechanism to 
award costs, expenses and attorney's fees to a prevailing 
party. The amendment was agreed to by a vote of 27 in favor and 
7 opposed.

                                                                        
         YEAS                   NAYS                     PASS           
                                                                        
Mr. Hyde               Mr. Conyers            Mrs. Schroeder            
Mr. Moorhead           Mr. Boucher                                      
Mr. McCollum           Mr. Bryant of Texas                              
Mr. Gekas              Mr. Serrano                                      
Mr. Coble              Mr. Sensenbrenner                                
Mr. Smith of Texas     Mr. Inglis                                       
Mr. Schiff             Mr. Bono                                         
Mr. Gallegly                                                            
Mr. Canady                                                              
Mr. Goodlatte                                                           
Mr. Buyer                                                               
Mr. Hoke                                                                
Mr. Heineman                                                            
Mr. Bryant of                                                           
 Tennessee                                                              
Mr. Chabot                                                              
Mr. Flanagan                                                            
Mr. Barr                                                                
Mr. Frank                                                               
Mr. Schumer                                                             
Mr. Berman                                                              
Mr. Reed                                                                
Mr. Nadler                                                              
Mr. Scott                                                               
Mr. Watt                                                                
Mr. Becerra                                                             
Ms. Lofgren                                                             
Ms. Jackson-Lee                                                         
                                                                        


    2. Chairman Hyde moved that H.R. 988 as amended be reported 
favorably to the House. The motion carried, 19 in favor and 12 
opposed.

                                                                        
           YEAS                        NAYS                   PASS      
                                                                        
Mr. Hyde                    Mr. Conyers                 Mr. Buyer       
Mr. Moorhead                Mr. Frank                                   
Mr. Sensenbrenner           Mr. Schumer                                 
Mr. McCollum                Mr. Berman                                  
Mr. Gekas                   Mr. Boucher                                 
Mr. Coble                   Mr. Bryant of Texas                         
Mr. Smith of Texas          Mr. Reed                                    
Mr. Schiff                  Mr. Nadler                                  
Mr. Gallegly                Mr. Scott                                   
Mr. Canady                  Mr. Watt                                    
Mr. Inglis                  Mr. Serrano                                 
Mr. Goodlatte               Ms. Jackson-Lee                             
Mr. Hoke                                                                
Mr. Bono                                                                
Mr. Heineman                                                            
Mr. Bryant of Tennessee                                                 
Mr. Chabot                                                              
Mr. Barr                                                                
Ms. Lofgren                                                             
                                                                        


    3. Ms. Lofgren moved to reconsider the vote on the motion 
to favorable report H.R. 988 to the House. The motion was 
defeated by a vote of 14 in favor and 19 opposed.
        YEAS                          NAYS
Mr. Conyers                         Mr. Hyde
Mr. Frank                           Mr. Moorhead
Mr. Schumer                         Mr. Sensenbrenner
Mr. Berman                          Mr. McCollum
Mr. Boucher                         Mr. Coble
Mr. Bryant of Texas                 Mr. Smith
Mr. Reed                            Mr. Schiff
Mr. Nadler                          Mr. Gallegly
Mr. Scott                           Mr. Canady
Mr. Watt                            Mr. Inglis
Mr. Becerra                         Mr. Goodlatte
Mr. Serrano                         Mr. Buyer
Ms. Lofgren                         Mr. Hoke
Ms. Jackson-Lee                     Mr. Bono
                                    Mr. Heineman
                                    Mr. Bryant of Tennessee
                                    Mr. Chabot
                                    Mr. Flanagan
                                    Mr. Barr

                      Committee Oversight Findings

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives, the Committee reports 
that the findings and recommendations of the Committee, based 
on oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

         Committee on Government Reform and Oversight Hearings

    No findings or recommendations of the Committee on 
Government Reform and Oversight were received as referred to in 
clause 2(l)(3)(D) of rule XI of the Rules of the House of 
Representatives.

               New Budget Authority and Tax Expenditures

    Clause 2(l)(3)(B) of House Rule XI is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 2(l)(3)(C) of rule XI of the 
Rules of the House of Representatives, the Committee sets 
forth, with respect to the bill, H.R. 988, the following 
estimate and comparison prepared by the Director of the 
Congressional Budget Office under section 403 of the 
Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, February 28, 1995.
Hon. Henry J. Hyde,
Chairman, Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
reviewed H.R. 988, the Attorney Accountability Act of 1995, as 
ordered reported by the House Committee on the Judiciary on 
February 22, 1995. CBO estimates that enacting H.R. 988 would 
not result in any significant cost to the federal government. 
Because enactment of H.R. 988 would not affect direct spending 
or receipts, pay-as-you-go procedures would not apply to the 
bill.
    H.R. 988 would revise federal rules of procedure in three 
areas. First, the bill would require the prevailing party in 
federal civil diversity cases (which are cases that involve two 
private parties from two different states and damages of at 
least $50,000) to pay the losing party's attorneys fees if the 
losing party made an offer of settlement prior to trial that 
was rejected and later proved to be larger than the damages 
actually awarded in the subsequent trial. Second, H.R. 988 
would establish the circumstances under which testimony based 
on scientific opinion could be admissible in court. Third, the 
bill would require federal judges, upon determining that an 
attorney has filed a frivolous lawsuit or has engaged in 
abusive tactics, to impose sanctions against the attorney. 
These mandatory sanctions could include the payment of the 
opposing party's attorney's fees or other expenses to 
compensate the parties injured by such conduct.
    Under current law, sanctions against attorneys are imposed 
at the discretion of federal judges and can include the payment 
of penalties to the courts. Based on information from the 
Administrative Office of the United States Courts (AOUSC), 
civil penalties collected (which are recorded in the budget as 
miscellaneous receipts to the Treasury) total less than 
$500,000 per year. Thus, eliminating the ability of federal 
judges to impose civil penalties payable to federal courts 
would not cause a significant loss of receipts to the Treasury. 
Also, according to the AOUSC, the number of hearings held to 
consider sanctions against attorneys would most likely increase 
under this bill. Any additional costs to the federal courts, 
however, would be insignificant.
    In addition, to the extent that these reforms to civil 
procedure would deter the filing of civil cases or encourage 
settlements prior to trial, the federal court system could 
realize some savings. The amount of such savings cannot be 
estimated until these new procedures have been implemented for 
a period of several years.
    H.R. 988 would not affect state courts, and thus would have 
no budgetary impact on state or local governments.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Susanne S. 
Mehlman.
        Sincerely,
                                    Robert D. Reischauer, Director.

                     Inflationary Impact Statement

    Pursuant to clause 2(l)(4) of rule XI of the Rules of the 
House of Representatives, the Committee estimates that H.R. 988 
will have no significant inflationary impact on prices and 
costs in the national economy.

                      Section-by-Section Analysis

    Section 1. This section provides a short title for the 
bill, the ``Attorney Accountability Act of 1995''.
    Section 2. This section amends the diversity jurisdiction 
statute (28 U.S.C. Sec. 1332) and provides a mechanism for the 
award of costs, expenses and attorney fees to a ``prevailing'' 
litigant. The emphasis is on pretrial settlements and it takes 
effect only when a settlement offer is made by a party to an 
adverse party within 10 days of trial. If the settlement offer 
is rejected and the judgment is less than that offer, even 
though the party may have prevailed, the party must pay the 
costs, expenses and attorney fees to the adverse party offeror 
from the date of last offer made by the adverse party offeror.
    At any time before judgment, the court may exempt any claim 
from this section if the court finds that the claim presents a 
question of law or fact that is novel and important and that 
substantially affects nonparties. This is intended to be a high 
standard and all three elements (novel, important and 
substantially affects nonparties) must be present before an 
exception applies.
    Attorney's fees awarded under this section shall be 
reasonable and 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, and attorneys may not exceed the actual 
cost paid by the offeree to its own attorney. If no such cost 
exists because of a contingency fee agreement, then the offeree 
must pay the reasonable costs and fees that would have been 
incurred if no contingency agreement existed. This section does 
not apply to any claim seeking an equitable remedy.
    Section 3. This section amends Rule 702 of the Federal 
Rules of Evidence. Section 3 narrows the opportunity for 
distorted scientific evidence to be introduced into federal 
trial of civil litigation. It focuses the nature and scope of 
expert witness testimony permitted during trial of a civil 
lawsuit by amending Section 702 and 403 of the Federal Rules of 
Evidence (FRE) to create a presumption of inadmissibility and a 
lower standard of prejudice. It reduces the opportunity for 
``junk'' or unfounded scientific opinion pronounced by heavily 
credentialed but biased witnesses from reaching juries. It is 
intended to raise the accountability of expert witnesses in 
federal civil litigation. It requires U.S. district judges to 
manage cases proactively with respect to ``fringe'' claims 
invoking the mantle of scientific research. By its several 
provisions, Section 3 codifies and further applies rule 702 FRE 
as enunciated in 1993 by the U.S. Supreme Court in Daubert v. 
Merrell Dow Pharmaceuticals, Inc. 113 S.Ct. 2786 (1993).
    Section 3 accomplishes these objectives by:
          (1) inserting into the FRE the presumption that 
        expert witness opinion based upon scientific evidence 
        of all varieties is inadmissible, and requiring the 
        proponents of such evidence to rebut the presumption;
          (2) providing that a trial judge in pre-trail 
        proceedings screen the argument made in rebuttal of the 
        presumption of admissibility through a finding of the 
        proferred evidence's scientific validity and 
        reliability, structuring the court's review in 
        accordance with the standards in Daubert v. Merrell Dow 
        Pharmaeuticals, Inc., 113 S.Ct. 2786;
          (3) requiring a further finding that the proponents 
        of scientific evidence have linked in proposed 
        testimony an opinion on the ultimate fact in issue to a 
        credible scientific foundation;
          (4) requiring a judge to make a finding that weighs 
        the preferred expert opinion's probative value against 
        its propensity to prejudice, confuse or mislead a jury; 
        and
          (5) by requiring a judicial inquiry into the fee 
        basis for expert witness testimony, and a ruling of 
        inadmissibility by operation of law in any instance in 
        which the court finds that an expert witness's fee is 
        contingent upon the outcome of a case.
    Section 4. This section would amend Rule 11(c) of the 
Federal Rules of Civil Procedure. This section makes several 
changes to Rule 11(c). First, it reestablishes a system of 
mandatory, as opposed to discretionary, sanctions. 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. Fourth, it eliminates the ``safe harbor'' provision of 
the current Rule 11(c), which permits a lawyer or litigant to 
withdraw a challenged pleading, without penalty, prior to the 
award of sanctions. Fifth, it would return to the pre-December 
1993 practice of having Rule 11 apply to Discovery.
    Section 5. This section would set an effective date for the 
Act at 180 days after enactment.

                              Agency Views

       Committee on Rules of Practice and Procedure
           of the Judicial Conference of the United States,
                                  Washington, DC, February 7, 1995.
Hon. Carlos J. Moorhead,
Chairman, Subcommittee on Courts and Intellectual Property, Committee 
        on the Judiciary, House of Representatives, Rayburn House 
        Office Building, Washington, DC.
    Dear Mr. Chairman: I write to request your assistance to 
prevent amendment of Rule 702 of the Federal Rules of Evidence 
(Testimony by Experts) outside the Rules Enabling Act process 
in your consideration of H.R. 10, the Common Sense Legal Reform 
Act.
    The Chief Justice established and appointed members to the 
Judicial Conference Advisory Committee on Evidence Rules in 
early 1993. As part of a comprehensive review of all the 
evidence rules, the committee discussed at length the rules on 
expert testimony at separate public meetings on May 9-10, 1994, 
and October 17-18, 1994.
    The committee unanimously concluded that amendment of Rule 
702 would be counterproductive at this time in light of the 
recent decision of the Supreme Court in Daubert v. Merrell Dow 
Pharmaceuticals, Inc. (1993). It is yet too early to determine 
whether Daubert curbs abuses in the use of expert testimony. A 
valid assessment of its effects can only be made after courts 
acquire more experience with it. The committee will continue to 
study the operation and effect of the rule as construed under 
Daubert by the courts.
    At its January 9-10, 1995 meeting, the committee discussed 
the proposed amendment of Evidence Rule 702 contained in H.R. 
10. Section 102 of the bill would add a new subdivision (b) to 
Rule 702 purportedly codifying the Daubert decision. Daubert is 
now the law of the land. Restating the Court's opinion, even if 
drafted accurately, is unnecessary. But Rule 702(b) as proposed 
in H.R. 10 does not accurately codify Daubert. And if enacted 
would cause mischief.
    Rule 702(b) distinguishes between ``validity'' and 
``reliability'' of scientific evidence, a distinction expressly 
rejected in Daubert. Under the proposed amendment, a judge must 
determine that ``validity'' of scientific evidence as a 
preliminary matter. This new requirement imposes an ill-defined 
burden on the courts. Indeed, it is difficult to see how 
scientific evidence can be ``reliable'' and yet not be 
``valid.'' The uncertainties created by the requirements could 
cause significant problems, particularly for prosecutors who 
often rely heavily on ``scientific evidence'' in establishing 
the guilt of defendants.
    Rule 702(b) limits its scope to ``scientific knowledge.'' 
It does not extend to ``technical or other specialized 
knowledge,'' items explicitly contained in Rule 702. By 
implication, the proposed amendment would bar extension of 
Daubert to these other types of evidence--something Daubert 
leaves open.
    The proposed Rule 702(b) would also reverse the present 
Evidence Rule 403 balancing test, which Daubert expressly 
applies to Rule 702 testimony. Rule 702(b) would require that 
the proffered opinion be ``sufficiently reliable so that the 
probative value of such evidence outweighs the dangers 
specified in Rule 403''; instead of the existing test which 
permits the exclusion of evidence ``if its probative value is 
substantially outweighed by the danger of unfair prejudice, 
confusion of the issues, or misleading the jury.''
    The reverse balancing test used in Rule 702(b) raises 
serious problems, because it applies only to ``scientific 
knowledge.'' The Rule 403 balancing test would continue to 
apply to opinion testimony that is ``technical or other 
specialized knowledge.'' There is no apparent reason to apply 
different balancing tests to different types of opinions. The 
distinctions will generate unnecessary and wasteful litigation 
as resourceful lawyers attempt to discern differences in 
individual cases.
    Section 102 would also add a new Evidence Rule 702(c), 
which excludes testimony from an expert who is entitled to 
receive ``compensation contingent on the legal disposition of 
any claim with respect to which such testimony is offered.'' 
The need for the provision is unclear. Contingent fee expert 
testimony is prohibited in most districts under disciplinary 
rules regulating professional conduct.
    Unlike disciplinary rules, the proposed Rule 702(c) would 
regulate and penalize contingent fee expert testimony by 
excluding the proffered evidence. Neither the provision's 
advantages nor adverse effects are fully understood. Moreover, 
the relationship between the new rule and the numerous 
statutory fee-shifting provisions is unclear. Expert testimony 
given in pro bono cases where payment of fees for experts is 
shifted to the losing party may be subject inadvertently to 
exclusion under Rule 702(c).
    Although less likely, disputes may arise concerning large 
corporations' in-house experts whose livelihoods depend on 
their past records in testifying before the courts or experts 
testifying in cases litigated on a contingency attorney-fee 
basis. The entire question of what ``entitled to receive 
compensation'' means in Rule 702(c) is a matter that needs 
careful attention and study.
    Revision of evidence rules governing the admission of 
expert testimony in civil and criminal cases involves 
particularly complex issues that vary tremendously depending on 
the case. Under the Rules Enabling Act rulemaking process, 
every proposed amendment is subject to public comment and 
widespread examination by individuals who work daily with the 
rules and meticulous care in drafting by acknowledged experts 
in the area. Proposed amendment of Evidence Rule 702 is 
precisely the type of work best handled by the Act's rulemaking 
process.
    The committee urges you to withdraw the proposed amendments 
to Evidence Rule 702 in section 102 from H.R. 10.
            Sincerely yours,
                                           Ralph K. Winter,
                             Judge, United States Court of Appeals.
                                ------                                

                        U.S. Department of Justice,
                             Office of Legislative Affairs,
                                 Washington, DC, February 24, 1995.
Hon. Patricia Schroeder,
House of Representatives,
Washington, DC.
    Dear Congresswoman Schroeder: Thank you for the opportunity 
to comment on Section 102 of H.R. 10, the ``Common Sense Legal 
Reform Act.'' The provision would amend Federal Rule of 
Evidence 702 in an attempt to curtail the use of so-called 
``junk science'' in the courtroom.
    It is the Justice Department's view that Section 102 
neither codifies present caselaw interpreting Rule 702 nor 
reinstates earlier common law. Considerable effort has been and 
is being expended in developing materials to assist federal 
judges in assessing complex scientific matters under present 
Rule 702. The proposal to amend Rule 702 uses undefined terms 
and alters long-standing evidentiary presumptions. As a result, 
it could spawn extensive litigation and force the courts to 
start over in evaluating the use of scientific evidence in both 
criminal and civil proceedings.
    The current Rule 702 is broadly phrased, applying to both 
civil and criminal proceedings:

          If scientific, technical, or other specialized 
        knowledge will assist the trier of fact to understand 
        the evidence or to determine a fact in issue, a witness 
        qualified as an expert by knowledge, skill, experience, 
        training, or education, may testify thereto in the form 
        of an opinion or otherwise.

    The proposed amendment would provide that ``testimony in 
the form of an opinion by a witness that is based on scientific 
knowledge shall be inadmissible unless the court determines 
that such opinion is (1) based on scientifically valid 
reasoning; and (2) sufficiently reliable so that the probative 
value of such evidence outweighs the dangers specified in Rule 
403.'' (emphasis added). Section 102 of the proposed bill would 
also add a new Evidence Rule 702(c) barring testimony from 
expert witnesses entitled to receive any compensation 
contingent on the outcome of any claims with respect to which 
their testimony is offered.
    The interest of the Justice Department regarding the 
admissibility and use of scientific evidence was clearly stated 
in the introduction to the government's amicus curiae brief 
filed with the U.S. Supreme Court in the landmark cases Daubert 
v. Merrell Dow Pharmaceuticals, Inc.:

          The United States is vitally interested in the issue 
        of the admissibility of expert testimony concerning 
        scientific theories in federal court. The federal 
        government is a party to a far greater number of civil 
        cases `on a nationwide basis than even the most 
        litigious private entity.' (Citation). In addition the 
        government is solely responsible for the enforcement of 
        federal criminal laws. Because of the great diversity 
        of its civil and criminal litigation, the federal 
        government finds itself supporting the admission of 
        scientific theories in some cases while opposing their 
        admission in others. The federal government is 
        therefore interested in a principled approach to 
        resolution of the question presented in this case.

    The consequences of proposed Section 102 cannot be fully 
understood without explanation of the U.S. Supreme Court's 
recent ruling in Daubert v. Merrell Dow Pharmaceuticals, Inc., 
113 S. Ct. 2786 (1993). The issue in Daubert was whether the 
1975 enactment of the Federal Rules of Evidence precluded 
federal trial courts from relying solely on the seventy-year 
old common-law test enunciated in Frye v. United States, 293 F. 
1013 (D.C. Cir. 1923) to determine whether expert scientific 
testimony should be received by the court or heard by the jury. 
Under Frye, expert scientific opinion was admissible only if it 
were based on techniques that were ``generally accepted'' by 
the relevant scientific community and found to be reliable. A 
split among the circuit courts regarding the effect of the 
Federal Rules and increasing controversy over the use of expert 
scientific testimony in litigation led the Court to accept 
certiorari in Daubert.
    The Daubert case involved an attempt to introduce into 
evidence certain epidemiological and statistical studies to 
prove that ingestion of the prescription drug Bendectin by the 
plaintiffs' mothers during pregnancy had caused serious birth 
defects. The trial court had granted the defendant's summary 
judgment motion on the grounds that the expert testimony 
proposed by the plaintiffs did not meet the ``general 
acceptance'' standard for the admission of such evidence under 
Frye, and the Ninth Circuit upheld that determination. The 
Daubert court remanded the case, holding that the common law 
rule of Frye was superseded by the adoption of Rule 702 as the 
federal standard for the admissibility of expert scientific 
testimony. Since the sparse language of the rule itself offered 
little direction, the Supreme Court sought to provide guidance 
as to how such evidence should be evaluated by courts under the 
more flexible and permissive Rule 702.
    The Daubert decision is complex and cannot be easily 
distilled into a word or two of ``black letter law.'' Rather, 
the nine to nothing decision defines a general construct or 
scheme for the judicial evaluation of scientific evidence. 
According to the Daubert majority, the first step in 
comprehending the standard for admissibility of scientific 
testimony is to appreciate the meaning of the term ``scientific 
knowledge'' in Rule 702. Knowledge connotes more than 
subjective belief or unsupported speculation. The phrase was 
interpreted to establish a standard of ``evidentiary 
reliability,'' further explained to mean ``trustworthiness'' or 
``scientific validity.'' 113 S. Ct. 2786, 2795. In order to 
qualify as ``scientific knowledge,'' an inference or assertion 
``must be derived by the scientific method'' and proposed 
testimony must be supported by ``appropriate validation--i.e. 
`good grounds'.'' In addition, the Court found that Rule 702 
included a requirement of ``relevance'' or ``helpfulness,'' 
mandating a ``valid scientific connection to the pertinent 
inquiry as a precondition to admissibility.'' The majority 
opinion also offered four guidelines to judges to assist in the 
inquiry, suggesting that (1) the theory or technique should be 
able to be or have been tested; (2) the theory or technique 
should be subjected to peer review and publication; (3) the 
court should attempt to determine the known or potential rate 
of error; and (4) the court should inquire as to the degree of 
acceptance within the relevant scientific community. Id. at 
2796-2797.
    Finally, the Court underscored the connection between Rule 
702 and Rule 403, to the effect that scientific testimony may 
be excluded, even if probative and reliable, if it will tend to 
mislead, prejudice or confuse the jury. Id. at 2798. The Court 
repudiated the notion that abandonment of the ``general 
acceptance'' standard would result in a ``free-for-all in which 
befuddled juries are confounded by absurd and irrational 
pseudoscientific assertions,'' instead relying on the common 
sense and wisdom of the judicial ``gatekeepers'' to ensure that 
expert testimony ``both rests on a reliable foundation and is 
relevant to the task at hand.'' Id.
    Several components of the Justice Department were involved 
in developing the Department's amicus brief, including the 
Criminal Division, the FBI, the Torts and Appellate branches of 
the Civil Division, and the Environment and Natural Resources 
Division. Seeking to accommodate the sometimes competing 
interests of the various components with respect to the use of 
scientific evidence, the Department lent its support to those 
courts that favored a more generalized inquiry into the 
reliability of scientific evidence in light of the purpose for 
which it is offered. The very formulation adopted by the 
Supreme Court in Daubert regarding the definition of scientific 
``knowledge'' is suggested in the Justice Department's brief to 
the Court, as well as the guidelines for determining 
reliability.
    In light of the Daubert ruling, the proposed amendment to 
Rule 702 would seem to have the following effects:
    1. The proposed rule requires opinion testimony to be based 
on ``scientifically valid reasoning,'' an undefined term that 
differs significantly from the text and context of the Daubert 
holding and the ``general acceptance'' test of Frye. This will 
necessitate protracted litigation to determine the scope and 
intent of the new formulation. We anticipate the possibility of 
revalidating many areas of expert testimony which have already 
received the imprimatur of the federal courts in the context of 
such litigation.
    2. The proposed rule incorporates a presumption that all 
scientific evidence is inadmissible, unless it meets the 
uncertain two-pronged test of the amended rule. This is 
contrary to the holding by the Daubert court that Rule 702 was 
intended to be permissive and flexible with respect to the 
admissibility of expert testimony. Moreover, even for well 
established forensic sciences, such as frequent analysis, 
firearms examinations, serology, etc., we foresee unnecessary 
admissibility battles in criminal cases, coupled with undue 
expense and delay. Such a reformulated rule might prevent the 
admissibility of cutting edge technologies (as DNA 
identification once was) which could prove to be powerful tools 
both for convicting the guilty and exonerating the innocent. 
Unless their testimony was specifically held to be admissible, 
every expert witness in every case, criminal and civil, would 
be barred from testifying. In criminal and civil cases, 
needless satellite litigation over the admissibility of 
evidence would inevitably result with serious detrimental 
effects on the prosecution of crimes and the expeditious 
resolution of civil cases.
    3. Proposed Rule 702(b) is expressly limited in scope to 
scientific evidence, while existing Rule 702 also applies to 
``technical, or other specialized knowledge,'' raising 
confusion about the extension of Daubert to other types of 
expert opinion testimony.
    4. The proposed amendment reverses the burden of Rule 403, 
which Daubert expressly ties to Rule 702 testimony. Rule 403 
permits the exclusion of relevant evidence ``if its probative 
value is substantially outweighed by the danger of unfair 
prejudice, confusion of the issues or misleading the jury'' 
(dangers must outweigh probative value). Proposed Rule 702(b) 
requires that the opinion be ``sufficiently reliable so that 
the probative value of such evidence outweighs the dangers 
specified in rule 403'' (probative value must outweigh 
dangers). There is also an issue as to whether this reversal of 
the Rule 403 balance applies to other kinds of expert opinion 
testimony.
    5. The proposed amendment could strategically disadvantage 
the United States in cases involving significant issues of 
science, technology, forensics, public health, the environment, 
and economic analysis.
    It is the view of the Department that proposed Section 102 
neither codifies the Daubert decision or reinstates the Fyre 
rule and that the measure would force the courts to begin all 
over again in the evaluating the use of scientific evidence in 
both criminal and civil proceedings. The provision could well 
jeopardize the progress that had been made with the Daubert 
decision and the cases following, cutting short the opportunity 
for the circuit courts to further refine the meaning of the 
decision. See, Daubert v. Merrell Dow Pharmaceuticals, Inc., 
1995 WL 1736 (9th Cir. 1995) sustaining the inadmissibility of 
plaintiffs evidence under the Supreme Court's new formulation. 
Of particular concern is the presumption againt admissibility 
of scientific evidence stated by the amendment, and confusion 
as to whether the Daubert ruling was incorporated in the 
amended rule or overruled.
    Since the Daubert decision in 1993, numerous activities 
have been undertaken to enhance the ability of federal judges 
to assess and manage complex scientific issues. The Department 
endorses these efforts. The Federal Judicial Center (FJC) has 
just published an extensive manual which examines procedures 
for the management of expert testimony, including the use of 
procedures such as court appointed experts and special masters, 
in cases presenting the most difficult issues. Justice 
Department attorneys participated in the preparation of that 
publication. The FJC also is expanding opportunities for 
judicial education concerning scientific evidence, and will 
undertake research and evaluation related to the use and 
management of scientific and technical testimony. Similarly, 
the Einstein Program for Law and Judicial Policy Studies at 
George Washington University, in conjunction with the State 
Justice Institute, the National Institute of Justice, and the 
FBI, is developing seven science-related benchbooks for judges. 
Within the judicial community, the new ``gatekeeper'' role 
assigned to judges by the Daubert decision appears to have been 
taken very seriously. We thus urge that Daubert and the 
mechanisms which have flowed from the opinion be permitted to 
be tested over a period of several years. If Daubert proves to 
be unwieldy for the judiciary and litigants, it can certainly 
be revisited. However, it appears prudent to allow the opinion 
and the judiciary's role as gatekeeper a reasonable chance to 
succeed.
    The Advisory Committee on Evidence Rules also has examined 
Rule 702 in light of the Daubert ruling. A senior official of 
the Justice Department is a member of that committee. As 
indicated in a letter to the Ranking Member of the House 
Judiciary Committee, dated February 7, 1995, the Chair of the 
Advisory Committee, Judge Ralph Winter, urged the withdrawal of 
the proposed amendment to Rule 702, allowing the Advisory 
Committee to assess needed changes. We share the view that the 
Rules Enabling Act process is the most effective means of 
considering this complex subject.
    The Office of Management and Budget has advised this 
Department that there is no objection to the submission of this 
report from the standpoint of the Administration's program.
            Sincerely,
                                         Sheila F. Anthony,
                                        Assistant Attorney General.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italic, existing law in which no change is proposed 
is shown in roman):

              SECTION 1332 OF TITLE 28, UNITED STATES CODE

Sec. 1332. Diversity of citizenship; amount in controversy; costs

  (a) * * *
          * * * * * * *
  (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 made 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 
attorneys' 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 attorneys' 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 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.
                              ----------                              


               RULE 702 OF THE FEDERAL RULES OF EVIDENCE

 Rule 702. Testimony by Experts

  (a) In general.--If scientific, technical, or other 
specialized knowledge will assist the trier of fact to 
understand the evidence or to determine a fact in issue, a 
witness qualified as an expert by knowledge, skill, experience, 
training, or education, may testify thereto in the form of an 
opinion or otherwise.
  (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.
                              ----------                              


            RULE 11 OF THE FEDERAL RULES OF CIVIL PROCEDURE

Rule 11. Signing of Pleadings, Motions, and Other Papers; 
                    Representations to Court; Sanctions

  (a) * * *
          * * * * * * *
  (c) Sanctions. If, after notice and a reasonable opportunity 
to respond, the court determines that subdivision (b) has been 
violated, the court [may] shall, subject to the conditions 
stated below, impose an appropriate sanction upon the 
attorneys, law firms, or parties that have violated subdivision 
(b) or are responsible for the violation.
          (1) How Initiated.
                  (A) By Motion. A motion for sanctions under 
                this rule shall be made separately from other 
                motions or requests and shall describe the 
                specific conduct alleged to violate subdivision 
                (b). It shall be served as provided in Rule 5[, 
                but shall not be filed with or presented to the 
                court unless, within 21 days after service of 
                the motion (or such other period as the court 
                may prescribe), the challenged paper, claim, 
                defense, contention, allegation, or denial is 
                not withdrawn or appropriately corrected]. If 
                warranted, the court [may] shall award to the 
                party prevailing on the motion the reasonable 
                expenses and attorney's fees incurred in 
                presenting or opposing the motion. Absent 
                exceptional circumstances, a law firm shall be 
                held jointly responsible for violations 
                committed by its partners, associates, and 
                employees.
                  (B) On Court's Initiative. On its own 
                initiative, the court may enter an order 
                describing the specific conduct that appears to 
                violate subdivision (b) and directing an 
                attorney, law firm, or party to show cause why 
                it has not violated subdivision (b) with 
                respect thereto.
          (2) Nature of Sanction; Limitations. [A sanction 
        imposed for violation of this rule shall be limited to 
        what is sufficient to deter repetition of such conduct 
        or comparable conduct by others similarly situated. 
        Subject to the limitations in subparagraphs (A) and 
        (B), the sanction may consist of, or include, 
        directives of a nonmonetary nature, an order to pay a 
        penalty into court, or, if imposed on motion and 
        warranted for effective deterrence, an order directing 
        payment to the movant of some or all of the reasonable 
        attorneys' fees and other expenses incurred as a direct 
        result of the violation.] 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.
                  (A) * * *
          * * * * * * *
  [(d) Inapplicability to Discovery. Subdivisions (a) through 
(c) of this rule do not apply to disclosures and discovery 
requests, responses, objections, and motions that are subject 
to the provisions of Rules 26 through 37.]
          * * * * * * *
                            DISSENTING VIEWS

    We strongly dissent from the ill-conceived provisions of 
H.R. 988. We discuss below our objections to its component 
parts.

                           i. attorney's fees

    ``Loser pays'' is a phrase that appeals to everyone who has 
heard an anecdote about a court case that produced what appears 
to be an absurd or abusive outcome. Government by anecdote, 
however, can produce disastrous policy, and this provision in 
particular deserves close scrutiny, and rejection, because it 
will impinge on the right of the people to have access to the 
courts to resolve their disputes.
    Although the Contract with America claims that its ``loser 
pays'' provision is intended to penalize frivolous lawsuits, 
discourage the filing of weak cases and encourage the pursuit 
of strong cases,\1\ it is almost certain to have consequences 
well beyond those salutary ones. We have no problem with a 
provision narrowly tailored to penalize frivolous lawsuits; and 
indeed, Rule 11 sanctions and causes of action for abuse of 
process or malicious prosecution are examples of tried and 
tested judicial mechanisms for penalizing frivolous lawsuits.
    \1\ Newt Gingrich & Dick Armey, ``Contract with America,'' 143, 146 
(Times Books 1994).
---------------------------------------------------------------------------
    We have a serious problem, however, with provisions that 
deter middle-income persons from pursuing reasonable claims or 
defenses, and place them at an unfair disadvantage in disputes 
with risk-neutral parties--such as large corporations for whom 
the risk of fee-shifting will become just a cost of doing 
business. In a sense, the legislation creates a destructive 
dynamic where all but the rich will apply a test, in their 
minds, of whether their claim will ``beyond all reasonable 
doubt'' succeed at trial, before pursuing a civil action that 
our civil justice system provides should be decided by a trier 
of fact on a ``preponderance of the evidence'' standard. This 
makes absolutely no sense if you believe in a fair and 
accessible civil justice system. It makes good sense if your 
only goal is to deter litigation, whatever the consequences.
    It is notable that the Republican majority is eager to 
embrace the so-called ``English rule'' just as prominent voices 
in England are calling for the abandonment of that rule in 
England. 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. ``This 
offends one of the most basic principles of a free society: 
equality before the law,'' it noted.
    The ``loser pays'' provision in H.R. 988, as amended in 
committee by the Goodlatte amendment, may well have the 
intended, and salutary, effect of discouraging frivolous 
claims. It may well serve to encourage a reasonable settlement 
in those cases in which the defendant is clearly liable. Its 
fatal flaw, however, is that it does not distinguish between 
frivolous cases and the much larger class of cases in which 
liability is a close call. We may slam the courthouse door with 
impunity on the former, but it would devastate the right of 
access of the judicial system to close the door on the latter.
    Yet, 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 or defenses. As one 
scholar has noted:

          [F]or a middle-income litigant facing some 
        possibility of an adverse fee shift, * * * defeat may 
        wipe him out financially. * * * [T]he 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.\2\
    \2\ Thomas D. Rowe, Jr., ``Predicting the Effects of Attorney Fee 
Shifting,'' 47 Law & Contemp. Probs. 148, 153 (1984).

    Middle-income parties and small businesses may have to 
place their very solvency on the line in order to pursue a 
meritorious claim. The burden of proof in a civil case is 
``preponderance of the evidence,'' often described as that 
amount of evidence that shifts the scales, even if only 
slightly, from the point of balance. A middle-income plaintiff 
confronted with a written offer to settle under Section 2 of 
H.R. 988 must to settle at that point, unless he or she is 
willing to assume the risk of payment of the other side's 
attorney's fees. For middle-income plaintiffs who would be 
financially ruined by such an award, the calculus becomes, in 
effect, whether it is beyond a reasonable doubt that they will 
prevail. A rational middle-income plaintiff confronted with a 
settlement offer of $1.00 will drop even meritorious claims at 
that point, if the defendant's liability is a close question.
    Particularly when their dispute is with a risk-neutral 
defendant, such as a large corporation for whom the risk of 
paying the other side's legal fees is merely a cost of doing 
business, middle-income people will be placed at a serious 
strategic disadvantage in the federal courts, even when their 
claims are not frivolous.
    If the purpose is to discourage frivolous lawsuits, H.R. 
988 doesn't even do that very well. Because the fee-shifting 
provision of H.R. 988 applies only in diversity cases, the 
effect of the rule will be to shift cases to the state courts, 
rather than to deter them altogether.
    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. 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.
    ``Loser pays'' is gimmick phraseology masking great harm to 
our civil justice system and the middle class which looks to it 
to uphold their economic rights. As such, it fits in very 
nicely with the ``Contract with America,'' but very poorly with 
the fundamental precepts that have guided the American justice 
system. This legislation should be rejected by the full House.

                        ii. scientific evidence

    The Committee's approach to amending Federal Rule of 
Evidence 702, relating to the admissibility of scientific 
evidence, exemplifies the bumpersticker method of governance 
reflected in the House Republicans' ``Contract with America.'' 
This bill, we are told, ``curbs the use of `junk science' and 
requires so-called experts to be real experts.'' \3\ While ``No 
Junk Science!'' and ``Honesty in Evidence!'' are exciting 
slogans, the underlying issues are too nuanced to permit sound 
policy to be articulated in the space of a car bumper.
    \3\ Newt Gingrich & Dick Armey, ``Contract With America'' 143 
(Times Books 1994).
---------------------------------------------------------------------------
    To the extent that ``junk science'' is a problem in our 
courts, the Supreme Court provided an adequate cure in the 
Daubert case.\4\ The federal judges, who will be required to 
live with the results of our hasty, poorly-drafted rules 
amendment, tell us that amendment of Rule 702 ``would be 
counterproductive at this time in light of * * * Daubert,'' and 
``would cause mischief'' because it imposes ill-defined burdens 
and uncertainties on the courts.\5\ By rushing this rules 
change through the Committee and the House without going 
through the rulemaking process that Congress itself established 
under the Rules Enabling Act, 28 U.S.C. Sec. Sec. 2071-2074, we 
trample upon the courts and the public alike in our stampede to 
the 100 Day finish line.
    \4\ Daubert v. Merrell Dow Pharmaceuticals, Inc., 113 S. Ct. 2786 
(1993).
    \5\ Letter from The Hon. Ralph K. Winter, Judge, United States 
Court of Appeals and Chair, Evidence Rules Advisory Committee of the 
Judicial Conference of the United States, to The Hon. Carlos Moorhead, 
Chairman, Subcommittee on Courts and Intellectual Property (February 7, 
1995).
---------------------------------------------------------------------------

A. The Supreme Court has carefully crafted a remedy for this problem

    In an opinion issued in 1993, the Supreme Court carefully 
crafted a framework for the judicial evaluation of scientific 
evidence, designed to curb abuses in the use of expert 
testimony. Daubert v. Merrell Dow Pharmaceuticals, Inc., 113 S. 
Ct. 2786 (1993). Daubert provides detailed guidance to judges, 
who serve as ``gatekeepers'' to ensure that expert testimony 
``both rests on a reliable foundation and is relevant to the 
task at hand.'' Id. at 2798.
    Writing on behalf of the Evidence Rules Advisory Committee 
of the Judicial Conference of the United States, Judge Winter 
urges that we not amend Rule 702 at this time. He notes that 
the Evidence Rules Advisory Committee ``unanimously concluded 
that amendment of Rule 702 would be counterproductive at this 
time in light of [Daubert].'' The rational approach would be to 
assess the operation of Daubert to determine whether it is 
effective in curbing abuses in the use of scientific testimony; 
if it isn't, the experience of the courts under Daubert will be 
instructive in perfecting the remedy.
    The newly-instituted Republican majority of the Judiciary 
Committee, however, appears to be constrained from recognizing 
that a solution to the problem has already been set into 
motion--perhaps because such a recognition would foreclose the 
opportunity to check off a box on the ``Contract With America'' 
checklist in front of the television cameras. Instead, it is 
the imperative of the Contract that we trump the Supreme 
Court's careful analysis and guidance with a rules amendment 
that will cause confusion and turmoil throughout the federal 
judiciary.

B. The amendment is confusing and disruptive

    Although some proponents of Section 3 of H.R. 988 claim 
that it will simply codify Daubert, they are plainly wrong. By 
omitting many of the guidelines spelled out in Daubert, by 
using undefined terms that differ from the language of Daubert, 
and by reversing the presumption with respect to admissibility, 
H.R. 998 effectively reverses Daubert in favor of a less-
nuance, untested, and unclear standard. The U.S. Department of 
Justice notes:
    It is the Justice Department's view that Section 102 \6\
    \6\ Section 102 of H.R. 10 is the predecessor of Section 3 of H.R. 
988. It varied slightly from the present version, requiring that the 
court determine ``that such opinion is--(1) based on scientifically 
valid reasoning; and (2) sufficiently reliable so that the probative 
value of such evidence outweighs the dangers specified in rule 403.''

        neither codifies present case law interpreting Rule 702 
        nor reinstates earlier common law * * * The proposal to 
        amend Rule 702 uses undefined terms and alters long-
        standing evidentiary presumptions. As a result, it 
        could spawn extensive litigation and force the courts 
        to start over in evaluating the use of scientific 
        evidence. * * * \7\
    \7\ Letter from Sheila F. Anthony, Assistant Attorney General, U.S. 
Department of Justice Office of Legislative Affairs, to The Hon. 
Patricia Schroeder, Ranking Democrat, Subcommittee on Courts and 
Intellectual Property (February 24, 1995).

    Of the three witnesses who testified about scientific 
evidence at the February 10 hearing of the Subcommittee on 
Courts and Intellectual Property, only one asserted that the 
proposal codifies Daubert, and he recommended the insertion of 
language ``that would make clear that the amendment * * * is 
not intended to undermine or otherwise relax the four 
guidelines in Daubert.'' \8\ No such language has been added. 
The other two witnesses asserted that the proposal radically 
departs from Daubert. Dr. Franklin M. Zweig, testifying at the 
invitation of the majority, noted that ``a dispassionate 
assessment must observe that it goes way beyond [Daubert],'' 
calling it ``an entirely different species of evidence law than 
the one currently applied by the federal judiciary [under 
Evidence Rule 702].'' \9\
    \8\ Testimony of Robert P. Charrow at 9.
    \9\ Testimony of Franklin M. Zweig at 11.
---------------------------------------------------------------------------
    Dr. Zweig warned that this amendment could have significant 
unanticipated effects: thousand of hearings annually, with 
accompanying interlocutory appeals, perhaps spawning satellite 
litigation; the diversion of federal judicial resources to 
conduct the prescribed inquires; a bench trial on the substance 
prior to the jury trial that would follow; a hobbling of 
federal intellectual property adjudication, generally regarded 
as ``junk-free,'' with a possible similar impact on 
international trade litigation; and an increase in form 
shopping for civil cases.\10\
    \10\ Summary of Testimony of Franklin M. Zweig.
---------------------------------------------------------------------------
    Judge Winter and his committee warn us that enactment of 
this provision would cause mischief. We should pay heed.
    Perhaps most troubling is the reversal of the long-standing 
presumption of admissibility of evidence; H.R. 998 incorporates 
a presumption that all scientific evidence is inadmissible 
unless it meets the three-pronged test of subsection (b). A 
presumption of inadmissibility places tremendous pressure on 
the courts to conduct extensive, burdensome pre-trial hearings, 
and removes a significant amount of decisionmaking authority 
from the juries.
    We emphatically disagree with the notion that jurors lack 
the common sense and reasoning ability to evaluate scientific 
evidence. As Chief Justice Rehnquist has observed, ``The 
founders of our nation considered the right of trial by jury in 
civil cases * * * a safeguard too precious to be left to the 
whim of the sovereign. * * *'' Parklane Hosiery Co. v. Shore, 
439 U.S. 322, ______ (1979) (dissent). John Dickenson, one of 
the leading Federalists, wrote: ``Trial by jury is our 
birthright; * * * who in opposition to the genius of United 
America, shall dare to attempt its subversion.'' \11\ This bill 
subverts the jury by reversing the long-standing presumption of 
admissibility of evidence, and empowering federal judges, 
unelected officials appointed for life, to conduct much of the 
evaluation now left to jurors.
    \11\ Quoted in Testimony of Anthony Z. Roisman, February 10, 1995, 
Subcommittee on Courts and Intellectual Property.
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C. The amendment wrongly sidesteps the rulemaking process

    Finally, we object to the consideration of an amendment to 
the Federal Rules of Evidence in a manner that sidesteps the 
rulemaking process Congress established under the Rules 
Enabling Act. As Judge Winter noted:

         Revision of evidence rules governing the admission of 
        expert testimony * * * involves particularly complex 
        issues that vary tremendously depending on the case. 
        Under the Rules Enabling Act rulemaking process, every 
        proposed amendment is subject to public comment and 
        widespread examination by individuals who work daily 
        with the rules and meticulous care in drafting by 
        acknowledged experts in the area. Proposed amendment of 
        Evidence Rule 702 is precisely the type of work best 
        handled by the Act's rulemaking process.

Letter of the Hon. Ralph K. Winter to the Hon. Carlos Moorhead 
at 3.
    We are embarking on a process that will dramatically affect 
every federal court in the land. It will fundamentally reshape 
and curtail the role of juries in cases involving scientific 
evidence, and will create vast areas of uncertainty in the 
trial of civil cases in federal court. The rulemaking process 
established by the Rules Enabling Act is designed to ensure 
that we take such steps only after full consultation with the 
courts, the public, experts, and those who work regularly with 
the rules. To sidestep that process is to indulge in a form of 
arrogance that does not bode well for our relationship with the 
judiciary, nor for our system of justice.

                         iii. rule 11 amendment

    Rule 11 of the Federal Rules of Civil Procedure provides 
for the imposition of sanctions to deter abuses in the signing 
of pleadings, motions, and other court papers. Amended in 1983 
to expand the power of the court to award attorney's fees to a 
litigant whose opponent acts in bad faith in instituting or 
conducting litigation,\12\ Rule 11 instead ``become a font of 
rancor.'' \13\ It contributed significantly to the rising 
incivility of the bar as lawyers ``had a double duty, one to 
try the case and the other to try the opposing counsel.'' \14\
    \12\ Fed. R. Civ. P. advisory committee's note.
    \13\ ``Rule 11 Snags Lawyers,'' ABA Journal (Jan. 1991).
    \14\ Testimony of John P. Frank before the Subcommittee on Courts 
and Intellectual Property (February 6, 1995).
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    The burden placed on the courts by the 1983 version of Rule 
11 was considerable: an American Judicature study found that in 
24.3 percent of the cases there was some Rule 11 involvement 
without sanctions, and in 7.6 percent of the cases there were 
Rule 11 sanctions.\15\ That is, one-third of all cases involved 
satellite litigation based on Rule 11; one-fourth of all cases 
were burdened with Rule 11 activity, even though sanctions did 
not ultimately obtain.
    \15\ Id., citing American Judicature Study, Report of the Third 
Circuit Task Force on Federal Rule of Civil Procedure 11 (S. Burbank, 
ed., 1989).
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    To remedy these problems, Rule 11 was revised in 1993, 
using the process set out in the Rules Enabling Act, with 
hearings and consideration by the Supreme Court and the 
Congress. The revised rule:

        continues to require litigants to `stop-and-think' 
        before initially making legal or factual contentions. 
        It also, however, emphasizes the duty of candor by 
        subjecting litigants to potential sanctions for 
        insisting upon a position after it is no longer tenable 
        and by generally providing protection against sanctions 
        if they withdraw or correct contentions after a 
        potential violation is called to their attention.

Fed. R. Civ. P. 11, advisory committee note.
    Because it is of such recent vintage, the Federal Judicial 
Center has not had time to study how the revised Rule 11 is 
working. There are preliminary indications, however, that the 
revision has reduced satellite litigation, caused more lawsuits 
to be withdrawn because of the safe-harbor provisions of the 
rule, and improved the civility of the bar.\16\
    \16\ Frank Testimony at 8-9; ``Sanctions Litigation Declining,'' 
ABA Journal (March 1995).
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    As with the ``junk science'' provision of H.R. 988, we are 
rushing to fix a problem before taking the time to see if a 
previously-established remedy is sufficient; and we are doing 
so in a way that bypasses the Rules Enabling Act and the 
processes that would ensure adequate consultation with the 
federal courts about rules changes.

                               conclusion

    H.R. 988 is a composite of so-called federal court reforms 
that decimate the established rules of our civil justice 
system. These reforms are not based on empirical evidence of 
malfunctions in the courts or widespread abuse by persons 
seeking to vindicate their rights. They are based on a desire 
to systematically begin closing the door of justice to all but 
the most affluent.
    For most Americans, the arcane legal language of the bill 
will never be scrutinized, instead subsumed by catchy labels 
like ``loser pays.'' But the American legal system, which is 
without peer in the world, was not developed in a hundred days, 
nor launched in the wake of pleasing semantic phrases. It was 
developed by a careful--even conservative--approach of Congress 
working with the judicial branch in developing fair and 
workable rules of federal civil procedure and evidence. 
Obviously, the proponents of H.R. 988, in their zeal to achieve 
a result for an ideological point of view, care nothing at all 
for a system that works well for all parties.
    History has shown that such cavalier disregard for things 
that work well in government do not stand the test of time. 
When put to the test, it will be evident that H.R. 988 does not 
live up to the high ideals that are the underpinnings of the 
American system of civil justice.

                                   Charles E. Schumer.
                                   Howard L. Berman.
                                   Jose E. Serrano.
                                   John Conyers.
                                   Pat Schroeder.
                                   Jerrold Nadler.
                                   Barney Frank.
                                   Bobby Scott.
                                   John Bryant.
                                   Melvin L. Watt.