[House Report 109-123]
[From the U.S. Government Publishing Office]
109th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 109-123
======================================================================
LAWSUIT ABUSE REDUCTION ACT OF 2005
_______
June 14, 2005.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the
following
R E P O R T
together with
ADDITIONAL AND DISSENTING VIEWS
[To accompany H.R. 420]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the bill
(H.R. 420) to amend Rule 11 of the Federal Rules of Civil
Procedure to improve attorney accountability, and for other
purposes, having considered the same, reports favorably thereon
with an amendment and recommends that the bill as amended do
pass.
CONTENTS
Page
The Amendment.................................................... 2
Purpose and Summary.............................................. 3
Background and Need for the Legislation.......................... 5
Hearings......................................................... 45
Committee Consideration.......................................... 45
Vote of the Committee............................................ 45
Committee Oversight Findings..................................... 47
New Budget Authority and Tax Expenditures........................ 47
Congressional Budget Office Cost Estimate........................ 47
Performance Goals and Objectives................................. 48
Constitutional Authority Statement............................... 49
Section-by-Section Analysis and Discussion....................... 49
Changes in Existing Law Made by the Bill, as Reported............ 50
Markup Transcript................................................ 51
Additional Views................................................. 109
Dissenting Views................................................. 111
The Amendment
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Lawsuit Abuse Reduction Act of
2005''.
SEC. 2. ATTORNEY ACCOUNTABILITY.
Rule 11(c) of the Federal Rules of Civil Procedure is amended--
(1) by amending the first sentence to read as follows: ``If
a pleading, motion, or other paper is signed in violation of
this rule, the court, upon motion or upon its own initiative,
shall impose upon the attorney, law firm, or parties that have
violated this subdivision or are responsible for the violation,
an appropriate sanction, which may include an order to pay the
other party or parties for 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.'';
(2) in paragraph (1)(A)--
(A) by striking ``Rule 5'' and all that follows
through ``corrected.'' and inserting ``Rule 5.''; and
(B) by striking ``the court may award'' and
inserting ``the court shall award''; and
(3) in paragraph (2), by striking ``shall be limited to
what is sufficient'' and all that follows through the end of
the paragraph (including subparagraphs (A) and (B)) and
inserting ``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.
The sanction may consist of an order to pay to the 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.''.
SEC. 3. APPLICABILITY OF RULE 11 TO STATE CASES AFFECTING INTERSTATE
COMMERCE.
In any civil action in State court, the court, upon motion, shall
determine within 30 days after the filing of such motion whether the
action substantially affects interstate commerce. Such court shall make
such determination based on an assessment of the costs to the
interstate economy, including the loss of jobs, were the relief
requested granted. If the court determines such action substantially
affects interstate commerce, the provisions of Rule 11 of the Federal
Rules of Civil Procedure shall apply to such action.
SEC. 4. PREVENTION OF FORUM-SHOPPING.
(a) In General.--Subject to subsection (b), a personal injury claim
filed in State or Federal court may be filed only in the State and,
within that State, in the county (or Federal district) in which--
(1) the person bringing the claim, including an estate in
the case of a decedent and a parent or guardian in the case of
a minor or incompetent--
(A) resides at the time of filing; or
(B) resided at the time of the alleged injury;
(2) the alleged injury or circumstances giving rise to the
personal injury claim allegedly occurred;
(3) the defendant's principal place of business is located,
if the defendant is a corporation; or
(4) the defendant resides, if the defendant is an
individual.
(b) Determination of Most Appropriate Forum.--If a person alleges
that the injury or circumstances giving rise to the personal injury
claim occurred in more than one county (or Federal district), the trial
court shall determine which State and county (or Federal district) is
the most appropriate forum for the claim. If the court determines that
another forum would be the most appropriate forum for a claim, the
court shall dismiss the claim. Any otherwise applicable statute of
limitations shall be tolled beginning on the date the claim was filed
and ending on the date the claim is dismissed under this subsection.
(c) Definitions.--In this section:
(1) The term ``personal injury claim''--
(A) means a civil action brought under State law by
any person to recover for a person's personal injury,
illness, disease, death, mental or emotional injury,
risk of disease, or other injury, or the costs of
medical monitoring or surveillance (to the extent such
claims are recognized under State law), including any
derivative action brought on behalf of any person on
whose injury or risk of injury the action is based by
any representative party, including a spouse, parent,
child, or other relative of such person, a guardian, or
an estate; and
(B) does not include a claim brought as a class
action.
(2) The term ``person'' means any individual, corporation,
company, association, firm, partnership, society, joint stock
company, or any other entity, but not any governmental entity.
(3) The term ``State'' includes the District of Columbia,
the Commonwealth of Puerto Rico, the United States Virgin
Islands, Guam, and any other territory or possession of the
United States.
(d) Applicability.--This section applies to any personal injury
claim filed in Federal or State court on or after the date of the
enactment of this Act.
SEC. 5. RULE OF CONSTRUCTION.
Nothing in section 3 or in the amendments made by section 2 shall
be construed to bar or impede the assertion or development of new
claims or remedies under Federal, State, or local civil rights law.
SEC. 6. THREE-STRIKES RULE FOR SUSPENDING ATTORNEYS WHO COMMIT MULTIPLE
RULE 11 VIOLATIONS.
(a) Mandatory Suspension.--Whenever a Federal district court
determines that an attorney has violated Rule 11 of the Federal Rules
of Civil Procedure, the court shall determine the number of times that
the attorney has violated that rule in that Federal district court
during that attorney's career. If the court determines that the number
is 3 or more, the Federal district court--
(1) shall suspend that attorney from the practice of law in
that Federal district court for 1 year; and
(2) may suspend that attorney from the practice of law in
that Federal district court for any additional period that the
court considers appropriate.
(b) Appeal; Stay.--An attorney has the right to appeal a suspension
under subsection (a). While such an appeal is pending, the suspension
shall be stayed.
(c) Reinstatement.--To be reinstated to the practice of law in a
Federal district court after completion of a suspension under
subsection (a), the attorney must first petition the court for
reinstatement under such procedures and conditions as the court may
prescribe.
SEC. 7. PRESUMPTION OF RULE 11 VIOLATION FOR REPEATEDLY RELITIGATING
SAME ISSUE.
Whenever a party attempts to litigate, in any forum, an issue that
the party has already litigated and lost on the merits on 3 consecutive
prior occasions, there shall be a rebuttable presumption that the
attempt is in violation of Rule 11 of the Federal Rules of Civil
Procedure.
SEC. 8. ENHANCED SANCTIONS FOR DOCUMENT DESTRUCTION.
(a) In General.--Whoever influences, obstructs, or impedes, or
endeavors to influence, obstruct, or impede, a pending court proceeding
through the intentional destruction of documents sought in, and highly
relevant to, that proceeding--
(1) shall be punished with mandatory civil sanctions of a
degree commensurate with the civil sanctions available under
Rule 11 of the Federal Rules of Civil Procedure, in addition to
any other civil sanctions that otherwise apply; and
(2) shall be held in contempt of court and, if an attorney,
referred to one or more appropriate State bar associations for
disciplinary proceedings.
(b) Applicability.--This section applies to any court proceeding in
any Federal or State court that substantially affects interstate
commerce.
Purpose and Summary
The Lawsuit Abuse Reduction Act of 2005 (``LARA''), H.R.
420, was introduced by Rep. Lamar Smith. H.R. 420 will restore
the teeth to Federal Rule of Civil Procedure 11 it once had to
deter frivolous Federal lawsuits. It would also extend Rule
11's protections to prevent frivolous lawsuits in state courts
when state judges determine a case would have national economic
consequences that affect interstate commerce. The bill would
also prevent forum shopping, the nefarious practice by which
personal injury attorneys bring lawsuits in courts that
notoriously and consistently hand down astronomical awards even
when the case has little or no connection to the court's
jurisdiction. H.R. 420 would prevent forum shopping by
requiring that personal injury cases be brought only in the
plaintiff's place of residence, where the plaintiff was
allegedly injured, where the defendant's principal place of
business is located, or where the defendant resides.
LARA would: (1) restore mandatory sanctions for filing
frivolous lawsuits in violation of Rule 11; (2) remove Rule
11's ``safe harbor'' provision that currently allows parties
and their attorneys to avoid sanctions for making frivolous
claims by withdrawing frivolous claims after a motion for
sanctions has been filed; (3) allow monetary sanctions,
including attorneys' fees and compensatory costs, against any
party making a frivolous claim; (4) apply Rule 11's provisions
to state cases a state judge finds affect interstate commerce;
(5) require that personal injury cases be brought only where
the plaintiff resides, where the plaintiff was allegedly
injured, where the defendant's principal place of business is
located, or where the defendant resides; (6) apply a ``three
strikes and you're out'' rule to attorneys who commit Rule 11
violations in Federal district court; (7) impose mandatory
civil sanctions for document destruction intended to obstruct a
pending court proceeding; and (8) provide that if a party
attempts to relitigate a losing claim more than three
consecutive times, there shall be a rebuttable presumption that
Rule 11 has been violated.
H.R. 420 applies to cases brought by individuals as well as
businesses (both big and small), including business claims
filed to harass competitors and illicitly gain market share.
The bill also applies to both plaintiffs and defendants.\1\
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\1\ Under the pre-1993 Rule 11, sanctions were imposed on
defendants for having raised frivolous defenses. In SEC v. Keating,
1992 WL 207918, [1992 Transfer Binder] Fed.Sec.L.Rep. (CCH) 96,906
(C.D.Cal.1992), the court imposed sanctions of the defendant Charles
Keating because 12 of 14 ``shotgun'' defenses were ``patently
frivolous.'' Sanctions were also imposed on defendants for filing
inappropriate Rule 11 motions; See Berger v. Iron Workers, 843 F.2d
1395 (D.C. Cir. 1988) (affirming in part per curiam 7 Fed. Rules Serv.
3d 306 (D.D.C. 1986)); and also for filing frivolous or harassing
counterclaims. See Aetna Insurance v. Meeker, 953 F.2d 1328 (11th Cir.
1992) (affirming district court Rule 11 sanction of defendants for
pursuing frivolous counterclaims of negligent salvage and conversion).
In Swanson v. Sheppard, 445 N.W.2d 654 (N.D.1989), for example, the
court imposed Rule 11 sanctions on the defendant because the defendant
counterclaimed ``simply to discourage the plaintiff from continuing
with his cause of action.'' Sanctions were imposed on defendants for
failing to conduct a reasonable inquiry into the legal basis for their
Rule 12(b)(6) motion to dismiss. In National Survival Game, Inc. v.
Skirmish, U.S.A., Inc., 603 F. Supp. 339 (S.D.N.Y. 1985), the court sua
sponte imposed Rule 11 sanctions on defendants' counsel on the ground
that counsel failed to conduct a reasonable inquiry into the legal
basis for the Rule 12(b)(6) motion to dismiss, stating ``Defendants
failed to cite a single case or authority in their two-page memorandum
[in support of the motion]. Apparently, they completely ignored the
firmly established precedents directly contradictory to their position.
No doubt exists that [defendants'] counsel failed to conduct the
`reasonable inquiry' that Rule 11 requires to ensure that a motion `is
warranted by existing law or a good faith argument for the extension,
modification or reversal of existing law . . .' '' Id. at 341-42. See
also Steele v Morris, 608 F. Supp. 274 (S.D.W.Va. 1985) (court granted
the plaintiff's motion for Rule 11 sanctions to be imposed upon the
defendant, concluding that the defendant's counsel failed to make
reasonable inquiry into both the facts and the law before filing a
motion to dismiss in this case which alleged, among other things, that
the plaintiff suffered emotional distress due to the defendant's
willful, deliberate, and outrageous conduct). Sanctions were also
imposed on defendants when they were found to have ignored firmly
established precedent. In National Survival Game, Inc. v. Skirmish,
U.S.A., Inc., 603 F. Supp. 339, 341-42 (S.D.N.Y. 1985), Rule 11
sanctions were imposed because defendants ``completely ignored the
firmly established precedents directly contradictory to their
position.'' See also Smith v. United Transp. Union Local 81, 594 F.
Supp. 96, 101 (S.D. Cal. 1984) (Rule 11 sanctions imposed where
defendants frivolously maintained suit by ignoring relevant law,
relying on irrelevant law, and basing arguments on vacated cases).
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The bill also expressly provides, in Section 5, that
``Nothing in'' the changes made to Rule 11 ``shall be construed
to bar or impede the assertion or development of new claims or
remedies under Federal, State, or local civil rights law.'' The
development of civil rights claims is thereby explicitly
protected under the bill's Rule 11 provisions.
Background and Need for the Legislation
H.R. 420 will prevent frivolous lawsuits and help dispel
the legal culture of fear that has come to permeate American
society.
FRIVOLOUS LITIGATION HAS A CORROSIVE EFFECT ON AMERICAN CULTURAL AND
SOCIAL INSTITUTIONS
As Philip Howard has pointed out, due to an onslaught of
frivolous lawsuits ``[l]egal fear has become a defining feature
of our culture.'' \2\ This values crisis caused by lawsuit
abuse reaches all parts of American society:
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\2\ Philip K. Howard, The Collapse of the Common Good: How
America's Lawsuit Culture Undermines Our Freedom (2001) at 11.
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Churches
In response to litigation against a church after a
parishioner committed suicide, churches have begun implementing
policies discouraging counseling by ministers. Instead,
parishioners are being referred to secular psychologists and
other therapists.\3\ According to a recent Newsweek cover
story, ``The Rev. Ron Singleton's door is always open. That
way, when the Methodist minister of a small congregation in
Inman, S.C., is counseling a parishioner, his secretary across
the hall is a witness in case Singleton is accused of
inappropriate behavior. (When his secretary is not around, the
reverend does his counseling at the local Burger King.)
Singleton has a policy of no hugging from the front; just a
chaste arm around the shoulders from the side. And he's
developed a lame little hand pat to console the lost and the
grieving. The dearth of hugging is `really sad,' he says, but
what is he going to do? He could ill afford a lawsuit.'' \4\
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\3\ Id. at 32.
\4\ Stuart Taylor, Jr. and Evan Thomas, ``Civil Wars'' Newsweek
(December 15, 2003) at 43.
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Schools
A recent poll found that ``[n]early 8 in 10 teachers (78%)
said students are quick to remind them that they have rights or
that their parents can sue.'' \5\
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\5\ Public Agenda, ``Teaching Interrupted: Do Discipline Policies
in Today's Public Schools Foster the Common Good?'' (May 2004) at 2-3.
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The Supreme Court's 1975 Goss v. Lopez \6\ decision
extended Federal due process rights to student discipline and
literally made every school discipline decision a potential
Federal case. According to Newsweek:
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\6\ 419 U.S. 565 (1975) (holding imposition of suspensions without
preliminary hearings violated students' due process rights guaranteed
by Fourteenth Amendment).
``Legal fear'' is just as intense in the educational
system. Many Americans sense that schools have become
chaotic and undisciplined over time and the quality of
teachers has declined. Many teachers say that the joy
has gone out of their jobs. What's not generally known
is the role of courts and Congress in creating these
problems by depriving teachers and principals of the
freedom to use their own common sense and best
judgment. Thanks to judicial rulings and laws over the
past four decades, parents can sue if their kids are
suspended for even a single day--for any reason--
without adequate ``due process.'' \7\
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\7\ Stuart Taylor, Jr. and Evan Thomas, ``Civil Wars'' Newsweek
(December 15, 2003) at 48.
Unruly students sense the teachers' fear and their own
empowerment. ``A kid will be acting out in class, and
you touch his shoulder, and he'll immediately come back
with `Don't touch me or I'll sue,' or, `You don't have
any witnesses,' '' says Rob Wiel, who taught high-
school math and coached football and baseball in the
Denver suburbs for 20 years before retiring
recently.\8\
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\8\ Id. at 49.
In New Jersey, ``A state judge . . . threw out a lawsuit
filed by an Atlantic County man who said assigned seating in a
school lunchroom violated his 12-year-old daughter's right to
free speech. Superior Court Judge Valerie Armstrong said
Galloway Township school administrators had the right to impose
the restriction to maintain order and safety in a cafeteria
that serves 260 students in each of four 30-minute lunch
periods.'' \9\
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\9\ John Curran, ``Judge Rejects a Rights Suit Over School's Lunch
Seating,'' The Philadelphia Inquirer (July 20, 2004) at B4.
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According to the St. Petersburg Times:
In Pinellas County [Florida], two Palm Harbor
University High School baseball players sued the school
district claiming they were wrongly booted from school
because of a roughhousing incident that occurred on a
team road trip. In Hillsborough County, Robinson High
School senior Nicole ``Nikki'' Youngblood filed suit
after her picture was left out of the school yearbook
when she refused to wear a feminine drape instead of a
shirt and tie as she wished. These two cases only
scratch the surface of lawsuits filed against local
public school districts on an almost daily basis. More
and more, offenses that used to be settled inside the
schoolhouse now end up at the courthouse. The result,
educators say, is less money for learning. ``We spend
millions and millions on attorney fees every year that
has nothing to do with the classroom,'' said Wayne
Blanton, executive director of the Florida School
Boards Association. ``Every lawsuit we have to defend
is money that doesn't get to the classroom.'' . . .
``Lots of people file suit,'' said Crosby Few,
Hillsborough School Board attorney. ``A lot of them are
frivolous.'' . . . In the book, Judging School
Discipline: The Crisis of Moral Authority, the authors
argue that the hundreds of lawsuits challenging school
disciplinary procedures have hurt the quality of public
education. One of the authors, Richard Arum, an
associate professor of sociology at New York
University, said just the threat of lawsuits keeps
teachers from taking charge of their classrooms.\10\
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\10\ Melanie Ave, ``Lawsuits Drain School Dollars'' St. Petersburg
Times (February 2, 2004) (emphasis added).
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And as the Arizona Republic has reported:
Scottsdale School Board member Christine Schild has
called the legal fees ``outrageous.'' . . . Legal bills
for the 2003-04 school year are estimated to be as high
as $675,000. This is the highest amount in recent
years, and possibly ever . . . Large school districts
routinely spend thousands of dollars each year on
attorneys. The most common expenses are for student
expulsion hearings and employee discipline . . . [D]ay-
to-day legal expenses involving disputes with employees
and student discipline are not covered by insurance and
come out of the operating budget.\11\
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\11\ Anne Ryman, ``Baracy to Pick In-house Attorney for School
District,'' The Arizona Republic (July 8, 2004) at 1.
Thanks to frivolous lawsuits, ``in America, hugging or,
indeed, even a pat on the back is now considered so dangerous
that teachers can't do it.'' \12\ According to Lynn Maher of
the New Jersey chapter of the National Education Association
(``NEA''), ``Our policy is basically don't hug children.'' \13\
The guidelines of the Pennsylvania chapter of the NEA urge
teachers to do no more than ``briefly touch'' a child's arm or
shoulder.\14\
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\12\ Philip K. Howard, The Collapse of the Common Good: How
America's Lawsuit Culture Undermines Our Freedom (2001) at 5.
\13\ Id. at 5.
\14\ Id. at 5.
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Salon.com has chronicled the threat frivolous lawsuits pose
to a successful program designed to get children to exercise
more by walking or bike riding to school. According to
Salon.com:
[A] new program is rising to the top in the bike-walk
hierarchy. It's called Safe Routes to School, a rapidly
expanding 4-year-old effort that coordinates
transportation, health and education agencies to get
children walking and biking to school. Statewide Safe
Routes programs are already underway in California,
Washington and Wisconsin, and the pending
reauthorization of the highway and transit bill, TEA-3,
contains a $1 billion appropriation for a Federal Safe
Routes to School program.
``It has the potential to become one of the best ways
to improve conditions for walking and biking,'' said
Clark, describing the broad cross-section of Safe
Routes supporters, including parents, including parents
and teachers, health agencies and urban planners.
``There's an unassailable coalition.''
Sharon Roerty, director of community programs at the
National Center for Bicycling and Walking in Bethseda,
Md., concurs. ``Safe Routes to School means a better
walking and biking environment for everyone,'' she
said. ``We picked schools because that's a motherhood
and apple pie. But it could be a senior center; it
could be a train station.''
But if Safe Routes to School is a case study in
successful grass-routes organizing, the story behind it
also unfolds as a classic--and damning--parable of
contemporary American culture .. . . Wendi Kallins,
project manager for the Marin County SR2S program,
which has become a national model for the burgeoning
movement, says parents routinely cite safety as the
main reason they prevent their kids from walking or
biking to school. But more often than not, parents'
safety arguments are like falling down the rabbit hole;
plunge deeper, and it gets curiouser and curiouser.
Fifty percent of the children hit by cars near schools
are hit by vehicles driven by parents of other
students, according to the National Highway Traffic
Safety Administration. Researchers for the Marin County
program found that up to 30 percent of morning traffic
is caused by parents driving their children to school.
(These figures have since been validated in other parts
of the country.) . . .
Fast forward to the 21st century, where liability
insurance for kids who walk or bike to school has
become one of the major challenges facing SR2S
advocates. In 2002, the Environmental Protection Agency
funded a $96,000 Portland project to develop a Walking
School Bus--in which groups of kids walk designated
routes to school under adult supervision--at a local
elementary school. Organizers spent months mapping safe
routes, conducting outreach to parents, and running
criminal background checks on senior citizens
volunteers, only to have the project collapse in the
absence of liability coverage for kids who might become
injured or go missing. A senior-citizen-led walking
school bus in Larkspur, Calif. Met with a similar fact,
according to Kallins.
``The fact that one would have to even consider kindly
senior citizens being sued for walking kids to school
says a lot about out culture,'' she observed.\15\
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\15\ Linda Baker, ``Walk to School, Yes, But Don't Forget Your
Lawyer,'' Salon.com (October 13, 2004).
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Doctor's Offices
According to Newsweek:
Dr. Sandra R. Scott of Brooklyn, N.Y., has never been
sued for malpractice, but that doesn't keep her from
worrying. As an emergency-room doctor, she often hears
her patients threaten lawsuits--even while she's
treating them. ``They'll come in, having bumped their
heads on the kitchen cabinet, and meanwhile I'll be
dealing with two car crashes,'' she says. ``And if they
don't have the test they think they should have in a
timely fashion, they'll get very angry. All of a
sudden, it's `You're not treating me, this hospital is
horrible, I'm going to sue you.' '' \16\ ``I'm only a
human being,'' she says. ``I'm an educated physician
but the miracles are out of my hands.'' \17\
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\16\ Stuart Taylor, Jr. and Evan Thomas, ``Civil Wars'' Newsweek
(December 15, 2003) at 43-44.
\17\ Id. at 51.
When Dr. Brian Bachelder moved back to Mt. Gilead,
Ohio, to practice family medicine in 1984, he hoped to
emulate the country doc who'd treated him as a kid . .
. But in recent years, Bachelder, 49, has watched
litigation reshape his practice. Last December, facing
malpractice premiums that soared from $12,000 in 2000
to $57,000 in 2003, Bachelder decided to lower his bill
by cutting out higher-risk procedures like vasectomies,
setting broken bones and delivering babies--even though
obstetrics was his favorite part of the practice . . .
Today the threat of litigation hangs over nearly every
move Bachelder makes, changing the very nature of his
relationship with patients. He worries that the
slightest mistake could provoke a lawsuit. ``Anything
less than perfection is malpractice,'' he says. Even in
confronting the most common ailments--headaches or ear
infections--Bachelder must consider the possibility of
a rare and devastating disease. He often orders
expensive tests--not just to rule out the worst, but
also to bolster his case before a potential jury . . .
Bachelder's fear of lawsuits isn't just theoretical--
he's been sued a half-dozen times in his 20-year
career. In one case, Bachelder referred a boy with a
bladder problem to a urologist. The urologist operated,
and the patient subsequently sued; Bachelder was also
named in the complaint. He was eventually dropped from
the case, but not before his liability insurance paid
out $40,000 in legal fees.\18\
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\18\ Debra Rosenberg, ``Hard Pill to Swallow'' Newsweek (December
15, 2003) at 46.
The most dangerously incompetent doctors often remain in
place for many years, in part because employers fear wrongful-
dismissal lawsuits by fired doctors even more than malpractice
suits by their victims.\19\
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\19\ Stuart Taylor, Jr. and Evan Thomas, ``Civil Wars'' Newsweek
(December 15, 2003) at 48.
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Sports
The New Yorker reports on how diving boards and U.S.
Olympic diving medals have both become a thing of the past due
to frivolous lawsuits: ``After a golden age in the seventies .
. . the American pool has suffered a gradual decline: thanks,
for the most part, to concerns about safety and liability,
diving boards have been removed and deep ends undeepened. . . .
Such developments have consequences. . . . In the last two
Olympics, medal counts for [once-dominant] American divers
reached their lowest levels since the 1912 Games.'' \20\
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\20\ Field Maloney, ``Cannonball!'' New Yorker, Talk of the Town
(September 8, 2004).
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According to Newsweek:
Ryan Warner is a volunteer who runs an annual softball
tournament in Page, Ariz., that usually raises about
$5,000 to support local school sports programs. But not
this year. A man who broke his leg at a recent
tournament sliding into third base filed a $100,000
lawsuit against the city, and Warner fears he may be
named as a defendant. ``It's very upsetting when you're
doing something for the community, not making any money
for yourself, to be sued over something over which you
had no control,'' he says. So Warner canceled the
tournament.\21\
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\21\ Id. at 44.
Parents, on behalf of their children, increasingly sue
not only for physical injuries, but for ``hurt
feelings'' when they don't make a team, says John
Sadler of Columbia, S.C., who insures amateur sports
leagues .. If a ref steps into a fight, he can be sued
if one of the players he is holding back takes a punch.
If the ref doesn't intervene, he can be sued for
allowing the fight to go on.\22\
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\22\ Id. at 49.
Even apparently innocent soccer moms are at risk. In
Jupiter, Fla., one mother volunteered to pick up a
pizza for the team. She drove over the foot of a child
who, left unattended, had run into the road. The police
did not even give the woman a ticket. But the parents
of the child sued the mother and the soccer league and
tried to sue the city, the refs and various
sponsors.\23\
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\23\ Id. at 49.
Other examples include the following. In Vestavia Hills,
Alabama, the father of Laura Brooke Smith ``sued [the] school
district, saying his daughter's rejection from the high school
cheerleading squad despite professional coaching has caused her
humiliation and mental anguish.'' \24\
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\24\ Fox News (May 31, 2001).
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In North Haven, Connecticut, the ``families of two high
school sophomores have filed a Federal lawsuit over the
school's decision to drop them from the drum majorette squad.''
\25\
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\25\ Ann DiMatteo, ``Families Sue Over Unfair Twirl Tryouts,'' The
New Haven Register, May 18, 2001.
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A student was barred from participating in her high
school's cheerleading tryouts ``as punishment for passing a
profane note on a . . . school bus in 2003.'' In response, her
father hired a lawyer and filed a lawsuit ``saying the
punishment violated his daughter's constitutional rights.'' An
appeals court dismissed the lawsuit, agreeing with school
officials that students ``do not have a constitutional right to
participate in extra-curricular activities.'' \26\
---------------------------------------------------------------------------
\26\ Kelly Melhart, ``Court Dismisses Suit over Punishment,'' Fort
Worth-Star Telegram (April 19, 2005).
---------------------------------------------------------------------------
And in Pennsylvania, ``[a] teenager, who felt she was
destined for greatness as a softball player, has filed a
$700,000 lawsuit against her former coach, alleging his
`incorrect' teaching style ruined her chances for an athletic
scholarship.'' \27\
---------------------------------------------------------------------------
\27\ Dave Sommers, ``Legal Pitch,'' The Trentonian, May 1, 2001.
---------------------------------------------------------------------------
ABC News reports that:
When his 16-year-old son didn't get the most valuable
player award, Michel Croteau didn't get upset. He hired
a lawyer and sued his son's youth hockey league to the
tune of more than $200,000 . . . The Croteaus are not
alone. In the last year, parents have filed more than
200 non-injury-related sports lawsuits against coaches,
leagues and school districts in the United States,
according to Gil Fried, a University of New Haven
professor who specializes in sports law . . . The
Butzke family sued the Comsewogue, N.Y., school
district because their eighth-grade daughter was taken
off the varsity high school soccer team. The Branco
family took legal action against the Washington
Township, N.J., school district after their son, David,
was cut from the junior varsity basketball team . . .
The Rubin family sued California's New Haven Unified
School District for $1.5 million because their son got
kicked off the varsity basketball team . . . The family
felt James Logan High School Coach Blake Chong may have
cost their son not just a scholarship, but an NBA
career.'' \28\
---------------------------------------------------------------------------
\28\ ABCNews.com Report, ``Blame the Coach? Angry Parents Take
School Coaches to Court'' (August 7, 2003).
In 1999, even major league baseball issued a directive to
players that they should no longer throw foul balls to eager
fans in the stands because there might be a lawsuit if someone
got hurt trying to recover a souvenir.\29\ Yet another lawsuit
was filed against Major League Baseball for injuries resulting
from being hit by a practice ball before Game One of the 2000
World Series.\30\
---------------------------------------------------------------------------
\29\ Philip K. Howard, The Collapse of the Common Good: How
America's Lawsuit Culture Undermines Our Freedom (2001) at 46.
\30\ Zach Haberman, ``Fan Blinded by Ball Sues Yanks for $5M,'' The
New York Post (April 11, 2005).
---------------------------------------------------------------------------
Playgrounds
The lawsuit culture is even changing the traditional
American landscape: playgrounds are increasingly removing
seesaws for fear of liability.\31\ According to Newsweek:
---------------------------------------------------------------------------
\31\ Id. at 3.
Playgrounds all over the country have been stripped of
monkey bars, jungle gyms, high slides and swings,
seesaws and other old-fashioned equipment once
popularized by President John F. Kennedy's physical-
fitness campaign. The reason: thousands of lawsuits by
people who hurt themselves at playgrounds. But some
experts say that new, supposedly safer equipment is
actually more dangerous because risk-loving kids will
test themselves by, for instance, climbing across the
top of a swing set. Other kids sit at home and get
fat--and their parents sue McDonald's.\32\
---------------------------------------------------------------------------
\32\ Stuart Taylor, Jr. and Evan Thomas, ``Civil Wars'' Newsweek
(December 15, 2003) at 44.
As Philip Howard has written, ``just letting a claim go to
a jury . . . will affect whether seesaws stay in playgrounds
all across America.'' \33\
---------------------------------------------------------------------------
\33\ Philip K. Howard, The Collapse of the Common Good (New York:
2001) at 58.
---------------------------------------------------------------------------
Today, a brochure from the National Program for Playground
Safety advises: ``Seesaw use is quite complex because it
requires two children to cooperate and combine their actions,''
and now ``there is a trend to replace [them] with spring-
centered seesaws.'' \34\ A culture of legal fear is actually
reducing the opportunities of American children to burn
calories in playgrounds.
---------------------------------------------------------------------------
\34\ U.S. Consumer Product Safety Commission, Handbook for Public
Playground Safety, Pub. No. 325 at 23.
---------------------------------------------------------------------------
Good Deeds
According to the Chicago Daily Herald:
By day, Dave Peterson works with diagnostic
multiplexers and beam shakers to maintain the Fermi
National Accelerator Laboratory's antiproton source.
But at dawn and dusk the Geneva resident drags a
homemade snowplow behind his daughter's Pacific Electra
mountain bike, clearing a 16-inch wide section of the
Fox River Trail as he rides to and from work in
Batavia. Because he rides at a time when few are
watching, he's become something of a local legend the
last two winters, a Bigfoot. ``It's one of those weird
things that has touched a nerve with a lot of people,''
Peterson said. A whole lot. In fact, many of the path's
regulars have come to expect it to be clear--and that
has put Peterson's plowing on hiatus. The county has
asked him to stop because if there's an expectation
that the trail will be plowed, there's a greater chance
for litigation, said Kane County Forest Preserve
District operations supervisor Pat McQuilkin. ``If a
person falls, you are more liable than if you had never
plowed at all. Crazy world,'' wrote AnnMarie Fauske,
the district's community affairs director, in response
to a letter to Peterson. ``Unfortunately, the times we
are in allow for a much more litigious environment than
common sense would dictate.'' . . . ``There is
something I can do here,'' Peterson said. ``I can use
my skills as an engineer to make life easier for the
little old ladies who walk on the path.'' But the
forest preserve worries that if they take a wrong step
and fall, those little old ladies might decide to
sue.\35\
---------------------------------------------------------------------------
\35\ Garrett Ordower, ``County Tells Bicyclist Thanks, But Stop
Plowing Trail,'' The Chicago Daily Herald (February 21, 2004).
---------------------------------------------------------------------------
The Girl Scouts
The Girl Scouts in Metro Detroit alone have to sell 36,000
boxes of cookies each year just to pay for liability
insurance.\36\ According to former Girl Scout Laurie Super [of
Downington, Pennsylvania], ``[i]t's getting harder to sell
[cookies] . . . Our local Wawa stores said they couldn't let
the girls set up their booth anymore, because of liability
issues.'' \37\
---------------------------------------------------------------------------
\36\ See ``Fine Filers of Frivolous Lawsuits,'' The Detroit News
(February 24, 2004).
\37\ Julia Moskin, ``Crave Thin Mints?'' The New York Times (March
14, 2004).
---------------------------------------------------------------------------
Santa Clause
Even Santa Claus lives under a constant threat of legal
harassment. As the Los Angeles Times quoted one Santa Claus,
``When I started doing this years ago, I never even thought
about liability . . . But Santas have a pretty good chance of
getting sued . . .'' \38\
---------------------------------------------------------------------------
\38\ J.R. Moehringer, ``Ho! Ho! Is More Like Uh-Oh,'' The Los
Angeles Times (December 23, 2004).
---------------------------------------------------------------------------
Everyone
The corrosive effects of lawsuit abuse were recently
summarized by Newsweek:
Americans will sue each other at the slightest
provocation. These are the sorts of stories that fill
schoolteachers and doctors and Little League coaches
with dread that the slightest mistake--or offense to an
angry or addled parent or patient--will drag them into
litigation hell, months or years of mounting legal fees
and acrimony and uncertainty, with the remote but scary
risk of losing everything . . . Americans don't just
sue big corporations or bad people. They sue doctors
over misfortunes that no doctor could prevent. They sue
their school officials for disciplining their children
for cheating. They sue their local governments when
they slip and fall on the sidewalk, get hit by drunken
drivers, get struck by lightning on city golf courses--
and even when they get attacked by a goose in a park
(that one brought the injured plaintiff $10,000). They
sue their ministers for failing to prevent suicides.
They sue their Little League coaches for not putting
their children on the all-star team. They sue their
wardens when they get hurt playing basketball in
prison. They sue when their injuries are severe but
self-inflicted, when their hurts are trivial and when
they have not suffered at all. Many of these cases do
not belong in court. But clients and lawyers sue
anyway, because they hope they will get lucky and win a
jackpot from a system that allows sympathetic juries to
award plaintiffs not just real damages--say, the cost
of doctor's fees or wages lost--but millions more for
impossible-to-measure ``pain and suffering'' and highly
arbitrary ``punitive damages.'' (Under standard
``contingency fee'' arrangements, plaintiffs' lawyers
get a third to a half of the take.) . . . Many
Americans sue because they have come to believe that
they have the ``right'' to impose the costs and burdens
of defending a lawsuit on anyone who angers them,
regardless of fault or blame. The cost to society
cannot be measured just in money, though the bill is
enormous, an estimated $200 billion a year, more than
half of it for legal fees and costs that could be used
to hire more police or firefighters or teachers.\39\
---------------------------------------------------------------------------
\39\ Stuart Taylor, Jr. and Evan Thomas, ``Civil Wars'' Newsweek
(December 15, 2003) at 44-45.
[T]he time may come when ordinary Americans recognize
that for every sweepstakes winner in the legal lottery,
there are millions of others who have to live with the
consequences--higher taxes and insurance rates,
educational and medical systems seriously warped by
lawsuits, fear and uncertainty about getting sued
themselves.\40\
---------------------------------------------------------------------------
\40\ Id. at 51. Although the American Trial Lawyers Association has
vociferously attacked the Newsweek article, Newsweek stands solidly by
its report, stating ``NEWSWEEK received a large volume of mail from
trial lawyers critical of our cover story. We stand by the story as
both accurate and fair. The criticisms are for the most part easily
refuted with material in the public record.'' Newsweek, ``Mail Call''
(January 12, 2004).
As Will Rogers once observed, Americans are ``letting
lawyers instead of their conscience be their guide.''
POLLS SHOW AMERICANS OVERWHELMINGLY SUPPORT LEGISLATION BARRING
FRIVOLOUS LAWSUITS
We all pay for these frivolous lawsuits through higher
prices as consumers and through higher taxes as taxpayers.
A recent poll found that 83% of likely voters believe there
are too many lawsuits in America, 76% believe lawsuit abuse
results in increased prices for goods and services, and 65%
said they would be more likely to vote for congressional
candidates who supported curbs on lawsuit abuse.\41\ Another
poll found that 73% of Americans support requiring sanctions
against attorneys who file frivolous lawsuits.\42\
---------------------------------------------------------------------------
\41\ See American Tort Reform Association, ``National Poll on Tort
Reform'' (February 27, 2003).
\42\ See Insurance Research Council, ``IRC Study Finds Strong
Support for Wide Variety of Civil Justice Reform Measures'' (April 5,
2004) at 4.
---------------------------------------------------------------------------
Small businesses rank the cost and availability of
liability insurance as second only to the costs of health care
as their top priority,\43\ and both problems are fueled by
frivolous lawsuits.
---------------------------------------------------------------------------
\43\ Bruce D. Phillips, ``Small Business Problems and Priorities''
(National Federation of Independent Business Research Foundation, June
2004).
---------------------------------------------------------------------------
When Business Week wrote an extensive article on what the
most effective legal reforms would be, Business Week stated
that what's needed is ``Penalties That Sting.'' As Business
Week recommends, ``Give judges stronger tools to punish
renegade lawyers. Before 1993, it was mandatory for judges to
impose sanctions such as public censures, fines, or orders to
pay for the other side's legal expenses on lawyers who filed
frivolous lawsuits. Then the Civil Rules Advisory Committee
(CRAC), an obscure branch of the courts, made penalties
optional. This needs to be reversed . . . by Congress.'' \44\
---------------------------------------------------------------------------
\44\ Mike France, ``Special Report--Tort Reform: How to Fix the
Tort System,'' Business Week (March 14, 2005) at 76.
---------------------------------------------------------------------------
The Class Action Fairness Act, which recently became
law,\45\ prohibits forum shopping when the case is styled as a
class action. The same policy should apply to individual
lawsuits as well, and LARA would fill that gap in policy. As
The Wall Street Journal said in a recent editorial, ``One
suggestion is blending class action reform with the Lawsuit
Abuse Reduction Act (LARA), a related measure that also passed
the House last year. LARA would also reduce forum shopping and
frivolous personal injury claims and fine lawyers who bring
them.'' \46\
---------------------------------------------------------------------------
\45\ Public Law No. 109-2.
\46\ ``Tort Reform Roadmap,'' The Wall Street Journal (editorial)
(January 27, 2005) at A12.
---------------------------------------------------------------------------
FRIVOLOUS LAWSUITS AGAINST INNOCENT VICTIMS HAVE BECOME COMMONPLACE,
ESPECIALLY THREATENING SMALL BUSINESSES AND HEALTH CARE
Because existing rules against frivolous lawsuits are
ineffective, as one commentator has pointed out, ``The right to
sue has been exploited by lawyers. They can gamble on taking
cases on a contingency basis because they need only win 1 in 10
to score the big judgment that will make up for the other
losses.'' \47\
---------------------------------------------------------------------------
\47\ Mortimer B. Zuckerman (Editorial) ``Welcome to Sue City,
U.S.A.'' U.S. News & World Report (June 16, 2003) at 64.
---------------------------------------------------------------------------
Small businesses and workers suffer. This year, the
nation's oldest ladder manufacturer, family-owned John S.
Tilley Ladders Co. of Watervliet, New York, near Albany, filed
for bankruptcy protection and sold off most of its assets due
to litigation costs. Founded in 1855, the Tilley firm could not
handle the cost of liability insurance, which had risen from 6%
of sales a decade ago to 29%, even though the company never
lost an actual court judgment. ``We could see the handwriting
on the wall and just want to end this whole thing,'' said
Robert Howland, a descendant of company founder John
Tilley.\48\
---------------------------------------------------------------------------
\48\ Carrie Coolidge, ``The Last Rung; The Tort System Takes Down a
149-year-old Ladder Manufacturer,'' Forbes (January 12, 2004) at 52.
---------------------------------------------------------------------------
A recent report by the AEI-Brookings Joint Center for
Regulatory Studies has concluded that ``The tort liability
price tag for small businesses in America is $88 billion a
year'' and that ``Small businesses bear 68 percent of business
tort liability costs, but take in only 25% of business
revenue.'' \49\ The small businesses studied in the report
account for 98% of the total number of businesses with
employees in the United States.\50\
---------------------------------------------------------------------------
\49\ Judyth Pendell and Paul Hinton, ``Liability Costs for Small
Business'' (U.S. Chamber Institute for Legal Reform, June, 2004) at 1
(``small business'' defined as ``those with less than $10 million in
annual revenue and at least one employee in addition to the owner'').
\50\ Id.
---------------------------------------------------------------------------
As Bernie Marcus, co-founder and former chairman of The
Home Depot, has described, ``An unpredictable tort system casts
a shadow over every plan and investment. It is devastating for
start-ups. The cost of even one ill-timed abusive lawsuit can
bankrupt a growing company and cost hundreds of thousands of
jobs. CEOs and their boards are forced to lower their
aspirations and hold back on innovations to manage defensively.
This is holding our nation back from competing effectively in
the global marketplace and offshore competition is seriously
cutting into market share for U.S. companies.'' \51\
---------------------------------------------------------------------------
\51\ Washington Legal Foundation, ``Conversations With . . .''
(Fall 2004).
---------------------------------------------------------------------------
Doctors and patients suffer. Before the 1960s, only one
physician in seven had ever been sued in their entire
lifetime,\52\ whereas today's rate is about one in seven
physicians sued per year.\53\
---------------------------------------------------------------------------
\52\ See ``Opinion Survey of Medical Professional Liability,'' JAMA
164:1583-1594 (1957).
\53\ See R. Bovbjerg, ``Medical Malpractice: Problems & Reforms,''
The Urban Institute, Intergovernmental Health Policy Project (1995).
---------------------------------------------------------------------------
Further, the Harvard Medical Practice Study found that over
half of the filed medical professional liability claims they
studied were brought by plaintiffs who suffered either no
injuries at all, or, if they did, such injuries were not caused
by their health care providers, but rather by the underlying
disease.\54\ The researchers found that, of the 47 medical
malpractice claims they studied that resulted in
litigation,\55\ ``[i]n 14 cases, the physicians reviewed the
record and found no adverse event. For most of these cases, the
physicians examined the outcome and concluded that the cause
was the underlying disease rather than medical treatment . . .
In these 14 cases, our physician reviewers took a stand
opposite to that of the plaintiff-patient's expert.'' \56\
Further, the reviewers found that in an additional 10 cases an
adverse event occurred, but there was no negligence on the part
of the health care provider.\57\ Of the 47 claims filed that
the researchers analyzed, less than half demonstrated any
actual negligence, and many demonstrated no discernable
injury.\58\
---------------------------------------------------------------------------
\54\ See Harvard Medical Practice Study to the State of New York,
Patients, Doctors, and Lawyers: Medical Injury, Malpractice Litigation,
and Patient Compensation in New York at 11-5 (1990) (``[T]he tort
system imposes the costs of defending claims on [health care] providers
who may not even have been involved in an injury, let alone a negligent
injury.'').
\55\ See id. at 7-1.
\56\ See id. at 7-33.
\57\ See id. at 7-33.
\58\ See also Paul Weiler, et al., A Measure of Malpractice (1993)
at 71 (``[Of those 47,] 10 claims involved hospitalization that had
produced injuries, though not due to provider negligence; and another
three cases exhibited some evidence of medical causation, but not
enough to pass our probability threshold. That left 26 malpractice
claims, more than half the total of 47 in our sample, which provided no
evidence of medical injury, let alone medical negligence.'').
---------------------------------------------------------------------------
EXAMPLES OF FRIVOLOUS LAWSUITS
Here are just a few examples of the frivolous lawsuits that
have tormented innocent Americans.\59\
---------------------------------------------------------------------------
\59\ Recently, Britain's most senior judges, the Appellate
Committee of the House of Lords, branded Britain's U.S.-style claims
system an ``evil'' that interferes with civil liberties and freedom in
a landmark ruling in a compensation case. In the case of Tomlinson v.
Congleton Borough Council, [2003] U.K.H.L. 47 (2003), the Appellate
Committee stated ``The pursuit of an unrestrained culture of blame and
compensation has many evil consequences and one is certainly the
interference with the liberty of the citizen. Of course there is some
risk of accidents arising out of the joie de vivre of the young, but
that is no reason for imposing a grey and dull safety regime on
everyone.''
According to Reuters, ``A lawsuit against . .
. U.S. weather forecasters . . . over the South Asian
tsunami disaster is fueling calls for greater curbs on
what critics say are frivolous cases brought by lawyers
out to make a quick buck. The suit, brought on behalf
of a group of tsunami victims, `perfectly illustrates'
the need for U.S. laws to hold lawyers liable for the
economic damages they inflict on those they sue, said
legal scholar Lester Brickman.'' \60\ The petition was
filed in Federal court in Manhattan.\61\
---------------------------------------------------------------------------
\60\ Gail Appleson, ``Tsunami Suit Shows Need to Curb Lawyers,
Critics Say,'' Reuters (March 8, 2005).
\61\ Id.
Austin Aitken filed a lawsuit against NBC's
``Fear Factor'' television program. Austin Aitken told
the Associated Press that he watches ``Fear Factor''
often and had no problem with past installments in
which the reality show's participants ate worms and
insects in pursuit of a $50,000 prize--but eating rats
went ``too far.'' Aitken says he became ``dizzy and
lightheaded'' and vomited after watching contestants
eat rats. He also ran into a doorway because he was
disoriented, ``causing suffering, injury and great
pain.'' Aitken's lawsuit asks for $2.5 million as
compensation. ``I just put any figure,'' he told the
Associated Press.\62\
---------------------------------------------------------------------------
\62\ ``Viewer Sues NBC Over Rat-Eating Fear Factor,'' Associated
Press (January 6, 2005).
U.S. District Judge Loretta Preska had to say
about the current state of Federal litigation:
``Plaintiffs here have lost their way; they need to
consult a map or a compass or a Constitution because
Plaintiffs have come to the judicial branch for relief
that may only be granted by the legislative branch.
This action is one of dozens of similar bootless
actions filed in twenty-three district courts across
the United States on behalf of uninsured and indigent
patients, wherein Plaintiffs argue, without basis in
law, that private non-profit hospitals are required to
provide free or reduced-rate services to uninsured
persons . . . This orchestrated assault on scores of
nonprofit hospitals, necessitating the expenditure of
those hospitals' scares resources to beat back
meritless legal claims, is undoubtedly part of the
litigation explosion that has been so well-documented
in the media . . . For the foregoing reasons, the
Defendants' motions to dismiss the above-captioned
actions are granted in their entirety with prejudice.
The Clerk of the Court shall mark these actions closed
and all pending motions denied as moot.'' \63\
---------------------------------------------------------------------------
\63\ Kolari v. New York-Presbyterian Hospital, 2005 WL 710452
(S.D.N.Y.), at *1-*2, *14.
Barbara Streisand sued the California Coastal
Records Project, which took thousands of pictures of
the California coastline intended to protect the
state's shoreline. The photographs are made available
free of charge to state and local governments,
university researchers, conservation organizations, and
others. Streisand sued because a picture of her Malibu
estate (her mansion composed only 3% of one photo among
thousands) was posted on the public interest
organization's Web site. She sued for $50 million (five
separate claims for $10 million each), but on May 10,
2004, Streisand was ordered to pay the people she sued
$154,000 in legal fees they accrued defending against
her ridiculous lawsuit.\64\
---------------------------------------------------------------------------
\64\ See Jennifer Pittman, ``The Blame Game'' The Silicon Valley/
San Jose Business Journal (January 9, 2004); Kenneth R. Weiss,
``Streisand Sues Over Photograph of Her Coast Home on Web Site,'' The
Los Angeles Times (May 30, 2003) at B1; Streisand v. Adelman, Case No.
SC077257 (Sup. Ct. Los Angeles Cty.) (complaint filed May 30, 2003);
Streisand v. Adelman, Case No. SC077257 (Sup. Ct. Los Angeles Cty.)
(ruling on submitted matters: Motion to Tax Costs and Motion for
Attorneys; Fees).
According to the Indianapolis Star, ``Indiana
drivers who get into wrecks with someone who is talking
on a cell phone can forget about suing the phone's
manufacturer. The Indiana Court of Appeals on Friday
dismissed an Evansville lawsuit in which Terry L.
Williams tried to do just that after a March 2002
traffic crash. Williams collided with Kellie Meagher,
who was allegedly talking on a Cingular Wireless phone.
In the lawsuit, Williams alleged Cingular knew--or
should have known--that Meagher would use the phone
while driving. Vanderburgh Superior Court Judge Mary
Margaret Lloyd dismissed Cingular from the suit. After
the dismissal, Williams asked the judge to reconsider,
citing new evidence that included a `Blondie' cartoon
strip in which Blondie, while talking on a cell phone,
caused an accident. But the Evansville judge was
unmoved. Now an appellate court also agrees that
Cingular was not liable.'' \65\
---------------------------------------------------------------------------
\65\ Kevin Corcoran, ``Court: Don't Blame Cell-Phone Maker for
Crash,'' The Indianapolis Star (June 5, 2004).
In April, 1995, Carl and Diana Grady sued
Frito Lay claiming that Dorito chips stuck in Charles
Grady's throat and tore his esophagus. The Gradys
wanted to present the ``expert'' testimony of Dr.
Charles Beroes to support their claim that Doritos are
inherently dangerous and negligently designed. Beroes'
research included pressing Doritos onto a scale until
the tip snapped off, and measuring the amount of time
it took saliva to soften the Doritos. None of Beroes'
tests involved chewing. After eight years of costly
litigation, the Pennsylvania Supreme Court threw out
the case, noting that Dr. Beroes' tests ``smacked of a
high school science fair project and did not bear any
relationship to the reality of the . . . consumption of
foodstuffs.'' \66\ Justice Saylor pointed out in his
concurring opinion ``the common sense notion that it is
necessary to properly chew hard foodstuffs prior to
swallowing.'' \67\
---------------------------------------------------------------------------
\66\ Grady v. Frito-Lay, Inc., 839 A.2d 1038, 1042 (8th Cir. 2003)
(citing Grady v. Frito-Lay, Inc., 2000 WL 33436367, at *2) (Pa.Com.Pl.
April 3, 2000)).
\67\ Id. at 1053 (Saylor, J., concurring).
After three years of litigation, an appeals
court finally held that the survivor of a crash cannot
sue an airline for punitive damages when the pilots did
not intentionally crash the plane. At midnight on June
1, 1999, during a severe thunderstorm, a fully loaded
American Airlines jet crashed while trying to land in
Little Rock, Arkansas. Eleven people died, including
the pilot. Two passengers sued seeking compensatory and
punitive damages. A U.S. district court judge ruled
that ``uncontroverted evidence'' showed the pilots had
a good faith belief that the plane could be landed
safely.\68\ Upholding the district court's decision,
Judge Morris Arnold held that no reasonable jury could
find that the members of the flight crew crashed the
plane on purpose. Judge Morris wrote, ``[s]tated
differently, we hold that no reasonable jury could find
that the members of the flight crew knew, or ought to
have known, in light of the surrounding circumstances,
that their conduct would naturally and probably result
in injury.'' \69\
---------------------------------------------------------------------------
\68\ In re: Aircraft Accident at Little Rock, Arkansas on June 1,
1999, 231 F.Supp. 852, 879 (E.D.Ark. 2002).
\69\ Id. at 878-79.
After five years of litigation, the Nevada
Supreme Court dismissed the appeal of Lane Holmes, who
sued the Turtle Stop in Las Vegas, claiming a cup
caused him to suffer leg burns from dripping hot
coffee.\70\ The court upheld the decision of the trial
court that ruled ``[t]he danger is open and obvious.''
\71\
---------------------------------------------------------------------------
\70\ Holmes v. Turtle Stop, Inc., 62 P.3d 1165 (2000).
\71\ Cy Ryan, ``Court Says Warning About Hot Coffee Unnecessary,''
The Las Vegas Sun (July 11, 2000).
A woman in Knoxville, Tennessee, sought
$125,000 in damages against McDonald's, claiming a hot
pickle dropped from a hamburger, burning her chin and
causing her mental injury. Her husband also sued for
$15,000 for loss of consortium.\72\
---------------------------------------------------------------------------
\72\ See Randy Kenner, ``Lawsuit on Hot Pickle Draws Attention
Around the Globe,'' Knoxville News-Sentinel (October 10, 2000) at A1.
On September 3, 2003, a Federal district
judge in New York threw out for a second time a lawsuit
filed on behalf of obese children claiming McDonald's
Corporation was legally responsible for their over-
consumption of food.\73\ The court earlier noted the
national ramifications of the complaint and the
requested damages, stating ``McDonalds has also,
rightfully, pointed out that this case, the first of
its kind to progress far enough along to reach the
stage of a dispositive motion, could spawn thousands of
similar `McLawsuits' against restaurants . . . The
potential for lawsuits is even greater given the
numbers of persons who eat food prepared at other
restaurants in addition to those serving fast food.''
\74\
---------------------------------------------------------------------------
\73\ See Pelman v. McDonald's Corp., S.D.N.Y. 02 Civ. 7821 (RWS),
at 34-35 (September 3, 2003).
\74\ Pelman v. McDonald's Corp., 237 F.Supp.2d 512, 518 (S.D.N.Y.
2003).
The Michigan Court of Appeals threw out a
case brought by Richard Overton, who ``pointed to
defendant's television advertisements featuring Bud
Light as the source of fantasies coming to life,
fantasies involving tropical settings, and beautiful
women and men engaged in unrestricted merriment.
Plaintiff sought monetary damages in excess of $10,000,
alleging that defendant's misleading advertisements had
caused him physical and mental injury, emotional
distress, and financial loss.'' \75\
---------------------------------------------------------------------------
\75\ Overton v. Anheauser-Busch Co., 517 N.W.2d 308, 309 (Mich.
App. 1994).
In Florida, a woman sued Universal Studios
for $15,000 for ``extreme fear, emotional distress and
mental anguish'' because the theme park's annual
haunted house was too scary.\76\
---------------------------------------------------------------------------
\76\ Tim Barker, ``Universal Fall Leads to Lawsuit,'' Orlando
Sentinel (January 5, 2000) at C1.
After over three years of litigation,
Georgia's Court of Appeals held that the day trading
firms where Mark Barton invested before embarking on a
shooting rampage are not liable for the victims'
injuries and deaths. A unanimous panel on the court
stated ``We find this case is one in which the issue of
proximate cause is so plain, palpable and indisputable
as to demand summary judgment for the defendants.''
\77\ The court noted that it was ``troubled by the
implication that the list of defendants potentially
liable for any person's violence, if sparked by
economic misfortune, would be limited only by the
number of stock brokers, investment advisers, lawyers,
business partners, lottery ticket sellers, etc., whom
the assailant blamed for his financial losses.'' \78\
---------------------------------------------------------------------------
\77\ Brown v. All-Tech Investment Group, 2003 WL 23315394 (Ga.
App.) at *5.
\78\ Id. at *7, n.5.
After a decade of litigation, Texas' 1st
Court of Appeals reversed a $43 million judgment
against a car manufacturer in a products liability suit
that alleged a defective seat belt caused the 1992
drowning death of a woman with a blood-alcohol level of
0.17 who failed to escape from her Honda Civic when it
became submerged under water.\79\
---------------------------------------------------------------------------
\79\ Honda of America Manufacturing, Inc. v. Norman, 104 S.W.3d.
600 (2003) (Tex.App. 1st.).
The family of a man who died on a fishing
trip sued the Weather Channel for $10 million, claiming
that the man relied on the channel's forecast for his
safety. In dismissing the case, the Miami Federal court
stated that if forecasters were held accountable, ``the
duty could extend to farmers who plant their crops
based on a forecast of no rain, construction workers
who pour concrete or lay foundation based on the
forecast of dry weather, or families who got to the
beach for the weekend.'' \80\
---------------------------------------------------------------------------
\80\ See ``Storm Death Is Not Weatherman's Fault,'' New York Post
(March 29, 1999) at 84.
A West Virginia man who fell down an
escalator at an airport finally dropped a lawsuit filed
against US Airways over the accident. According to the
Associated Press, ``The lawsuit in circuit court in
Fort Myers alleged the airline didn't warn Floyd
Shuler, 61, about the adverse affects of drinking
alcohol on a plane. Shuler said in a news release from
Wheeling, W.Va., that he didn't intend for the suit to
be filed. `I learned about the filing of the lawsuit
against US Airways . . . along with everyone else,'
Shuler said. `It was never my intent to take on the
airline industry. I apologize for any inconvenience
this has caused US Airways.' Shuler's attorney, Paul
Kutcher, did not return a phone call from The
Associated Press seeking comment. The suit . . . said
US Airways was negligent by failing to warn Shuler that
the effects of alcohol are greater at night on airline
passengers. The suit also alleged that the company did
not properly maintain the escalator at Southwest
Florida International Airport when he fell down it on
Aug. 28, 1999, and it sought damages in excess of
$15,000.'' \81\
---------------------------------------------------------------------------
\81\ Associated Press, ``Man Drops Suit Filed Against Airline After
He Drank Booze, Fell,'' USA Today (April 4, 2004).
Several months after the Escondido,
California library's resident cat attacked Richard
Espinosa's 50-pound Labrador-mix assistance dog,
Espinosa filed a $1.5-million claim against the city,
alleging that he was harmed due to the dog's injuries.
According to the legal papers filed, Espinosa claimed
his Federal and state constitutional rights were
violated and that ``. . . the defendants actions and
subsequent inactions caused Espinosa to suffer
significant lasting, extreme and severe mental anguish
and emotional distress including, but not limited to,
terror, humiliation, shame, embarrassment,
mortification, chagrin, depression, panic, anxiety,
flashbacks, nightmares, loss of sleep . . .'' \82\
According to the North County Times, ``It took a jury
little more than 2 hours of deliberation Friday to
reject a claim from a man that the city of Escondido
violated his civil rights when a cat living in a city
library attacked his assistance dog more than 3 years
ago . . . Espinosa originally asked for $1.5 million in
compensation and damages . . . During jury selection
Wednesday, Judge Hofmann excused four potential jurors
who said they felt the case was `frivolous' and that
they could not be impartial. Others also said the case
was without merit, but said they could look beyond that
feeling. `After that first juror said the word
``frivolous,'' and so did the next five, I thought the
whole panel should have been thrown out,' Espinosa said
. . . The city offered twice to settle with Espinosa,
including one offer of $1,000. Espinosa declined.
Nelson was unable to estimate how much the city spent
defending itself against Espinosa's allegations, but he
said it was a considerable sum. He also said the case
could drag on for months or years if Espinosa does
appeal.'' \83\
---------------------------------------------------------------------------
\82\ Chuck Shepherd, ``News of the Weird,'' The Orlando Weekly
(August 30, 2001).
\83\ Teri Figueroa, ``Jury Rejects Claim by Man in Attack on Dog by
Library Cat,'' The North County Times (January 20, 2004).
In Ohio, Hamilton County Commissioner Todd
Portune sued the Bengals and the National Football
League claiming the team violated its stadium lease by
failing to be competitive. The complaint, which also
named the other 31 NFL franchises as defendants,
alleges fraud, civil conspiracy, antitrust violations
and breach of contract.\84\
---------------------------------------------------------------------------
\84\ Terry Kinney (the Associated Press) ``Commissioner Sues
Bengals, NFL'' (January 31, 2003).
After three years of litigation, the Nebraska
Supreme Court upheld a lower court ruling and found
Ford Motor Co. and Bridgestone/Firestone Inc. not
liable for the death of a woman killed by a man who
gave her a lift after she got a flat tire. The woman's
parents claimed in the lawsuit that a Firestone
Wilderness AT tire on their daughter's Ford Explorer
failed, setting off the chain of events that resulted
in her death. The Nebraska court said the companies
could not have foreseen the murderer's criminal
acts.\85\
---------------------------------------------------------------------------
\85\ Kevin O'Hanlon, ``Court: Faulty Tire Didn't Cause Murder,''
the Associated Press (August 8, 2003).
According to the Albany Times Union, ``The
spectacle of American spending always gets a little
silly in the holiday season, but shoppers over the next
few weeks will be hard-pressed to match the performance
last year of Antoinette Millard. She ran up bills of
almost $1 million in New York luxury stores like
Cartier and Barneys, and, according to court papers,
Millard is now suing American Express for improperly
soliciting her to sign up for a big-spender's credit
card, her purchasing weapon of choice.'' \86\
---------------------------------------------------------------------------
\86\ Steve Lohr, ``Buying Easy, Paying Hard,'' Times Union
(December 5, 2004) at A1.
The Court of Appeals of Indiana had this to
say about a recent lawsuit brought by a man who sued
his cell phone company because he got in an accident
---------------------------------------------------------------------------
while using it in his car. The court stated:
LWith respect to Cingular, the complaint alleged:
``That at the time of this collision the defendant
Meagher was utilizing a telephone furnished by Cingular
Wireless. That Cingular Wireless was negligent in
furnishing a cellular phone to Meagher when it knew, or
should have known, that it would be used while the user
operated a motor vehicle.'' . . . A cellular phone does
not cause a driver to wreck a car. Rather, it is the
driver's inattention while using the phone that may
cause an accident . . . For example, many items may be
used by a person while driving, thus making the person
less attentive to driving. It is foreseeable to some
extent that there will be drivers who eat, apply make
up, or look at a map while driving and that some of
those drivers will be involved in car accidents because
of the resulting distraction. However, it would be
unreasonable to find it sound public policy to impose a
duty on the restaurant or cosmetic manufacturer or map
designer to prevent such accidents. It is the driver's
responsibility to drive with due care. Similarly,
Cingular cannot control what people do with the phones
after they purchase them. To place a duty on Cingular
to stop selling cellular phones because they might be
involved in a car accident would be akin to making a
car manufacturer stop selling otherwise safe cars
because the car might be negligently used in such a way
that it causes an accident . . . Ultimately, sound
public policy dictates that the responsibility for
negligent driving should fall on the driver.
Legislation has already been drafted to address the
issue of cellular phone use while driving and to place
the responsibility on the driver to refrain from doing
so. We are confident that the legislature is taking
appropriate measures to protect public safety, and that
is both its right and duty.'' \87\
---------------------------------------------------------------------------
\87\ Williams v. Cingular Wireless, No. 82A01-0312-CV-476 (Ct. App.
Ind. June 4, 2004), at 2, 7-9.
---------------------------------------------------------------------------
TODAY'S PRODUCT WARNINGS ARE A SAD TESTAMENT TO THE LEGAL CULTURE OF
FEAR
Today, testaments to the age of frivolous lawsuits are
written on all manner of product warnings that aim to prevent
obvious misuse. A label on a snow sled says ``Beware: sled may
develop a high speed under certain snow conditions.'' \88\ One
warning label on a toilet brush states ``Do not use for
personal hygiene.'' \89\ A 5-inch brass fishing lure with three
hooks is labeled ``Harmful if swallowed.'' A warning on an
electric router made for carpenters states ``This product not
intended for use as a dental drill.'' A warning label on a baby
stroller cautions ``Remove child before folding.'' A sticker on
a 13-inch wheel on a wheelbarrow warns ``Not intended for
highway use.'' A dishwasher carries the warning ``Do not allow
children to play in the dishwasher.'' A manufactured fireplace
log states ``Caution--Risk of Fire.'' A household iron contains
the warning ``Never iron clothes while they are being worn.''
\90\ And a cardboard car sun shield that keeps sun off the
dashboard warns ``Do not drive with sun shield in place.'' \91\
---------------------------------------------------------------------------
\88\ As one commentator has remarked, ``yet another popular
sledding hill'' closed in Methuen, Massachusetts because nobody wants
to ``assume the risk of paying damages for anyone who gets hurt. Of
course, in a world with common sense, [we] wouldn't have to worry about
it.'' Taylor Armerding, ``Liability, Litigation Make Sled Tracks
Disappear,'' Gloucester Daily Times (December 28, 2004).
\89\ David N. Goodman, ``Toilet Brush Warning Wins Consumer
Award,'' The Associated Press (January 6, 2005).
\90\ Sonny Garrett, ``Warning: People Are as Dumb as You Think,''
The Baxter Bulletin (April 17, 2004) (compiling list from Michigan
Lawsuit Abuse Watch in Annual Wacky Warning Label Contest).
\91\ Larry D. Hatfield, ``Dumbest Warning Labels Get their Due,''
The San Francisco Chronicle (January 24, 2002).
---------------------------------------------------------------------------
THE COSTS OF FRIVOLOUS LITIGATION
It should be emphasized that statistics do not capture the
very real experiences of victims of lawsuit abuse that
constituents suffer, and this debate is not about aggregate
statistics regarding the number of lawsuits filed.
However, requiring sanctions when judges find lawsuits are
frivolous will surely deter many frivolous cases from being
brought. That will be a good thing, considering the cost of
today's tort system to Americans is staggering. After leveling
off during the 1990's, the system's direct costs soared by a
stunning 14.4% in 2001 and another 13.3% in 2002, to a 2002
total of $233 billion, the equivalent of a 5% tax on wages,\92\
according to a report released by Tillinghast-Towers Perrin,
which publishes the most definitive trend statistics on tort
system costs. Inflation-adjusted direct U.S. tort costs per
person have shot from $89 in 1950 to $809 in 2002.\93\
---------------------------------------------------------------------------
\92\ Tillinghast-Towers Perrin, U.S. Tort Costs: 2003 Update:
Trends and Findings on the Costs of the U.S. Tort System, at 1.
Tillinghast's reports on tort system costs are funded internally.
\93\ Id. at 1.
---------------------------------------------------------------------------
The costs of America's lawsuit culture are staggering. As
chronicled by Sebastian Mallaby in The Washington Post:
The most complete study of the tort system's cost comes
from the consulting firm Tillinghast-Towers Perrin.
Tillinghast's clients are mainly insurers, which are at
loggerheads with the trial bar, so you may mistrust its
data. Nonetheless, Tillinghast has published seven
updates to its original 1985 study, refining its
methodology along the way. Its numbers are the best
available. And they are stunning . . . the really
shocking thing is where the billions went. Injured
plaintiffs--the fabled little guys for whom the system
is supposedly designed--got less than half the money.
According to Tillinghast's 2002 data, plaintiffs'
lawyers swallowed 19 percent of the $233 billion.
Defense lawyers pocketed an additional 14 percent, and
other administrative costs, mainly at insurance firms,
accounted for a further 21 percent. The legal-
administrative complex thus guzzled fully 54 percent of
the money in the tort system, or $126 billion. That's
43 times as much as the Federal Government has budgeted
this year to combat the global AIDS pandemic. No other
system for compensating misfortune has such outrageous
administrative costs. To guard against the possibility
of sickness, people buy medical insurance. The health
insurance industry, justly regarded as a paper-clogged
nightmare, has administrative costs of 14 percent. To
guard against the danger of disability, we have the
Social Security program. The overhead for the Social
Security disability system is around 3 percent. If you
want a really good number to set against the 54 percent
overhead in the tort system, just take a look at
Medicare. Its overhead is about 2 percent. So the tort
system's administrative costs are a scandal . . .
Measured as a share of GDP, America's tort system is
more than twice as expensive as it was in 1960, twice
as expensive as the current systems in France or
Canada, and three times as expensive as the system in
Britain. A reasonable goal for the American tort system
is to halve it.\94\
---------------------------------------------------------------------------
\94\ Sebastian Mallaby, ``The Trouble with Torts,'' The Washington
Post (January 10, 2005) at A17. See also U.S. Tort Costs: 2004 Update:
Trends and Findings on the Cost of the U.S. Tort System, Towers Perrin
Tillinghast (2004) (``Looking ahead, we anticipate growth in U.S. tort
costs to range from 5% to 8% in 2005, with a midpoint of 6.5% We expect
a similar increase in 2006.'').
---------------------------------------------------------------------------
As columnist Stuart Taylor, Jr., has observed:
The most recent NCSC [National Center for State Courts]
report states that its (incomplete) data ``indicate a
40 percent increase in tort filings'' from 1975 to
2002. Census figures indicate that the population
increase from 1975 to 2002 was about 33 percent. So
tort filings per capita have not declined by 8 percent
since 1975; they have increased somewhat . . . And
although the tort system's inflation-adjusted direct
costs per capita did decline modestly during the
1990's, they soared by a stunning 14.4 percent in 2001
and another 13.3 percent in 2002, to an estimated 2002
total of $233 billion. The tort system consumes 2.2
percent of GDP in the U.S.--almost four times the
percentage in 1950; more than triple the 0.6 percent in
the United Kingdom; and more than double the 0.8
percent in Japan, France, and Canada.\95\
---------------------------------------------------------------------------
\95\ Stuart Taylor, Jr., `` `False Alarm' by Stephanie Mencimer
[Washington Monthly, Oct. 2004]--A Response by Stuart Taylor, Jr.
[Newsweek, National Journal],'' available at http://
www.overlawyered.com/pages/taylormencimerwashingtonmonthly.html.
According to the Economic Report of the President, ``The
expansive tort system has a considerable impact on the U.S.
economy. Tort liability leads to lower spending on research and
development, higher health care costs, and job losses.'' \96\
And according to the Council of Economic Advisers, ``the United
States tort system is the most expensive in the world, more
than double the average cost of other industrialized nations.''
\97\ The direct costs of medical malpractice claims jumped by
an average of 11.9 percent a year from 1975 to 2002.\98\
---------------------------------------------------------------------------
\96\ Economic Report of the President (February 2004) at 203.
\97\ Council of Economic Advisers, ``Who Pays for Tort Liability
Claims? An Economic Analysis of the U.S. Tort Liability System'' (April
2002) at 1.
\98\ Tillinghast-Towers Perrin, U.S. Tort Costs: 2003 Update:
Trends and Findings on the Costs of the U.S. Tort System, at 2.
---------------------------------------------------------------------------
Of the $233 billion total, only 22 cents on the dollar went
to compensate alleged victims' economic losses; almost as much
(19 cents) went to their lawyers; 24 cents went to payments for
inherently unquantifiable noneconomic losses, mainly pain and
suffering; 14 cents went to defense costs; and 21 cents went to
insurance overhead costs.\99\
---------------------------------------------------------------------------
\99\ Id. at 17. According to an analysis of a report by the
National Center for State Courts by Newsweek's Stuart Taylor, Jr.,
although tort filings declined by 9 percent from 1992 to 2001, almost
all of that decline came in routine car-crash lawsuits. The report
shows that medical malpractice claims increased by 24 percent from
1992-2001 and that total tort filings soared by 40 percent from 1975 to
2001, despite a dip during the 1990's. See Stuart Taylor, Jr. Response
to ATLA's Claims, available at http://www.overlawyered.com/archives/
000708.html. Chief Justice Rehnquist released new data on January 1,
2004, showing an 8 percent drop in civil filings in fiscal year 2003,
``primarily as a result of decreases in personal injury/product
liability cases involving asbestos (such filings had soared 98 percent
the previous year).'' William H. Rehnquist, 36 The Third Branch 1
(January 2004), 2003 Year-End Report on the Federal Judiciary, Chapter
III, n.5. See also Economic Report of the President (February 2004), at
204-05 (``The number of injuries handles by the tort system has
increased along with expenditures. The number of filings per capita
started to rise in the early 1980's and peaked in the mid-1980's, at
least in the 16 states for which data on lawsuit filings are available
between 1975 and 2000. Much of the decline in filings since 1985
appears to have occurred in California, where medical liability reforms
included a $250,000 limit for noneconomic damages that was found
constitutional in 1985.'').
---------------------------------------------------------------------------
A recent report by Judyth Pendell, Senior Fellow at the
AEI-Brookings Joint Center for Regulatory Studies, and Paul
Hinton, Vice President of NERA Economic Consulting, has
concluded that ``The tort liability price tag for small
businesses in America is $88 billion a year'' and that ``Small
businesses bear 68 percent of business tort liability costs,
but take in only 25% of business revenue.'' \100\ The small
businesses studied in the report account for 98% of the total
number of businesses with employees in the United States.\101\
---------------------------------------------------------------------------
\100\ Judyth Pendell and Paul Hinton, ``Liability Costs for Small
Business'' (U.S. Chamber Institute for Legal Reform, June, 2004) at 1
(``small business'' defined as ``those with less than $10 million in
annual revenue and at least one employee in addition to the owner'').
\101\ Id.
---------------------------------------------------------------------------
Without the serious threat of punishment for filing
frivolous lawsuits, innocent individuals and companies will
continue to face the harsh economic reality that simply paying
off frivolous claimants through monetary settlements is often
cheaper than litigating the case. If it costs $10,000 to defend
yourself in court against frivolous charges, it makes financial
sense to settle the case for $9,000, even if you weren't at
fault in any way. This perverse dynamic not only results in
legalized extortion, but it leads to increases in the insurance
premiums all individuals and businesses must pay.\102\
---------------------------------------------------------------------------
\102\ Opponents of reform often claim that contingency fees--
agreements by which personal injury attorneys are allowed a percentage
cut from any monetary damages awarded to their client--provide a
``screening mechanism'' that weeds out frivolous cases. The argument
used is that personal injury attorneys will not take frivolous cases
because doing so would leave them with no monetary recovery. The
perverse dynamic outlined above, and the fact that filing fees are
usually no more than a hundred dollars and additional defendants can be
named in the lawsuit at no extra charge, makes clear that contingency
fee agreements provide no effective screening mechanism at all since
personal injury attorneys can simply take advantage of the legal costs
they impose on defendants simply in virtue of their filing a case to
extort money from those they sue.
---------------------------------------------------------------------------
The incentives for personal injury lawyers to file
meritless nuisance lawsuits for their settlement value are
clear. As leading commentators from Harvard Law School have
described the situation under current law:
[T]he plaintiff may choose to file a claim at some
(presumably small) cost. If the defendant does not then
settle with the plaintiff and does not, at a cost,
defend himself, the plaintiff will prevail by default
judgment . . . Given the model and the assumption that
each party acts in his financial interest and realizes
the other will do the same, it is easy to see how
nuisance suits can arise. By filing a claim, any
plaintiff, and thus the plaintiff with a weak case,
places the defendant in a position where he will be
held liable for the full judgment demanded unless he
defends himself. Hence, the defendant should be willing
to pay a positive amount in settlement to the plaintiff
with a weak case--despite the defendant's knowledge
that were he to defend himself, such a plaintiff would
withdraw.\103\
---------------------------------------------------------------------------
\103\ D. Rosenberg and S. Shavell, ``A Model in which Suits are
Brought for their Nuisance Value,'' 5 International Rev. of Law and
Economics 3, 3 (June 1985).
These commentators point out that defendants will always
have to suffer extortion through nuisance lawsuits because ``to
defeat a claim, the defendant will have to engage in actions
that are frequently more expensive than the plaintiff's cost of
making the claim, for the defendant will have to gather
evidence supporting his contention that he was not legally
responsible for harm done to the plaintiff or that no harm was
actually done.'' \104\ The same commentators offer the
following illustration:
---------------------------------------------------------------------------
\104\ Id. at 10.
Suppose, for instance, that the plaintiff files a claim
and demands $180 in settlement. The defendant will then
reason as follows. If he settles, his costs will be
$180. If he rejects the demand and does not defend
himself, he will lose $1000 by default judgment. If he
rejects the demand and defends himself, the plaintiff
will withdraw, but he will have spent $200 to
accomplish this. Hence, the defendant's costs are
minimized if he accepts the plaintiff's demand for
$180; and the same logic shows that he would have
accepted any demand up to $200. It follows that the
plaintiff will find it profitable to file his nuisance
claim; indeed, this will be so whenever the cost of
filing is less than the defendant's cost of
defense.\105\
---------------------------------------------------------------------------
\105\ Id. at 4.
Personal injury lawyers can always extort money from
innocent victims by filing nuisance lawsuits for their
settlement value. H.R. 420 will prevent such extortion by
giving victims an opportunity they do not have now to get
financial compensation for the costs they are forced to bear by
legal tormentors filing frivolous lawsuits.
H.R. 420: THE LAWSUIT ABUSE REDUCTION ACT (``LARA'')
What follows is a discussion of the need for The Lawsuit
Abuse Reduction Act (``LARA''), which was introduced by
Congressman Lamar Smith on June 15, 2004.
Section 2 of LARA: Attorney Accountability
As President Bush has stated, ``We have a responsibility to
confront frivolous litigation head on.'' \106\ The Lawsuit
Abuse Reduction Act of 2005 (``LARA''), H.R. 420, would do just
that by providing for appropriate sanctions against frivolous
lawsuits.
---------------------------------------------------------------------------
\106\ CBS: Evening News (February 18, 2005).
---------------------------------------------------------------------------
Federal Rule of Civil Procedure 11 (``Rule 11''), as
originally adopted and prior to the adoption of weakening
amendments in 1993, was widely popular among Federal judges,
and it served to significantly limit lawsuit abuse.
In 1990, the Judicial Conference's Advisory Committee on
Civil Rules undertook a review of Rule 11 and asked the Federal
Judicial Center to conduct an empirical study of its operation
and impact. The survey of 751 Federal judges found that an
overwhelming majority of Federal judges believed that Rule 11
did not impede development of the law (95%); the benefits of
the rule outweighed any additional requirement of judicial time
(71.9%); the 1983 version of Rule 11 had a positive effect on
litigation in the Federal courts (80.9%); and the rule should
be retained in its then-current form (80.4%).\107\
---------------------------------------------------------------------------
\107\ 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). A subsequent survey conducted by the Federal
Judicial Center in June, 1995, consisting of 148 Federal judges and
over 1,000 trial attorneys found that the 1993 amendments that
disallowed monetary compensation for victims of frivolous lawsuits were
a bad idea. In that survey, two-thirds of judges (66%), defense
attorneys (63%), and other attorneys (66%), and even a substantial
portion of plaintiff's attorneys (43%), supported restoring Rule 11's
compensatory function once again. See John Shapard et. al., Federal
Judicial Center, Report of a Survey Concerning Rule 11, Federal Rules
of Civil Procedure at 5.
---------------------------------------------------------------------------
Despite this wide judicial support for a strong Rule 11, in
1991 the Civil Rules Advisory Committee included provisions to
weaken Rule 11 in a much broader package of proposed amendments
to the Federal Rules driven largely by the desire to avoid
``satellite litigation'' of Rule 11 issues that could burden
allegedly overworked judges. The proposed changes were then
sent to the Supreme Court for approval or modification.
Exercising what it viewed to be a very limited oversight
role,\108\ the Supreme Court approved the proposed changes in
ministerial fashion and without substantive comment in April,
1993.
---------------------------------------------------------------------------
\108\ While the Supreme Court is authorized to ``prescribe'' the
general rules of Federal court practice and procedure, see Judicial
Improvements and Access to Justice Act, 28 U.S.C. Sec. 2072(a), 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 decisions in this area. As pointed out in the House
Judiciary's Committee Report on H.R. 988 in the 104th Congress, 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.'' H.R. Rep. No. 104-62, at 11, n.14
(1995).
---------------------------------------------------------------------------
In a strongly worded dissent on the Rule 11 changes,
Justice Scalia correctly anticipated that the proposed revision
would eliminate a ``significant and necessary deterrent'' to
frivolous litigation, stating ``the 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.'' \109\ Justices Scalia and Thomas
properly dissented from the transmittal of the amendments to
Rule 11 to Congress, arguing that ``[t]he proposed revision
would render the Rule toothless, by allowing judges to dispense
with sanction, by disfavoring compensation for litigation
expenses, and by providing a 21-day `safe harbor' within which,
if the party accused of a frivolous filing withdraws the
filing, he is entitled to escape with no sanction at all.''
\110\
---------------------------------------------------------------------------
\109\ Id. at 11.
\110\ 146 F.R.D. 401, 507-08 (1993).
---------------------------------------------------------------------------
Rule 11 as it existed prior to the 1993 amendments was very
popular with Federal judges. The Federal Judicial Center
(``FJC'') was commissioned to conduct empirical studies and
surveys on the operation of the old Rule 11,\111\ and in a
survey of all Federal trial judges, the FJC found that 80% were
of the opinion that the old Rule 11 had had an overall positive
effect and should not be changed.\112\ We need to restore those
positive effects once again.
---------------------------------------------------------------------------
\111\ Standing Committee on Rules of Practice and Procedure of the
Judicial Conference of the United States, Call for Written Comments on
Rule 11 of the Federal Rules of Civil Procedure and Related Rules as
Amended in 1983 (August 1990), reprinted in 131 F.R.D. 335 (1990).
\112\ Interim Report on Rule 11, Advisory Committee on Civil Rules,
reprinted in Georgene M. Vairo, Rule 11 Sanctions: Case Law
Perspectives and Preventive Measures, App. at 1-8 to 1-10 (2d ed.
1991).
---------------------------------------------------------------------------
After the proposal to gut Rule 11 was forwarded to
Congress, there was a 7-month period under the Rules Enabling
Act in which the Congress had the authority to make changes,
but time ran out before Congress could stop these damaging
amendments to Rule 11.\113\
---------------------------------------------------------------------------
\113\ Under the Rules Enabling Act, Congress has 7 months to act on
the proposed rules; if Congress does not act, the proposed rules become
law. See 28 U.S.C. Sec. 2074(a). Despite the introduction of H.R. 2979
in the 103rd Congress by Carlos J. Moorhead, which would have delayed
the effective date of the proposed changes to Rule 11, and a companion
bill in the Senate, no formal action was taken in the Democrat-
controlled House, and the revisions went into effect on December 1,
1993. The House later passed H.R. 988 in the 104th Congress--which,
among other things, would have restored Rule 11 to its original form--
by a vote of 232-193, but it was not taken up in the Senate.
---------------------------------------------------------------------------
Section 2 of LARA would restore teeth to Rule 11 once
again.
In particular, Section 2 of LARA would:
Allow monetary sanctions against parties that
file frivolous lawsuits. Shockingly, the 1993
amendments to Rule 11 prohibited any monetary sanctions
against parties who filed frivolous lawsuits. Rule 11
currently states that ``[m]onetary sanctions may not be
awarded against a represented party for a violation of
subdivision (b)(2),'' and subdivision (b)(2) requires
lawyers to certify that the case they're bringing is
``warranted by existing law or by a nonfrivolous
argument for the extension, modification, or reversal
of existing law or the establishment of new law.'' H.R.
420 would require monetary penalties against parties
who file frivolous lawsuits that cause economic harm to
the victims of frivolous lawsuits. Indeed, a survey
conducted by the Federal Judicial Center in June, 1995,
consisting of 148 Federal judges and over 1,000 trial
attorneys found that the 1993 amendments that
prohibited monetary compensation for victims of
frivolous lawsuits were a bad idea. In that survey,
two-thirds of judges (66%), defense attorneys (63%),
and other attorneys (66%), and even a substantial
portion of plaintiff's attorneys (43%), supported
restoring Rule 11's compensatory function once
again.\114\ H.R. 420 would do just that.
---------------------------------------------------------------------------
\114\ See John Shapard et. al., Federal Judicial Center, Report of
a Survey Concerning Rule 11, Federal Rules of Civil Procedure at 5.
Reverse the 1993 amendments to Rule 11 that
made Rule 11 sanctions discretionary rather than
mandatory. Because today, under a weak Rule 11,
sanctions in frivolous cases are not mandatory, there
is little incentive for a victim of a frivolous lawsuit
to spend time and money seeking Rule 11 sanctions.
Deterrence cannot be achieved without certain
punishment. While a court should have discretion to
fashion an appropriate sanction based on the
circumstances of the violation, litigants making
frivolous claims should not be allowed the opportunity
to escape sanctions entirely. Even Senator John Edwards
has written in Newsweek that ``[L]awyers who bring
frivolous cases should face tough, mandatory
sanctions.'' \115\ Senator Edwards also said on Meet
the Press that ``I feel very strongly that we need real
and enforceable penalties for frivolous lawsuits that
may be filed in this country.'' \116\ And Senator
Edwards' campaign issued a statement saying Senator
Edwards ``believes that we need a national system in
place that will weed out the meritless lawsuits without
taking away patients' rights.'' \117\ H.R. 420 would do
exactly that.
---------------------------------------------------------------------------
\115\ John Edwards, ``Juries: `Democracy in Action,' '' Newsweek
(December 15, 2003) at 53.
\116\ NBC News, ``Meet the Press'' (May 5, 2002) (transcript).
\117\ John Stossel, ``Lawyers and the Little Guy,'' ABCNews.com
(``Give Me a Break'' commentary on ABC News' 20/20) (July 23, 2004).
Reverse the 1993 amendments to Rule 11 that
allow parties and their attorneys to avoid sanctions
for making frivolous claims and demands by withdrawing
them within 21 days after a motion for sanctions has
been filed. Justice Scalia correctly pointed out that
such amendments would in fact encourage frivolous
lawsuits: ``In my view, 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: If objection
is raised, they can retreat without penalty.'' \118\
H.R. 420 would get rid of the free pass' lawyers have
to file frivolous lawsuits under today's Rule 11.
---------------------------------------------------------------------------
\118\ H.R. Rep. No. 104-62, at 11-12 (1995).
It is important to remember that nothing in H.R. 420, the
Lawsuit Abuse Reduction Act, changes the current standard by
which frivolous lawsuits are judged. That is, under H.R. 420,
the standard a judge will use to determine whether a case is
frivolous will remain as it has been, namely a determination
---------------------------------------------------------------------------
that:
the case is not being presented for any
improper purpose, such as to harass or to cause
unnecessary delay or needless increase in the cost of
litigation;
the claims, defenses, and other legal
contentions therein are warranted by existing law or by
a nonfrivolous argument for the extension,
modification, or reversal of existing law or the
establishment of new law;
the allegations and other factual contentions
have evidentiary support or, if specifically so
identified, are likely to have evidentiary support
after a reasonable opportunity for further
investigation or discovery; and
the denials of factual contentions are
warranted on the evidence or, if specifically so
identified, are reasonably based on a lack of
information or belief.
Only cases that meet the criteria outlined above will be
subject to Rule 11 sanctions under the Lawsuit Abuse Reduction
Act. The baseless nature of arguments by reform opponents that
Rule 11 somehow stifles growth in the law is belied by the fact
that Rule 11 explicitly allows for growth in the law, but not
for frivolous arguments for extensions of the law.
Further, LARA expressly provides that ``Nothing in'' the
changes made to Rule 11 ``shall be construed to bar or impede
the assertion or development of new claims or remedies under
Federal, State, or local civil rights law.'' The development of
civil rights claims is thereby explicitly protected in the
bill's Rule 11 provisions.
Section 3 of LARA: Applying Rules Against Frivolous Lawsuits to State
Cases Affecting Interstate Commerce
Section 3 of LARA would extend Rule 11's provisions
preventing frivolous lawsuits to state cases in which the state
court determines, based on an analysis of the relief requested,
that the case would affect interstate commerce. (For the most
part, states' rules of civil procedure are modeled after
Federal Rule 11,\119\ and sanctions for frivolous filings are
not mandatory in 38 states and the District of Columbia, just
as they are not mandatory under the Federal Rule 11.\120\)
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\119\ See Arkansas Rule 11, Addition to Reporter's Notes, 1997
Amendment (``The rule has been amended by designating the former text
as subdivision (a) and by adding new subdivision (b), which is based
[on] Rule 11(c)(1) of the Federal Rules of Civil Procedure, as amended
in 1993 . . . New subdivision (b) provides that requests for sanctions
must be made as a separate motion, rather than simply be included as an
additional prayer for relief in another motion. The motion for
sanctions is not to be filed until at least 21 days, or other such
period as the court may set, after being served . . .); Minn. R. Civ.
P. 11.04 (Minnesota), Advisory Committee Comments, 2000 Amendments
(``Rule 11 is amended to conform completely to the Federal rule . . .
On balance, the Committee believes that the amendment to the Rule to
conform to its Federal counterpart makes the most sense, given this
Committee's long-standing preference for minimizing the differences
between state and Federal practice . . .''); N.D. R. Civ. P. 1 (North
Dakota), Explanatory Note (``As will become readily apparent from a
reading of the rules, they are the Federal Rules of Civil Procedure
adapted, insofar as practicable, to state practice.''), N.D. R. Civ. P.
11, Explanatory Note (``Rule 11 was revised, effective March 1, 1996,
in response to the 1993 revision of Rule 11.''); Tenn. R. Civ. P. 11
(Tennessee), Advisory Commission Comment to 1995 Amendment (``Amended
Rule 11 tracks the current Federal version. Sanctions no longer are
mandatory, and non-monetary sanctions are encouraged. The 21-day safe
harbor provision allows otherwise sanctionable papers to be withdrawn,
thereby escaping sanctions.''); Utah R. Civ. P. 11 (Utah), Advisory
Committee Note (``The 1997 amendments conform state Rule 11 with
Federal Rule 11.''); Vt. R. Civ. P. 11 (Vermont), Reporter's Notes to
1996 Amendment (``Rule 11 is amended to conform to the 1993 amendment
of Federal Rule 11.''); W. Va. R. Civ. P. 11 (West Virginia) (West
Virginia's Rule 11 as amended effective April 1, 1998, is identical to
the current Federal Rule 11); Wyo. R. Civ. P. 11 (Wyoming) (Wyoming's
Rule 11 is identical to the current Federal Rule 11); Restatement
(Third) of the Law Governing Lawyers Sec. 170 reporter's note to cmt. c
(Tentative Draft No. 8, 1997). State courts also often rely on Federal
court decisions when interpreting their rules. See, e.g., Gray v.
Washington, 612 A.2d 839, 842 (D.C. 1992); Bryson v. Sullivan, 412
S.E.2d 327, 332 (1992); Bryant v. Joseph Tree, Inc., 829 P.2d 1099,
1104-05 (Wash. 1992) (en banc).
\120\ See Alabama Rule of Civil Procedure 11; Alaska Rule of Civil
Procedure 11; Arkansas Rule of Civil Procedure 11; Cal.C.C.P.
Sec. 128.5 (California); C.R.C.P. Rule 11 (Colorado); C.G.S.A. Sec. 52-
190a (Connecticut); De.R.S.Ct. Rule 33 (Delaware); D.C.R.R.C.P. Rule 11
(D.C.); Fl.St. R.C.P. Rule 1.150 (Florida); Hi.R.R.C.P. Rule 11
(Hawaii); Il.C.S.S.Ct. Rule 137 (Illinois); In.St. Trial P. Rule 11
(Indiana); L.S.A.-C.C.P. Art. 864 (Louisiana); Me.R.R.C.P. Rule 11
(Maine); Md.Rules, Rule 1-311 (Maryland); Massachusetts Rules of Civil
Procedure (Mass.R.Civ.P.), Rule 11; Minnesota Rules of Civil Procedure,
Rule 11.03; Ms.R.R.C.P. Rule 11; Miss. Code Ann. Sec. 11-55-5
(Mississippi); Missouri Supreme Court Rule 55.03; Ne.R.Civ.Pro.St.
Sec. 25-824 (Nebraska); N.H.R.Super.Ct. Rule 59 (New Hamphsire);
N.J.S.A. 2A:15-59.1 (New Jersey); N.M.R.Dist.Ct.R.C.P. Rule 1-011 (New
Mexico); N.D.R.R.C.P. Rule 11 (North Dakota); Ohio Civ.R. Rule 11; 12
Okl.St.Ann. Sec. 2011 (Oklahoma); Or.R.R.C.P. O.R.C.P. 17 (Oregon);
Pa.R.C.P. No. 1023.1; Pa.R.C.P. No. 1023.4 (Pennsylvania); R.I.R.R.C.P.
Rule 11 (Rhode Island); Rule 11, S.C.R.C.P. (South Carolina);
Tn.R.R.C.P. Rule 11.03 (Tennessee); Texas Civil Practice & Remedies
Code Sec. 10.004; Ut.R.R.C.P. Rule 11 (Utah); Vt.R.R.C.P. Rule 11
(Vermont); Va.R.S.S.Ct. Rule 1:4; Va.R.S.Ct. Rule 4:1 (Virginia);
Wa.R.Super.Ct.Civ. Cr. 11 (Washington); W.V.R.R.C.P. Rule 11 (West
Virginia); W.S.A. 802.05 (Wisconsin); Wy.R.R.C.P. Rule 11 (Wyoming).
---------------------------------------------------------------------------
In the remaining states various exceptions to the sanctions rule
allow frivolous filings to go unpunished and undeterred. See Arizona
Rules of Civil Procedure, Rule 11(a) (only ``appropriate'' sanction
required, not a sanction ``sufficient to deter repetition of such
conduct'' as under Federal Rule 11); Ga.St. Sec. 9-15-14 (Georgia)
(standard is that frivolous pleading must include claims or defenses no
court anywhere could be reasonably expected to accept); Id.R.R.C.P.
Rule 11 (Idaho) (only ``appropriate'' sanction required, not a sanction
``sufficient to deter repetition of such conduct''); I.C.A. Rule 1.413
(Iowa) (only ``appropriate'' sanction required, not a sanction
``sufficient to deter repetition of such conduct''); Ks.R.R.C.P. Code
60-211 (Kansas) (does not apply to abusive discovery requests and only
``appropriate'' sanction required in other cases, not a sanction
``sufficient to deter repetition of such conduct''); Ky.St.R.C.P. Rule
11 (Kentucky) (only ``appropriate'' sanction required, not a sanction
``sufficient to deter repetition of such conduct,'' and state rule
postpones ruling on frivolous pleadings until after entry of final
judgement); Mi.R.R.C.P.M.C.R. 2.114 (Michigan) (bars punitive damages
for frivolous pleadings); Mt.R.R.C.P. Rule 11 (Montana) (only
``appropriate'' sanction required, not a sanction ``sufficient to deter
repetition of such conduct''); Nv.St.R.C.P. Rule 11 (Nevada) (only
``appropriate'' sanction required, not a sanction ``sufficient to deter
repetition of such conduct''); N.Y.C.P.L.R. Sec. 8303-a (New York)
(sanctions limited to civil personal injury and property damage claims
and subject to a $10,000 limit); N.C.St.R.C.P. Sec. 1A-1, Rule 11
(North Carolina) (only ``appropriate'' sanction required, not a
sanction ``sufficient to deter repetition of such conduct''); S.D.C.L.
Sec. 15-6-11(b) (South Dakota) (only ``appropriate'' sanction required,
not a sanction ``sufficient to deter repetition of such conduct'').
Congress--under its constitutional authority in Article I,
Section 8 to regulate interstate commerce--has a responsibility
to require state judges to conduct their own analysis, upon
motion of parties, to determine whether, based on the relief
requested (including potentially huge monetary damage requests)
the case is such that it would affect interstate commerce by
threatening to bankrupt a multi-state industry, by risking the
loss of out-of-state jobs, or by otherwise incurring costs to
the interstate economy. Where a case filed in state court
substantially affects interstate commerce, as determined by a
state judge, it is entirely appropriate that national attorney
accountability rules should govern. Liability litigation, under
existing rules, presents a serious threat to state autonomy.
Manufacturers have no practical way of keeping their products
out of certain states. Personal injury lawyers, on the other
hand, get to choose their own forum and law. As a result, the
jurisdictions most friendly to personal injury lawyers can
unfairly impose the costs of their rules on the entire country
and redistribute income from out-of-state parties to in-state
parties. As one commentator has stated, ``Products liability
cases have surged since 2001 to an anticipated 25,700 cases in
2004 and now make up nearly 10 percent of all Federal civil
filings. In particular, the estimated 24,100 cases dealing with
personal injuries continues to grow and now account for 94
percent of all products liability cases.'' \121\
---------------------------------------------------------------------------
\121\ Kevin Stehr, ``Spot the Litigation Trends,'' Legal Times
(October 7, 2004).
---------------------------------------------------------------------------
H.R. 420's application of Rule 11 to state cases that
affect interstate commerce is entirely consistent with
federalism principles. James Madison, in Federalist No. 42,
described the purpose of the Commerce Clause as follows: ``A
very material object of this power was the relief of the States
which import and export through other States, from the improper
contributions levied on them by the latter. Were these at
liberty to regulate the trade between State and State, it must
be foreseen that ways would be found out to load the articles
of import and export, during the passage through their
jurisdiction, with duties which would fall on the makers of the
latter and the consumers of the former.'' \122\ That is,
Madison foresaw the problem in which products or services would
be made to cost more to consumers in one state because other
states those products and services passed through would levy
duties on them. That is precisely the problem today: some
states, by allowing frivolous lawsuits to be brought for
unlimited damages in cases involving products or services that
touch their jurisdictions are raising the costs of providing
those products and services to out-of-state customers,
resulting in higher prices and lost jobs across multiple states
or nationwide. It is the duty of Congress to prevent such
unfairness.\123\ H.R. 420 addresses a problem directly
analogous to the prime example James Madison used when
describing the need for the Constitution's Commerce Clause.
---------------------------------------------------------------------------
\122\ The Federalist Papers, Federalist No. 22 (Madison) at 267-68
(Clinton Rossiter ed., 1961).
\123\ James Madison, according to his own notes of what he argued
at the Constitutional Convention (he referred to himself in the third
person), made clear that Congress must have the power to regulate
commerce in this manner: ``Whether the States are now restrained from
laying tonnage duties depends on the extent of the power `to regulate
commerce.' . . . He was more & more convinced that the regulation of
Commerce was in its nature indivisible and ought to be wholly under one
authority.'' Debates on the Adoption of the Federal Constitution in the
Convention Held at Philadelphia in 1787 (Jonathan Elliot, ed. 1845) (as
reported by James Madison, notes of May 31, 1787) at 548.
---------------------------------------------------------------------------
Congress unquestionably has the authority to regulate
economic activities that ``affect'' interstate commerce,\124\
and such a provision would have state judges themselves
determine whether the case before them affected interstate
commerce and national interests that would trigger a Federal
rule against frivolous lawsuits.
---------------------------------------------------------------------------
\124\ See Kenneth Thomas, CRS Report for Congress, Federalism,
State Sovereignty and the Constitution: Basis and Limits of
Congressional Power (September 5, 2003) at 7 (stating that Congress can
regulate ``economic activities which `affect' commerce'').
---------------------------------------------------------------------------
Further, requiring state courts to determine whether a case
substantially affects interstate commerce based on an
assessment of the costs to the interstate economy, including
the loss of jobs, ``were the relief requested granted'' is
likely to deter trial lawyers from grossly inflating the size
of damages requested (which are designed to pressure unfair
settlements) because doing so will increase the chances that
their case will be found to affect interstate commerce, thus
triggering the application of Federal Rule 11's provisions
preventing frivolous lawsuits. This provision takes personal
injury attorneys requesting vast damages at their word
regarding what damages might be appropriate, but then holds
them to account for those requested damages by making them
subject to an analysis of the interstate economic costs were
such damages to be awarded. University of Chicago law professor
Cass Sunstein, along with Nobel Prize winner Daniel Kahneman,
have compiled research from studies involving more than 8,000
jury-eligible citizens in Illinois, Colorado, Texas, Arizona,
and Nevada that shows that juries give higher awards when
personal injury attorneys simply demand higher amounts.\125\ As
Philip Howard has written, ``A great thing about bringing
lawsuits in modern America is that it's so easy to threaten the
adversary's entire livelihood. One stroke of a finger on the
lawyer's word processor, and damages go from $100,000 to
$1,000,000. Three more keystrokes, and we're suing for a
billion dollars. This is fun . . . Damages claimed today are
completely arbitrary. Just stick your finger in the air and
threaten someone with any number that comes to mind.'' \126\
Section 3 of LARA will deter personal injury lawyers from
making ridiculous claims for astronomical damages.
---------------------------------------------------------------------------
\125\ See Cass Sunstein and Reid Hastie, Punitve Damages: How
Juries Decide (University of Chicago Press 2002) at 62.
\126\ Philip K. Howard, The Collapse of the Common Good: How
America's Lawsuit Culture Undermines Our Freedom (2001) at 59.
---------------------------------------------------------------------------
How ridiculous can damages claims get? In Michigan, a woman
who had a $5 fingernail repair job done at a local salon filed
a lawsuit for $500,000 or more in damages, claiming a
beautician nicked her finger with cuticle scissors. The woman's
lawyer said ``The $500,000 figure isn't necessarily what we'll
get [in court]. It's to put some attention to the case, and to
how important we consider it.'' \127\
---------------------------------------------------------------------------
\127\ Chad Halcom, ``Woman Files $500,000 Lawsuit for `Ruined'
Fingernail,'' The Macomb Daily (February 5, 2003).
---------------------------------------------------------------------------
The following exchange between a 60 Minutes correspondent
and Caesar Barber, who sued various restaurants for damages
related to his overconsumption of their products, also
illustrates the frivolous rationales behind gigantic damages
claims:
Caesar Barber: I'm saying that McDonald's affected my
health. Yes, I am saying that.
Richard Carleton (CBS News, 60 Minutes): So what do you
want in return?
Caesar Barber: I want compensation for pain and
suffering.
Richard Carleton But how much money do you want?
Caesar Barber: I don't know . . . maybe $1 million.
That's not a lot of money now.\128\
---------------------------------------------------------------------------
\128\ ``Food Fight,'' CBS News ``60 Minutes'' (Australia)
(September 15, 2002) (transcript).
Section 3 of LARA is not likely to be abused for several
reasons. Any party that fears it may run afoul of Rule 11
sanctions for filing frivolous pleadings will not move the
court to determine if the case substantially affects interstate
commerce. Further, any party that does not fear sanctions under
Rule 11 will only request that a state court rule on whether
the case substantially affects interstate commerce in rare
circumstances. This is because, first, no one is required under
LARA to make such a request to a state court if they do not
want to, and second, because the burden will be on any party
who decides to move for a determination that the case
``substantially affects interstate commerce'' to show just
that, and that will not be an easy case to make, especially in
smaller cases. The end result will be that motions will be made
under Section 3 of LARA only in those cases in which large
amounts of money are at stake with clear interstate effects and
only by those parties who have very strong reasons to believe
the court system is being abused by a party filing frivolous
pleadings. In such cases, it is entirely appropriate that a
Federal rule sanctioning lawsuit abuse be available.
Section 3 of LARA would serve national economic interests
by focusing attention on the jobs costs of frivolous
litigation. The provision would provide that the interstate
economy, including workers and jobs, when potentially
negatively affected, should be protected by a rule prohibiting
frivolous claims. The provision provides that if your lawsuit
in state court asks for damages that will cost jobs in other
states, and your lawsuit is determined to be frivolous, you'll
have to pay for the costs of that frivolous lawsuit.\129\
---------------------------------------------------------------------------
\129\ Such a provision will not result in state cases being removed
to Federal court, as a Federal standard does not confer Federal
question jurisdiction in the absence of Congressional creation of a
Federal cause of action. Under Supreme Court precedent, Congress has
given the lower courts jurisdiction to hear, originally or by removal
from a state court, only those cases in which a well-pleaded complaint
establishes either that Federal law creates the cause of action or that
the plaintiff's right to relief necessarily depends on resolution of a
substantial question of Federal law. Federal question jurisdiction
exists only if plaintiffs' right to relief depends necessarily on a
substantial question of Federal law. See Merrell Dow Pharmaceuticals
Inc. v. Thompson, 478 U.S. 804, 807 n.2 (1986); 28 U.S.C. Sec. 1331.
---------------------------------------------------------------------------
Further, LARA expressly provides that ``Nothing in section
3 . . . shall be construed to bar or impede the assertion or
development of new claims or remedies under Federal, State, or
local civil rights law.'' The development of civil rights
claims is thereby explicitly protected in the bill's provisions
governing the application of Rule 11 in cases with substantial
interstate effects.
Section 4 of LARA: Preventing Forum-Shopping for Favorably-minded
Judges
One of the nation's wealthiest personal injury attorneys is
Richard ``Dickie'' Scruggs, who sued asbestos companies in the
1980s and has made about $844 million from lawsuits against
tobacco companies.\130\ Here is what Scruggs said about what he
calls ``magic jurisdictions:''
---------------------------------------------------------------------------
\130\ Tom Wilemon, ``Social Ties Bind Political Elite,'' The Biloxi
Sun Herald (October 13, 2002) at 10.
``What I call the `magic jurisdiction,'. . . [is] where
the judiciary is elected with verdict money. The trial
lawyers have established relationships with the judges
that are elected; they're State Court judges; they're
popul[ists]. They've got large populations of voters
who are in on the deal, they're getting their [piece]
in many cases. And so, it's a political force in their
jurisdiction, and it's almost impossible to get a fair
trial if you're a defendant in some of these places.
The plaintiff lawyer walks in there and writes the
number on the blackboard, and the first juror meets the
last one coming out the door with that amount of money
. . . Any lawyer fresh out of law school can walk in
there and win the case, so it doesn't matter what the
evidence or law is.'' \131\
---------------------------------------------------------------------------
\131\ Richard ``Dickie'' Scruggs, ``Asbestos for Lunch Panel
Discussion'' at the Prudential Securities Financial Research and
Regulatory Conference (May 9, 2002) (quoted in Industry Commentary
(Prudential Securities, Inc., N.Y., New York) (June 11, 2002) at 5).
Personal injury lawyers often file cases in places that
have no connection to the case. They file their cases where
court procedures and the law are systematically applied in an
unfair manner against defendants, including in jurisdictions
with reputations for high damage awards and lower standards for
the admissibility of expert testimony.\132\ A recent poll found
that 46% of judges said donations influenced their judicial
decisions.\133\
---------------------------------------------------------------------------
\132\ See generally, American Tort Reform Association, ``Bringing
Justice to Judicial Hellholes'' (2003).
\133\ Editorial, ``Getting Politics Out of the Courts,'' Business
Week (September 27, 2004) at 140 (``In a poll of 894 elected judges
conducted in 2001and 2002 by a nonpartisan watchdog group, 46% said
donations influenced their judicial decisions.'').
---------------------------------------------------------------------------
After Texas enacted legislation restricting forum shopping
there, personal injury lawyers began eying its neighbor,
Oklahoma, as the next best place to bring their lawsuits. The
smoking gun on this issue is an undated ``Dear ATLA Colleague''
letter sent by Oklahoma attorney Stratton Taylor to the
Association of Trial Lawyers of America. Mr. Taylor is also
President Pro Tempore Emeritus of the Oklahoma State Senate,
and a current member of the state legislature. In his letter,
Senator Taylor leads, ``With recent events that have occurred
in Texas, you may be looking to file cases in Oklahoma.'' \134\
Only Congress can protect all Americans from unfair forum
shopping no matter where it occurs.
---------------------------------------------------------------------------
\134\ Letter from Stratton Taylor to ``ATLA Colleague'' (undated)
(on file with the House Committee on the Judiciary).
---------------------------------------------------------------------------
West Virginia State Supreme Court Justice Richard Neely
candidly described one of the reasons behind this phenomenon in
a book: ``As long as I am allowed to redistribute wealth from
out-of-state companies to injured in-state plaintiffs, I shall
continue to do so. Not only is my sleep enhanced when I give
someone else's money away, but so is my job security, because
the in-state plaintiffs, their families, and their friends will
reelect me . . . It should be obvious that the instate local
plaintiff, his witnesses and his friends, can all vote for the
judge, while the out-of-state defendants can't even be relied
upon to send a campaign donation.'' \135\
---------------------------------------------------------------------------
\135\ Richard Neely, The Product Liability Mess: How Business Can
Be Rescued From The Politics of State Courts 4, 62 (1998).
---------------------------------------------------------------------------
While businesses are hauled into court all over the
country, local personal injury lawyers work with the same
judges day after day, contribute to their election campaigns,
and routinely socialize with them.
Section 4 of LARA will help ensure that lawsuits have a
logical connection with the jurisdiction in which they are
heard.\136\ Section 4, by requiring plaintiffs to bring their
cases where they live or where they were injured, or where the
defendant's principal place of business is located, would help
stop forum-shopping. It would also allow a court to refuse to
hear a case if there is a more appropriate forum, including a
different state, in which the case could and should be heard.
By strengthening the rules governing venue and forum non
conveniens, courts can help ensure that cases are heard in a
court that has a logical connection to the claim, rather than a
court that is expected to produce the highest award for the
plaintiff.
---------------------------------------------------------------------------
\136\ These anti-forum shopping provisions would not do anything to
preclude lawsuits against foreign companies that are not already
precluded by the Due Process Clause of the Constitution under current
law. On October 8, 2004, Rep. Lamar Smith, in the Congressional Record,
made the following statement dispelling false allegations to the
contrary regarding a version of this legislation that passed the House
during the 108th Congress in the form of H.R. 4571:
Mr. Speaker, September 14 2004, the House debated and
passed H.R. 4571, the Lawsuit Abuse Reduction Act, a bill I
authored to help prevent frivolous lawsuits and the
notorious practice of forum shopping from ruining America's
small businesses. In the midst of floor debate on H.R.
4571, the Congressional Research Service issued a self-
described ``rush memorandum'' dated September 14, 2004, to
the minority staff of the House Judiciary Committee, which
stated ``H.R. 4571 does provide an option for filing a
lawsuit where a business has a principal place of business
. . . However, if a defendant's principal place of business
was not in the United States, then this option could not be
exercised in a United States court. Consequently, it would
appear that in certain circumstances, a United States
citizen or resident injured in this country would not have
a judicial forum in the United States in which to seek
relief.'' This statement left the misleading impression
that H.R. 4571, were it to become law, would somehow make
it more difficult to bring some personal injury lawsuits in
the United States. Not surprisingly, the misleading
impression left by the CRS memorandum was exploited by
those on the opposite side of the aisle in the midst of
debate on H.R. 4571, and later by the press. For example, a
report in CongressDaily/A.M. describing debate on H.R. 4571
stated ``Many Democrats . . . cited a Congressional
Research Service memorandum advising lawmakers that the
bill could prevent U.S. citizens from having their cases
heard in a U.S. court if the defendant's main place of
business is located in a foreign country. Rep. Jay Inslee,
D-Wash., sarcastically called the legislation `the Foreign
Corporation Protection Act.` '' Those statements are deeply
misleading, and here's why. In fact, nothing in H.R. 4571
would prevent cases from being brought against foreign
defendants that are not already precluded under current
law. I wrote to CRS requesting a clarification of current
law, and I received the following response: ``Under the Due
Process Clause, a foreign corporation that had its
principal place of business overseas, engaged in little or
no economic activity in the United States, and did not
otherwise subject itself to the jurisdiction of the United
States, could not be subject to the jurisdiction of the
various state courts. If such a corporation engaged in a
tortious activity such as manufacturing a defective
product, then a plaintiff would be unable to bring an
action in a state court forum for such tortious activity,
even if the product caused an injury in the United States.
In such a case, an injured party would be required to seek
compensation in the courts of another country.'' This makes
clear that while some Members on the other side of the
aisle claimed that H.R. 4571, if enacted, would preclude
certain lawsuits from being brought that could be brought
under current law, the Due Process Clause of the
Constitution has precluded under current law, and would
continue to preclude under H.R. 4571, some plaintiffs from
bringing an action in a state court forum against a foreign
defendant for tortious activity in certain circumstances,
even if the product caused an injury in the United States.
The bottom line is that H.R. 4571 would do nothing to
change current law in that regard. Indeed, no legislation
could change current law in that regard since the
constitutional requirements of the Due Process Clause
cannot be changed by legislation. In fact, the venue
statute of the gentleman from Washington Mr. Inslee's own
state provides that ``An action . . . for the recovery of
damages for injuries to the person or for injury to
personal property may be brought, at the plaintiffs option,
either in the district in which the cause of action, or
some part thereof, arose, or in the district in which the
defendant, or, if there be more than one defendant, where
some one of the defendants, resides at the time the
complaint is filed.'' That venue standard is for all
practical purposes the same as that provided in H.R. 4571.
H.R. 4571 provides that a personal injury lawsuit could be
brought in any state where the person bringing the claim
resides at the time of filing or resided at the time of the
alleged injury, any state where the alleged injury or
circumstances giving rise to the personal injury claim
allegedly occurred, or where the defendant's principal
place of business is located. Insofar as opponents of H.R.
4571 have a complaint regarding the inability to bring
certain lawsuits against foreign corporations in the United
States, their complaint is with the Constitution's Due
Process Clause, and not with H.R. 4571, which simply
reflects the same standard that prevails among the state's
venue laws, subject of course to the Due Process Clause of
the Constitution. If a foreign corporation's contacts with
the United States are so minimal as to make it
unconstitutional under the Constitution's Due Process
Clause to subject them to suit in the United States
regardless of whether the venue criteria of H.R. 4571--or
of any State venue statute--are met, there is nothing a
legislature can do by statute to remedy that situation. To
help set the record straight, I am submitting for the
record both my letter to CRS requesting a clarification,
---------------------------------------------------------------------------
and the CRS memorandum I received in response.
150 Cong. Rec. E1839-01 (October 6, 2004) (attaching
September 16, 2004 letter from Rep. Lamar Smith to Kenneth
R. Thomas, Legislative Attorney, American Law Division,
Congressional Research Service, and Mr. Thomas' letter in
response of October 4, 2004).
Section 4 of LARA would also prevent situations in which
floods of cases by non-residents interfere with in-state
residents' access to timely justice.
Congress unquestionably has the authority to regulate
economic activities that ``affect'' interstate commerce,\137\
and forum shopping clearly has a substantial affect on
interstate commerce by allowing opportunities for personal
injury lawyers to exploit lax venue and forum non conveniens
rules to pick and choose those courts with a reputation for
consistently awarding near-limitless awards. Section 4 of the
Lawsuit Abuse Reduction Act clearly applies to economic
activities, as the definition of ``personal injury claim'' is a
claim ``to recover'' for a person's personal injury. Such a
provision is entirely consistent with federalism principles.
James Madison, in Federalist No. 42, described the purpose of
the Commerce Clause as follows: ``A very material object of
this power was the relief of the States which import and export
through other States, from the improper contributions levied on
them by the latter. Were these at liberty to regulate the trade
between State and State, it must be foreseen that ways would be
found out to load the articles of import and export, during the
passage through their jurisdiction, with duties which would
fall on the makers of the latter and the consumers of the
former.'' \138\ That is, Madison foresaw the problem in which
products or services would be made to cost more to consumers in
one state because other states allowed the companies that
manufactured those products or supplied those services to be
sued in those other states even when the facts and
circumstances of the lawsuit had no connection to those states.
When personal injury attorneys are allowed to bring cases in
certain states and county courts that have a reputation for
being most favorable to granting the most lucrative awards, the
costs imposed on companies by such awards must be passed on to
consumers nationwide. That is precisely the problem today: some
states, by allowing lawsuits to be brought in local
jurisdictions even when the facts and circumstances of the case
have no connection to such local jurisdictions, are raising the
costs of providing products and services to out-of-state
customers, resulting in higher prices and lost jobs to people
in multiple states. It is the duty of Congress to prevent such
unfairness.\139\
---------------------------------------------------------------------------
\137\ See Kenneth Thomas, CRS Report for Congress, Federalism,
State Sovereignty and the Constitution: Basis and Limits of
Congressional Power (September 5, 2003) at 7 (stating that Congress can
regulate ``economic activities which `affect' commerce'').
\138\ The Federalist Papers, Federalist No. 22 (Madison) at 267-68
(Clinton Rossiter ed., 1961).
\139\ James Madison, according to his own notes of what he argued
at the Constitutional Convention (he referred to himself in the third
person), made clear that Congress must have the power to regulate
commerce in this manner: ``Whether the States are now restrained from
laying tonnage duties depends on the extent of the power `to regulate
commerce.' . . . He was more & more convinced that the regulation of
Commerce was in its nature indivisible and ought to be wholly under one
authority.'' Debates on the Adoption of the Federal Constitution in the
Convention Held at Philadelphia in 1787 (Jonathan Elliot, ed. 1845) (as
reported by James Madison, notes of May 31, 1787) at 548.
---------------------------------------------------------------------------
Jurisdictions with ``magic jurisdiction'' reputations
include the following:
Madison County, Illinois. Twice, the Chicago
Tribune crowned Madison County a ``jackpot
jurisdiction.'' \140\ As the newspaper recognized,
``[t]he number of suits has shot through the roof, and
local newspapers sport advertisements looking for the
local plaintiff who can provide a convenient excuse to
file in Edwardsville . . . [T]he Madison County
phenomenon also provides a dramatic illustration of the
potential for poor public policy when things get
carried away.'' \141\ A retired Madison County Judge
has said ``Eventually, because of the money created
through the plaintiffs bar and the power that money
brings, I believe there became an idea that the system
was beholden to the plaintiffs bar.'' \142\ Retired
Madison County judge John DeLaurenti has said that it
took Madison County four decades to earn its
reputation, ``but now, it is so big with so much money
and potential influence on people's careers that is has
become very difficult to limit it in any way.'' \143\
That same judge has also said ``I don't know if it's a
Judicial Hellhole, but just figure it out. When people
come from hither and thither to file these cases,
there's gotta be an inducement, doesn't there? They're
not coming to see beautiful Madison County.'' \144\
---------------------------------------------------------------------------
\140\ Editorial, ``A Madison County Jackpot,'' The Chicago Tribune
(April 2, 2003), at 22; Editorial, ``The Judges of Madison County,''
The Chicago Tribune (September 6, 2002) at 22.
\141\ Editorial, ``The Judges of Madison County,'' The Chicago
Tribune (September 6, 2002) at 22.
\142\ David Bailey (Reuters), ``Illinois County Court a Corporate
`Hellhole,' '' (October 5, 2003).
\143\ Id.
\144\ Marin Kasindorf, ``Robin Hood is Alive in Court, Say Those
Seeking Lawsuit Limit,'' USA Today (March 8, 2004) at A1 (emphasis
added).
LMadison County judges are infamous for their
willingness to take cases from across the country, with
little or no local connection, and hand down decisions
that regulate entire industries nationwide. Madison
County's over-eagerness to hear cases from other parts
of the state has even been criticized by the Supreme
Court of Illinois. Both the Madison County Circuit
Court and the Fifth District Court of Appeals have been
reversed many times in cases in which they denied
defendants' motions to transfer venue. In January 2002,
the Supreme Court of Illinois counted fourteen cases
since 1995 in which it ordered the Madison County
Circuit Court to transfer venue. In another ten cases,
the Supreme Court ordered the Fifth District to
consider vacating its denial of a defendant's forum non
conveniens motion.\145\
---------------------------------------------------------------------------
\145\ See First National Bank v. Guerine, 764 N.E.2d 54, 64-66
(Ill. 2002) (appendix).
LAsbestos cases, in particular, find their way to
Madison County Circuit Court at an astonishing rate.
Madison County (population 259,000) now hosts more
mesothelioma claims than New York City (population
8,000,000), and a nine member law firm with one office
in Madison County claims to handle more mesothelioma
cases than any firm in the country.\146\ This is
because, according to former Carter Administration U.S.
Attorney General Griffin Bell, its judges accept cases
from throughout the state and place them on
extraordinarily expedited schedules that do not provide
defendants with adequate time to prepare for
trial.\147\
---------------------------------------------------------------------------
\146\ See ``Asbestos Case Leads to $5.1 Million, Sanction,''
National Law Journal (December 2, 2002) at A4.
\147\ See Griffin B. Bell, ``Asbestos & the Sleeping
Constitution,'' 31 Pepp.L. Rev. 1, 8 (2003).
LMadison County's newspapers have called Madison
County ``lawyer heaven,'' \148\ a ``jackpot
jurisdiction,'' a ``hotbed of megabucks litigation,'' a
``local slot machine,'' and ``the most magic of all''
magic jurisdictions.\149\
---------------------------------------------------------------------------
\148\ Editorial, ``Lawsuit Heaven,'' St. Louis Post-Dispatch
(January 13, 2003) at B6.
\149\ Greg Burns, ``Lawyers Bring an International Class Action to
Rural Madison County . . . Why? Because It's the Lawsuit Capital,'' The
Chicago Tribune (March 8, 2004) at 1; Christi Parsons, ``Downstate
County is a `Plaintiff's Paradise,' '' The Chicago Tribune (June 17,
2002) at 1; Amity Shlaes, ``Commentary, Big Judgments, Bigger Mistakes:
Legal Windfalls in Madison County Demonstrate the Need to Limit Forum
Shopping of Class Action Lawsuits,'' The Chicago Tribune (June 29,
2004) at 15; Editorial, ``A Madison County Jackpot,'' The Chicago
Tribune (April 2, 2003) at 22.
Jefferson County (Beaumont), Texas. The
Austin American-Statesman has recognized that ``[o]ver
the past few decades, personal injury lawyers have
claimed this territory as their own, establishing
Beaumont, Port Arthur, Orange, and nearby towns as an
enclave where . . . juries often pass down sizable
judgments.'' \150\ As a result, huge verdicts against
doctors have caused medical professional liability
insurance rates to soar, sending Jefferson County
neurosurgeons, obstetricians, and other doctors fleeing
the area.\151\
---------------------------------------------------------------------------
\150\ David Pasztor, ``As Quinn Laid to Rest, Mourners Contemplate
Irony of His Slaying,'' The Austin American-Statesman (June 16, 2002)
at A1.
\151\ See Andrea Wright, ``Beaumont, Texas, Area Loses Doctors to
High Cost of Malpractice Insurance,'' Knight-Ridder Tribune Business
News (November 6, 2001).
22nd Judicial Circuit (Copiah, Claiborne and
Jefferson Counties), Mississippi. Fayette, the county
seat of Jefferson County, Mississippi, was dubbed the
``jackpot justice capital of America'' by CBS's 60
Minutes program.\152\ In this small, rural county, the
number of plaintiffs far exceeds the number of
residents.\153\ The national media, including the Los
Angeles Times,\154\ The New York Times,\155\ and the
Washington Times,\156\ have all recognized the
Jefferson County phenomenon. In November 2002, the CBS
News program, ``60 Minutes,'' devoted a program to
explaining why Mississippi's 22nd Judicial Circuit,
which includes Copiah, Claiborne, and Jefferson County
is a favorite place for plaintiffs' lawyers to flock
from all over the Nation. After the airing of the 60
Minutes program, Media General Operations, which owns
the local CBS-affiliate, the 60 Minutes producers, and
several individuals who commented in the program, found
themselves named as defendants in a $6.4 billion
defamation lawsuit in Jefferson County.\157\
---------------------------------------------------------------------------
\152\ Transcript, ``Jackpot Justice,'' 60 Minutes (November 25,
2002).
\153\ See Robert Pear, ``Mississippi Gaining as Lawsuit Mecca,''
The New York Times (August 20, 2001) at A1 (``Jefferson County, with
9,740 residents, is a small county, but litigation there is a big
business. An affidavit . . . said that more than 21,000 people were
plaintiffs in Jefferson County from 1995 to 2000.'').
\154\ See Ken Ellingwood, ``Mississippi Curbs Big Jury Awards Caps
on Liability Verdicts Are Seen as Pro-Business: Critics Say Companies
Will be Less Accountable,'' The Los Angeles Times (December 4, 2002) at
A1.
\155\ See Robert Pear, ``Mississippi Gaining as Lawsuit Mecca,''
The New York Times (August 20, 2001) at A1.
\156\ See Tim Lemke, ``Best Place to Sue?'' The Washington Times
(June 30, 2002) at A1.
\157\ See ``Judge Dismisses Two Mississippi Defendants from `60
Minutes' Defamation Lawsuit,'' Mercury News (July 3, 2003). The lawsuit
was filed by two former jurors who were offended by the program. See
id.
LOne small business, Bankston Drug Store, has been
called ``ground zero'' in the pharmaceutical litigation
business because, as the only pharmacy in Jefferson
County, it has been named in hundreds of lawsuits
alleging the defective manufacture of consumer
prescription drugs in order to bring a large, out-of-
state pharmaceutical company into local court.\158\ The
costs are real, and staggering. As Ms. Bankston
explained, ``I've searched record after record and made
copy after copy for use against me . . . I've had to
hire personnel to watch the store while I was dragged
into court on numerous occasions to testify. I have
endured the whispers and questions of my customers and
neighbors wondering what we did to end up in court so
often. And I have spent many sleepless nights wondering
if my business would survive the tidal wave of lawsuits
cresting over it.'' \159\
---------------------------------------------------------------------------
\158\ See Jerry Mitchell, ``Jefferson County Ground Zero for
Cases,'' The Clarion-Ledger (June 17, 2001) at A1.
\159\ Tom Wilemon, ``Judicial Probe Looking at Big Jury Awards,''
Sun Herald (July 12, 2003).
LIn recent years, the 22nd Judicial Circuit has
handed out numerous awards of $100 million or
more.\160\
---------------------------------------------------------------------------
\160\ See Betty Liu, ``The Poor Southern County That's Big on
Lawsuits,'' Financial Times (August 20, 2001).
LAnd in June 2003, it was reported that the Federal
Bureau of Investigation was probing possible judicial
corruption in South Mississippi as well as the
multimillion-dollar awards in Jefferson County.\161\
---------------------------------------------------------------------------
\161\ See Tom Wilemon, ``Judicial Probe Looking at Big Jury
Awards,'' Sun Herald (July 12, 2003); Tom Wilemon and Beth Musgrave,
``Indictments Cast Doubt on Trial Lawyers, Mississippi Justice
System,'' Sun Herald (July 26, 2003).
West Virginia, particularly Kanawha County.
Litigation activity has increased 53.6% more rapidly in
West Virginia than in the nation as a whole over the
last 10 years.\162\ Current West Virginia Chief Justice
Larry Starcher has been quoted as saying, ``I have a
hard time not being lenient, as a jurist, on behalf of
those people.'' \163\
---------------------------------------------------------------------------
\162\ See West Virginia Chamber of Commerce, Perryman Study,
``Negative Impact On The Current Civil Justice System On Economic
Activity In West Virginia'' (February 2003).
\163\ Court Watch, West Virginia Chamber of Commerce (July 2003).
Philadelphia, Pennsylvania (Court of Common
Pleas). The impact of extraordinary awards is most
noticed in Pennsylvania in the healthcare industry,
where, according to The Philadelphia Inquirer,
``hitting the `malpractice lottery' is a made-for-
Philadelphia phrase.'' \164\ According to a 2003 study
by the Pew Charitable Trusts, Pennsylvania is in one of
the worst situations in the nation regarding the
provision of affordable professional medical liability
insurance for physicians and hospitals.\165\ The report
shows that, in Philadelphia, plaintiffs are twice as
likely to win jury trials as in the rest of the nation
and a substantial percentage of cases result in
verdicts greater than $1 million.\166\
---------------------------------------------------------------------------
\164\ Josh Goldstein, ``Malpractice Lawsuits Thrive in City; Still,
Few are Filed, and Few are Decided by a Jury,'' Philadelphia Inquirer
(December 10, 2001) at A1.
\165\ See Randall R. Bovbjerg and Anna Bartow, ``Understanding
Pennsylvania's Medical Malpractice Crisis: Facts About Liability
Insurance, The Legal System, and Health Care in Pennsylvania'' (Pew
Charitable Trusts 2003).
\166\ See id. at 32.
City of St. Louis, Missouri. St. Louis City
Circuit Court is reportedly ``the place to be'' if you
are a plaintiff.\167\ Plaintiffs move cases to St.
Louis City because ``St. Louis City is a better
venue,'' according to one St. Louis plaintiffs'
attorney.\168\ Even Missouri Supreme Court Judge
Michael Wolff has recognized that ``[t]he preponderance
of anecdotal evidence is that jurors in the city of St.
Louis are far more favorably disposed toward injured
plaintiffs' claims than are their counterparts in
suburban St. Louis County or in most other counties in
the state.'' \169\
---------------------------------------------------------------------------
\167\ See Roland Klose, ``Venue's on the Menu For Lawyers Trying to
Take a Bite of Doe Run, St. Louis is the Place to Be,'' Riverfront
Times (April 10, 2002); Tim Bryant, ``Question of Merging City, County
Jury Pools is Revived; State Supreme Court Judge Suggested Move Last
Year,'' St. Louis Post-Dispatch (November 27, 2002) at B1 (discussing
the suggestion by Missouri Supreme Court Judge Michael Wolff of joining
the juror pools of St. Louis City and County because plaintiffs'
lawyers are known for trying to get their personal injury cases into
St. Louis City Circuit Court for a more sympathetic jury, to make the
issue of venue less important).
\168\ Id.
\169\ See State ex rel. Linthicum, 57 S.W.3d 855, 859 (Mo. 2001)
(Wolff, J., concurring in part, dissenting in part).
Eagle Pass, Texas. According to the San
Antonio Express-News, ``L. Wayne Scott, a professor at
St. Mary's University Law School . . . who has mediated
civil cases in Eagle Pass, estimates defendants there
are roughly 10 times more likely to lose than in
conservative Dallas and two or three times more likely
to fall than in San Antonio . . . Indeed, the prospect
of facing a jury in Eagle Pass--where Mayor Joaquin L.
Rodriguez also is one of the city's top plaintiff's
attorneys--frequently makes companies more willing to
settle and in higher amounts than they would agree to
in other venues.'' Local plaintiff's attorney Earl
Herring says that a case worth $10,000 in Eagle Pass
would be ``worth $500 in Uvalde.'' \170\
---------------------------------------------------------------------------
\170\ Greg Jefferson, ``Eagle Pass Remains Known as Plaintiff's
Attorney Paradise,'' The San Antonio Express News (November 2, 2003).
Hampton County, South Carolina. Examples of
the forum shopping that is rampant in Hampton County
include the following. Michigan-based General Motors
and Ohio-based Cooper Tire faced a lawsuit in Hampton
County simply because their products are sold in the
county; the plaintiff lived 90 miles away and the
accident occurred 350 miles away in Tennessee.\171\ In
another case, a Beaufort County resident sued
Continental Airlines because she was injured during a
rough landing on a flight between Savannah, Georgia,
and New Jersey, claiming that the airline does business
in Hampton County because it sells tickets over the
Internet.\172\
---------------------------------------------------------------------------
\171\ See Michael Freedman, ``Home Court Advantage,'' Forbes (June
10, 2002) at 74.
\172\ See Editorial, ``Wide-open Venue Law Undermines Confidence in
Court,'' The State (April 10, 2003) at A16.
---------------------------------------------------------------------------
Amendments Adopted at Committee
Three amendments adding additional provisions to the H.R.
420 were adopted at Committee. The first, offered by Mr.
Keller, applies a ``three strikes and you're out'' rule to
attorneys who commit Rule 11 violations in Federal district
court. The amendment provides that whenever a Federal district
judge determines an attorney has violated Rule 11 of the
Federal Rules of Civil Procedure three or more times within
that Federal district court, the court shall suspend that
attorney from practice of law in that Federal district court
for 1 year, and may suspend that attorney from practice of law
in that Federal district court for any additional period the
court considers appropriate. Under such provision, an attorney
has the right to appeal any such suspension, and such
suspension shall not take place pending such appeal. Further,
to be reinstated to the practice of law in a Federal district
court after completion of such suspension, the attorney must
first petition the court for reinstatement under such
procedures and conditions as the court may prescribe.
A second amendment, offered by Mr. Nadler, imposes
mandatory civil sanctions that are commensurate with those
available under Rule 11 of the Federal Rules of Civil
Procedure, in addition to other civil sanctions otherwise
applicable, for the intentional destruction of documents sought
in \173\ a pending civil court proceeding, and highly relevant
to such proceeding, with the intent to obstruct such
proceeding. The amendment applies its rule to proceedings in
Federal court, and in state courts where the court proceeding
substantially affects interstate commerce.
---------------------------------------------------------------------------
\173\ The term ``sought in'' as used in the amendment means sought
pursuant to the rules of the relevant Federal or state court
proceeding.
---------------------------------------------------------------------------
A third amendment, offered by Mr. Scott, provides that
whenever a party presents to a Federal court, or to a State
court in a proceeding that substantially affects interstate
commerce, a pleading, written motion, or other paper, that
includes a claim, defense, or other legal contention that the
party has already litigated and lost on the merits in any forum
in final decisions not subject to appeal on 3 consecutive
occasions, there shall be a rebuttable presumption that the
presentation of such paper is in violation of Rule 11 of the
Federal Rules of Civil Procedure.
RESPONSE TO JUDICIAL CONFERENCE LETTER ON H.R. 4571, THE LAWSUIT ABUSE
REDUCTION ACT
On July 9, 2004, the Judicial Conference of the United
States sent a letter to the Committee regarding H.R. 4571, the
version of H.R. 420 the House of Representatives passed during
the 108th Congress.\174\
---------------------------------------------------------------------------
\174\ Letter from Leonidas Ralph Mecham, Secretary, United States
Judicial Conference, to Chairman F. James Sensenbrenner (July 9, 2004)
(``Judicial Conference Letter'').
---------------------------------------------------------------------------
The letter states that Section 2 of H.R. 4571 would
reinstitute provisions to Rule 11 that were removed in 1993,
and that such provisions were removed ``because of the serious
problems it engendered during a 10-year period of operation.''
\175\ This assertion is contradicted by the Judicial
Conference's Advisory Committee on Civil Rules's own survey.
That committee undertook a review of Rule 11, in its pre-1993
form, and asked the Federal Judicial Center to conduct an
empirical study of its operation and impact. The survey of 751
Federal judges found that an overwhelming majority of Federal
judges believed that Rule 11 did not impede development of the
law (95%); the benefits of the rule outweighed any additional
requirement of judicial time (71.9%); the 1983 version of Rule
11 had a positive effect on litigation in the Federal courts
(80.9%); and the rule should be retained in its then-current
form (80.4%).\176\ Indeed, the letter from the Judicial
Conference admits as much with the cursory statement that ``The
1991 Federal Judicial Center Survey noted that most Federal
judges believed that the 1983 version of Rule 11 had positive
effects.'' \177\
---------------------------------------------------------------------------
\175\ Judicial Conference Letter, at 1.
\176\ 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).
\177\ Judicial Conference Letter, at 2.
---------------------------------------------------------------------------
Despite this survey conducted at the behest of the Judicial
Conference itself, the letter cites four ``serious problems''
caused by the 1983 amendments to Rule 11.
The first is that the 1983 amendments to Rule 11 resulted
in ``creating a significant incentive to file unmeritorious
Rule 11 motions by providing a possibility of monetary
penalty.'' \178\ In response, first, any unmeritorious Rule 11
motion could itself result in sanctions (and thereby deterred)
under Rule 11.\179\ Second, yet another survey conducted by the
Federal Judicial Center contradicts the assertion that the
option of monetary penalties under Rule 11 caused problems. A
survey conducted by the Federal Judicial Center in June, 1995,
consisting of 148 Federal judges and over 1,000 trial attorneys
found that the 1993 amendments that disallowed monetary
compensation for victims of frivolous lawsuits were a bad idea.
In that survey, two-thirds of judges (66%), defense attorneys
(63%), and other attorneys (66%), and even a substantial
portion of plaintiff's attorneys (43%), supported restoring
Rule 11's compensatory function once again.\180\
---------------------------------------------------------------------------
\178\ Id. at 2.
\179\ See Berger v. Iron Workers, 843 F.2d 1395 (D.C. Cir. 1988)
(affirming in part per curiam 7 Fed. Rules Serv. 3d 306 (D.D.C. 1986))
(imposing sanctions for filing inappropriate Rule 11 motions).
\180\ See John Shapard et. al., Federal Judicial Center, Report of
a Survey Concerning Rule 11, Federal Rules of Civil Procedure at 5.
---------------------------------------------------------------------------
The second problem the Judicial Conference letter cites is
that the 1983 amendments to Rule 11 resulted in ``engendering
potential conflict of interest between clients and their
lawyers, who advised withdrawal of particular claims despite
the clients' preference.'' \181\ In response, it is entirely
appropriate that an attorney advise withdrawing claims a client
wants to make when those claims are frivolous.
---------------------------------------------------------------------------
\181\ Judicial Conference Letter, at 2.
---------------------------------------------------------------------------
The third problem the Judicial Conference letter cites is
that the 1983 amendments to Rule 11 resulted in ``exacerbating
tensions between lawyers.'' \182\ In response, whatever
tensions the amendments may have caused lawyers, the threat of
frivolous lawsuits today has created a legal culture of fear
that has come to permeate all of American society, threatening
common sense judgments everywhere, from churches, to
playgrounds, to schools, to doctors' offices, to small
businesses nationwide, and everywhere in between. Surely if
restoring teeth to Rule 11 results in some tension between
lawyers, it is justified by helping to allow all Americans to
live their lives free of the constant fear that their every
innocent move could result in a devastating frivolous lawsuit.
---------------------------------------------------------------------------
\182\ Id. at 2.
---------------------------------------------------------------------------
The fourth problem the Judicial Conference letter cites is
that the 1983 amendments to Rule 11 resulted in ``providing
little incentive, and perhaps a distinct disincentive, to
abandon or withdraw a pleading or claim--and thereby admit
error--that lacked merit after determining that it no longer
was supportable in law or fact.'' \183\ In response, the
argument that mandatory sanctions deter offenders from
retracting offending conduct is no more persuasive than the
argument that stealing again and again should be allowed,
provided each time the thief gets caught he or she returns the
stolen goods; except in this case the argument is even weaker,
since under the current Rule 11, the money victims of frivolous
lawsuits are forced to spend to defend themselves, or to
prepare to defend themselves, against frivolous claims is not
even returned when an attorney is called to the carpet for
filing a frivolous pleading: rather, such attorney need only
withdraw the pleading and suffer no penalty whatsoever.
---------------------------------------------------------------------------
\183\ Id. at 2.
---------------------------------------------------------------------------
The letter from the Judicial Conference also states that,
if Section 3 of H.R. 4571 is enacted, it ``could affect the
cost and duration of a very large number of civil actions in
state courts.'' \184\ In response, Section 3 of H.R. 4571 is
not likely to be abused for several reasons. Any party that
does not fear sanctions under Rule 11 will only request that a
state court rule on whether the case substantially affects
interstate commerce in rare circumstances. This is because,
first, no one is required under H.R. 4571 to make such a
request to a state court if they do not want to, and second,
because the burden will be on any party who decides to move for
a determination that the case ``substantially affects
interstate commerce'' to show just that, and that will not be
an easy case to make, especially in smaller cases. The end
result will be that motions will be made under Section 3 of
H.R. 4571 only in those cases in which large amounts of money
are at stake with clear interstate effects and only by those
parties who have very strong reasons to believe the court
system is being abused by a party filing frivolous pleadings.
In such cases, it is entirely appropriate that a Federal rule
sanctioning lawsuit abuse be available. Section 3 of H.R. 4571
would serve national economic interests by focusing attention
on the employment costs of frivolous litigation. The provision
would provide that the interstate economy, including workers
and jobs, when potentially negatively affected, should be
protected by a rule prohibiting frivolous claims.
---------------------------------------------------------------------------
\184\ Id. at 3.
---------------------------------------------------------------------------
Finally, the Judicial Conference letter states that H.R.
4571 is ``inconsistent with the longstanding Judicial
Conference policy opposing direct amendment of the Federal
rules by legislation.'' \185\ However, Congress has never
relinquished its constitutional authority to create and alter
the rules of Federal court procedure,\186\ and it has a duty to
do so to address pressing problems, in this case the threat of
frivolous lawsuits that affect all aspects of American society.
---------------------------------------------------------------------------
\185\ Id. at 1.
\186\ See U.S. Const. Art. I, Sec. 8, cl. 9; Art. III, Sec. 1, cl.
1; Art. III, Sec. 2, cl. 2.
---------------------------------------------------------------------------
RESPONSE TO THE FEDERAL JUDICIAL CENTER'S 2005 SURVEY
The Federal Judicial Center recently issued a survey of
U.S. district court judges (``FJC 2005 Survey'') regarding Rule
11 and the problem of frivolous lawsuits.\187\
---------------------------------------------------------------------------
\187\ David Rauma and Thomas E. Willging, Report of a Survey of
United States District Judges' Experiences and Views Concerning Rule
11, Federal Rules of Civil Procedure (Federal Judicial Center 2005)
(hereinafter ``FJC 2005 Survey'').
---------------------------------------------------------------------------
As explained above, the Lawsuit Abuse Reduction Act would
largely restore Federal Rule of Civil Procedure 11 to what it
was before it was made toothless in 1993. Rule 11, prior to the
adoption of weakening amendments in 1993 which eliminated
mandatory and serious sanctions against those who filed
frivolous lawsuits, was widely popular among Federal judges,
and it served to significantly limit lawsuit abuse. In 1990,
the Judicial Conference's Advisory Committee on Civil Rules
(the same organization that requested the FJC 2005 Survey)
undertook a review of Rule 11 at the time and asked the Federal
Judicial Center to conduct an empirical study of its operation
and impact. The survey of 751 Federal judges found that an
overwhelming majority of Federal judges believed, based on
their experience under both a weaker and stronger Rule 11, that
a stronger Rule 11 did not impede development of the law (95%);
the benefits of the rule outweighed any additional requirement
of judicial time (71.9%); the stronger version of Rule 11 had a
positive effect on litigation in the Federal courts (80.9%);
and the rule should be retained in its then-current form
(80.4%).\188\ Of the 751 judges surveyed in 1990, 583
responded, roughly twice times as many as responded to the
FJC's 2005 Survey.
---------------------------------------------------------------------------
\188\ 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).
---------------------------------------------------------------------------
In the Federal Judicial Center's latest survey, only 278
judges responded to, and half of the judges surveyed (and over
half of the judges that responded to the survey) had no
experience at all with the stronger version of Rule 11. As the
FJC 2005 Survey states, ``the Center E-mailed questionnaires to
two random samples of 200 district judges each . . . One sample
comprised solely judges appointed to the bench before January
1, 1992 . . . [t]he other sample comprised solely judges
appointed to the bench after January 1, 1992.'' \189\ The FJC
report keeps secret the dates on which the respondent judges
first came to serve on the bench, so we have no way of knowing
whether any of those judges had any significant experience as
judges under the stronger Rule 11 that was in effect the decade
before 1993. Appendix A of the FJS 2005 Survey states that
``all judges in the first group [of 200 out of 400 surveyed]
would have had at least 1 year on the bench before the 1993
amendments to Rule 11 went into effect.'' \190\ That provides
little comfort that any significant number of the judges
surveyed had any significant experience under the stronger Rule
11. So the survey is fundamentally flawed in that we have no
reason to believe it included any significant number of judges
who had any significant experience under the stronger Rule 11.
---------------------------------------------------------------------------
\189\ FJC 2005 Survey, at 2.
\190\ Id. at 16 (Appendix A).
---------------------------------------------------------------------------
Further, the FJC 2005 Survey found that even of the Federal
judges surveyed, 55% indicated that the purpose of Rule 11
should be both deterrence and compensation,\191\ and the
Lawsuit Abuse Reduction Act would fulfill both purposes.
---------------------------------------------------------------------------
\191\ FJC 2005 Survey at 2.
---------------------------------------------------------------------------
Of course, Federal judges themselves do not suffer in any
direct way the costs of frivolous, abusive lawsuits. Those who
do suffer those costs, including the large financial costs of
nuisance lawsuits filed for their settlement value--namely the
small business community--overwhelmingly support the Lawsuit
Abuse Reduction Act. The National Federation of Independent
Business, for example, has made passing the Lawsuit Abuse
Reduction Act their top legislative priority. The small
business community rejects the notion today the amount of
frivolous lawsuits filed are ``just right.'' In just a few
months, a coalition of over 100 organizations, called the
Lawsuit Abuse Reform Coalition (``LARC''), came together to
support LARA's common sense reforms.
When sanctions for filing frivolous lawsuits are not
mandatory, as they are not mandatory now, those who are the
victims of frivolous lawsuits have no incentive to litigate the
frivolous nature of the claims against them because there is
currently no guarantee that even if the claims against them are
found to be frivolous they will be compensated for the harm
caused by those frivolous claims. What happens instead is that,
today, the victims of frivolous lawsuits are routinely extorted
to settle the case for certain sums just below those what would
be necessary to litigate the case to judgment, at which point
the case drops out of the dockets of the very judges who were
surveyed by the FJC.
Judges are unlikely to view frivolous litigation as a
problem because such cases rarely reach the bench. An
overwhelming number of cases settle before trial. When a
frivolous claim is filed, one of two things occur under the
current Rule 11: either the small business challenges the
plaintiff and the plaintiff simply withdraws the claim and
walks away (as they are allowed to do under the current Rule
11); or the small business settles rather than proceed with a
motion for sanctions because it is unlikely that the court will
fully reimburse it for the cost of defending against the
frivolous claim, and the cost of defending against the claim is
more than the expense of settlement.
The current situation favors judges, not small businesses
who are harmed by the litigation. Under the current Rule 11,
judges are relieved of their obligation to consider whether or
not a case is frivolous. They do not need to hold a hearing on
whether the case is frivolous and impose sanctions because, as
a matter of practice, Rule 11 requires frivolous lawsuits to be
withdrawn (with no reimbursement to the victim of the suit) or
settled (for just under the cost of defending against it).
While this is convenient for judges, it is not fair to small
businesses.
Everyone who sits back for a moment and reflects will
understand that a limitless variety of frivolous lawsuits clog
our courts in ways they did not in decades gone be. Judges do
not feel the painful costs of frivolous lawsuits, and as they
have sat as judges over the last decade they have only seen the
standards of how frivolous lawsuits should be treated erode
over time, starting with the explicitly forgiving nature of the
toothless Rule 11 that was enacted in 1993. It is time courts
were made to take the harm caused by frivolous lawsuits
seriously again--by making sanctions for filing frivolous
lawsuits mandatory, not discretionary, on the part of the
judge--and to empower the victims of frivolous lawsuits with
the certainty that they will be compensated for the frivolous
lawsuits they suffer under. Only the Lawsuit Abuse Reduction
Act can help free all Americans from the fear they feel today
under the constant threat of frivolous lawsuits.
Finally, the Federal judiciary has a history of opposing
any legal reforms it does not itself propose. For example, the
Federal Judicial Center has also opposed the Class Action
Fairness Act,\192\ which overwhelmingly passed Congress and
which became law earlier this year.\193\
---------------------------------------------------------------------------
\192\ See Letter from Ralph Mecham, Secretary, Judicial Conference
of the United States (Mar. 26, 2003).
\193\ The Class Action Fairness Act passed the Senate by a vote of
72 to 26, and the House by a vote of 279 to 149. It became Public Law
No. 109-2.
---------------------------------------------------------------------------
Hearings
The Committee on the Judiciary held no hearings on H.R. 420
during the 109th Congress.
Committee Consideration
On May 25, 2005, the Committee met in open session and
ordered favorably reported the bill H.R. 420 with an amendment
by a recorded vote of 19 yeas to 11 nays, a quorum being
present.
Vote of the Committee
In compliance with clause 3(b) of Rule XIII of the Rules of
the House of Representatives, the Committee notes that the
following rollcall votes occurred during the committee''s
consideration of H.R. 420.
1. Mr. Conyers offered an amendment that would have
provided that the Act would not apply to manufacturers,
sellers, or trade associations that, on or after the date of
enactment of the Act, shifts or transfers employment positions
or facilities to a location outside the United States. By a
rollcall vote of 11 yeas to 17 nays, the amendment was
defeated.
ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Coble....................................................... X
Mr. Smith (Texas)............................................... X
Mr. Gallegly.................................................... X
Mr. Goodlatte...................................................
Mr. Chabot......................................................
Mr. Lungren..................................................... X
Mr. Jenkins..................................................... X
Mr. Cannon...................................................... X
Mr. Bachus......................................................
Mr. Inglis...................................................... X
Mr. Hostettler.................................................. X
Mr. Green.......................................................
Mr. Keller...................................................... X
Mr. Issa........................................................ X
Mr. Flake.......................................................
Mr. Pence....................................................... X
Mr. Forbes...................................................... X
Mr. King........................................................ X
Mr. Feeney...................................................... X
Mr. Franks...................................................... X
Mr. Gohmert..................................................... X
Mr. Conyers..................................................... X
Mr. Berman...................................................... X
Mr. Boucher.....................................................
Mr. Nadler...................................................... X
Mr. Scott....................................................... X
Mr. Watt........................................................ X
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................
Ms. Waters...................................................... X
Mr. Meehan...................................................... X
Mr. Delahunt....................................................
Mr. Wexler......................................................
Mr. Weiner...................................................... X
Mr. Schiff...................................................... X
Ms. Sanchez..................................................... X
Mr. Smith (Washington)..........................................
Mr. Van Hollen.................................................. X
Mr. Sensenbrenner, Chairman..................................... X
-----------------------------------------------
Total....................................................... 11 17
----------------------------------------------------------------------------------------------------------------
2. Motion to report H.R. 420 with an amendment in the
nature of a substitute was agreed to by a rollcall vote of 19
yeas and 11 nays.
ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
Ayes Nays Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Coble....................................................... X
Mr. Smith (Texas)............................................... X
Mr. Gallegly.................................................... X
Mr. Goodlatte...................................................
Mr. Chabot...................................................... X
Mr. Lungren..................................................... X
Mr. Jenkins..................................................... X
Mr. Cannon...................................................... X
Mr. Bachus...................................................... X
Mr. Inglis...................................................... X
Mr. Hostettler.................................................. X
Mr. Green.......................................................
Mr. Keller...................................................... X
Mr. Issa........................................................ X
Mr. Flake.......................................................
Mr. Pence....................................................... X
Mr. Forbes...................................................... X
Mr. King........................................................ X
Mr. Feeney...................................................... X
Mr. Franks...................................................... X
Mr. Gohmert..................................................... X
Mr. Conyers..................................................... X
Mr. Berman...................................................... X
Mr. Boucher.....................................................
Mr. Nadler...................................................... X
Mr. Scott....................................................... X
Mr. Watt........................................................ X
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................
Ms. Waters...................................................... X
Mr. Meehan...................................................... X
Mr. Delahunt....................................................
Mr. Wexler......................................................
Mr. Weiner...................................................... X
Mr. Schiff...................................................... X
Ms. Sanchez..................................................... X
Mr. Smith (Washington)..........................................
Mr. Van Hollen.................................................. X
Mr. Sensenbrenner, Chairman..................................... X
-----------------------------------------------
Total....................................................... 19 11
----------------------------------------------------------------------------------------------------------------
Committee Oversight Findings
In compliance with clause 3(c)(1) of Rule XIII 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.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of Rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of Rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 420, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 3, 2005.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 420, the ``Lawsuit
Abuse Reduction Act of 2005.''
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contacts are Gregory
Waring (for Federal costs), who can be reached at 226-2860, and
Melissa Merrell (for the State and local impact), who can be
reached at 225-3220.
Sincerely,
Douglas Holtz-Eakin.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 420--Lawsuit Abuse Reduction Act of 2005.
H.R. 420 would amend Rule 11 of the Federal Rules of Civil
Procedure to require courts to impose appropriate sanctions on
attorneys, law firms, or parties who file frivolous lawsuits
and to require them to compensate parties injured by such
conduct. (Courts currently may, but are not required to, impose
such sanctions.) In addition, the bill would require certain
personal injury claims to be filed in a court where the person
bringing the claim lives, where the alleged injury occurred, or
where the defendant's business is located.
Under the legislation, any monetary sanction imposed under
Rule 11 would be between the parties to the suit. Thus, CBO
estimates that enacting the legislation would result in no cost
or savings to the Federal Government. H.R. 420 would not affect
direct spending or revenues.
H.R. 420 contains an intergovernmental mandate as defined
in the Unfunded Mandates Reform Act (UMRA) because it would
preempt certain State laws governing court procedures.
Specifically, it would require State judges to determine
whether certain liability lawsuits affect interstate commerce
and apply Federal civil procedures for frivolous lawsuits to
those cases. CBO estimates that the cost of complying with that
mandate would be minimal and well below the threshold
established in that act ($62 million in 2005, adjusted annually
for inflation). The bill contains no new private-sector
mandates as defined in UMRA.
The CBO staff contacts for this estimate are Gregory Waring
(for Federal costs), who can be reached at 226-2860, and
Melissa Merrell (for the State and local impact), who can be
reached at 225-3220. This estimate was approved by Peter H.
Fontaine, Deputy Assistant Director for Budget Analysis.
Performance Goals and Objectives
The Committee states that pursuant to clause 3(c)(4) of
Rule XIII of the Rules of the House of Representatives, H.R.
420 would: (1) restore mandatory sanctions for filing frivolous
lawsuits in violation of Rule 11 of the Federal Rules of Civil
Procedure; (2) remove Rule 11's ``safe harbor'' provision that
currently allows parties and their attorneys to avoid sanctions
for making frivolous claims by withdrawing frivolous claims
after a motion for sanctions has been filed; (3) allow monetary
sanctions, including attorneys' fees and compensatory costs,
against any party making a frivolous claim; (4) apply Rule 11's
provisions to state cases a state judge finds substantially
affects interstate commerce; (5) require that personal injury
cases be brought only where the plaintiff resides, where the
plaintiff was allegedly injured, where the defendant's
principal place of business is located, or where the defendant
resides; (6) apply a ``three strikes and you're out'' rule to
attorneys who commit Rule 11 violations in Federal district
court; (7) impose mandatory civil sanctions for document
destruction intended to obstruct a pending court proceeding;
and (8) provide that if a party attempts to relitigate a losing
claim more than three consecutive times, there shall be a
rebuttable presumption that Rule 11 has been violated.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of Rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in article I, section 8, clause 3 of the
Constitution.
Section-by-Section Analysis and Discussion
The following discussion describes the bill as reported by
the Committee.
Sec. 1. Short title. This section provides that the Act may
be cited as the ``Lawsuit Abuse Reduction Act of 2004.''
Sec. 2. Attorney Accountability. This section would restore
mandatory sanctions for filing frivolous lawsuits in violation
of Rule 11; remove Rule 11's ``safe harbor'' provision that
currently allows parties and their attorneys to avoid sanctions
for making frivolous claims by withdrawing frivolous claims
after a motion for sanctions has been filed; and require
monetary sanctions, including attorneys' fees and compensatory
costs, against any party making a frivolous claim and causing
economic harm to the victim of a frivolous lawsuit.
Sec. 3. Applicability of Rule 11 to State Cases Affecting
Interstate Commerce. This section applies Rule 11's provisions
to state cases a state judge finds substantially affect
interstate commerce, including by costing jobs in other states.
Sec. 4. Prevention of Forum-Shopping. Subsection (a) of
this section requires that personal injury cases be brought
only where the plaintiff resides, where the plaintiff was
allegedly injured (or where the circumstances giving rise to
the injury allegedly occurred) or where the defendant's
principal place of business is located, or where the defendant
resides. Subsection (b) of this section provides that if a
person alleges that the injury or circumstances giving rise to
the personal injury claim occurred in more than one county (or
Federal district), the trial court shall determine which State
and county (or Federal district) is the most appropriate forum
for the claim. If the court determines that another forum would
be the most appropriate forum for a claim, the court shall
dismiss the claim. Any otherwise applicable statute of
limitations shall be tolled beginning on the date the claim was
filed and ending on the date the claim is dismissed under this
subsection. Subsection (c) of this section provides the
definition of terms used in section 4.
Sec. 5. Rule of Construction. This section provides that
nothing in section 3 or in the amendments made by section 2
shall be construed to bar or impede the assertion or
development of new claims or remedies under Federal, State, or
local civil rights law.
Sec. 6. Three-Strikes Rule for Suspending Attorneys Who
Commit Multiple Rule 11 Violations. This section provides that
whenever a Federal district judge determines an attorney has
violated Rule 11 of the Federal Rules of Civil Procedure three
or more times within that Federal district court, the court
shall suspend that attorney from practice of law in that
Federal district court for 1 year, and may suspend that
attorney from practice of law in that Federal district court
for any additional period the court considers appropriate.
Under such provision, an attorney has the right to appeal any
such suspension, and such suspension shall not take place
pending such appeal. Further, to be reinstated to the practice
of law in a Federal district court after completion of such
suspension, the attorney must first petition the court for
reinstatement under such procedures and conditions as the court
may prescribe.
Sec. 7. Presumption of Rule 11 Violation for Repeatedly
Relitigating Same Issue. This section provides that whenever a
party presents to a Federal court, or to a State court in a
proceeding that substantially affects interstate commerce, a
pleading, written motion, or other paper, that includes a
claim, defense, or other legal contention that the party has
already litigated and lost on the merits in any forum in final
decisions not subject to appeal on 3 consecutive occasions,
there shall be a rebuttable presumption that the presentation
of such paper is in violation of Rule 11 of the Federal Rules
of Civil Procedure.
Sec. 8. Enhanced Sanctions for Document Destruction. This
section provides that provides for mandatory civil sanctions
that are commensurate with those available under Rule 11 of the
Federal Rules of Civil Procedure, in addition to other civil
sanctions otherwise applicable, for the intentional destruction
of documents sought in a pending civil court proceeding, and
highly relevant to such proceeding, with the intent to obstruct
such proceeding. The amendment applies to proceedings in
Federal court, and in state courts when the proceedings
substantially affect interstate commerce.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) 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 italics, existing law in which no change
is proposed is shown in roman):
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, 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.] If a pleading,
motion, or other paper is signed in violation of this rule, the
court, upon motion or upon its own initiative, shall impose
upon the attorney, law firm, or parties that have violated this
subdivision or are responsible for the violation, an
appropriate sanction, which may include an order to pay the
other party or parties for 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.
(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.
* * * * * * *
(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) Monetary sanctions may not be awarded
against a represented party for a violation of
subdivision (b)(2).
[(B) Monetary sanctions may not be awarded
on the court's initiative unless the court
issues its order to show cause before a
voluntary dismissal or settlement of the claims
made by or against the party which is, or whose
attorneys are, to be sanctioned.] 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. The sanction may
consist of an order to pay to the 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.
Markup Transcript
BUSINESS MEETING
WEDNESDAY, MAY 25, 2005
House of Representatives,
Committee on the Judiciary,
Washington, DC.
The Committee met, pursuant to notice, at 10:02 a.m., in
Room 2138, Rayburn House Office Building, Hon. F. James
Sensenbrenner, Jr. [Chairman of the Committee] presiding.
Chairman Sensenbrenner. The Committee will come to order. A
working quorum is present.
[Intervening business.]
Chairman Sensenbrenner. Pursuant to notice, I now call up
the bill H.R. 420, the ``Lawsuit Abuse Reduction Act of 2005,''
for purposes of markup and move its favorable recommendation to
the House. Without objection, the bill will be considered as
read and open for amendment at any point.
[The bill, H.R. 420, follows:]
Chairman Sensenbrenner. The chair recognizes the gentleman
from Texas, Mr. Smith, the sponsor of the legislation, to
explain the bill.
Mr. Smith. Thank you, Mr. Chairman.
Mr. Chairman, H.R. 420 will deter frivolous litigation. Our
country's values and its economy are under attack from
unnecessary lawsuits. Americans sue over the slightest offense.
Schoolteachers, doctors, Little League coaches, Girl Scout
troop leaders often fear that the slightest offense to an angry
parent or patient will result in years of litigation. In
addition to intimidating members of our Nation's communities,
frivolous lawsuits harm our economy and threaten to bankrupt
business owners as well. The alarming spread of frivolous
lawsuits has made a mockery of our legal system. Frivolous
suits are brought despite no evidence that shows negligence on
the part of the defendant. These are nuisance lawsuits, but
costly to the defendants.
Many Americans have legitimate legal grievances and deserve
their day in court. Justice should not be denied to those who
deserve it. However, some lawyers game the system, which drives
up the cost of doing business and drives down the integrity of
the judicial system.
For example, the CEO of San Antonio's Methodist Children's
Hospital was sued after he stepped into a patient's hospital
room and asked how the patient was doing. A jury cleared him of
any wrongdoing.
In a New Jersey Little League game, a player lost sight of
a flyball because of the sun. He was injured when the ball hit
him in the eye. The coach was forced to hire a lawyer after the
boy's parents sued, and the coach was forced to settle the case
for $25,000.
A Pennsylvania man sued the Frito-Lay Company claiming that
Doritos chips were inherently dangerous after one stuck in his
throat. After 8 years of costly litigation, the Pennsylvania
Supreme Court finally threw out the case, writing that there is
``a common-sense notion that it is necessary to properly chew
hard foodstuffs prior to swallowing.''
Today almost any party can bring any suit in practically
any jurisdiction because plaintiffs and their attorneys have
nothing to lose. All they want is for the defendant to settle.
This is legalized extortion. It is lawsuit lottery.
Some Americans file lawsuits for reasons that can only be
described as absurd. They sue a theme park because its haunted
houses are too scary, they sue the weather channel for an
inaccurate forecast, and they sue McDonald's claiming a hot
pickle dropped from a hamburger caused a burn and mental
injury. Our national motto might as well be, When in doubt,
file a lawsuit. While plaintiffs have nothing to lose and
everything to gain by working the system this way, defendants,
on the other hand, often stand to lose everything. They can
unfairly lose their careers, their businesses, and their
reputations. This is not justice.
But the good news is that there is a remedy. Change Federal
Rule of Civil Procedure 11. The Lawsuits Abuse Reduction Act
does just that. It requires judges to sanction plaintiffs who
file frivolous lawsuits merely to extort financial settlements,
as well as defendants who unnecessarily prolong the process.
Under H.R. 420, if either party feels they have been subject to
a frivolous claim or pleading, they can file a motion with the
court for sanctions. If the judge determines that the claim was
frivolous, then the sanctions imposed can include an order to
pay the attorneys fees of the party who was the victim of the
frivolous claim.
Also, if a State judge determines that a frivolous lawsuit
has a significant impact on interstate commerce, the judge
could sanction the litigants by using rule 11.
Finally, Mr. Chairman, this legislation prevents forum-
shopping. It requires that personal injury claims only be filed
in the State, county, or Federal district where the plaintiff
resides, where the injury occurred, or in the State or county
where the defendant's principal place of business is located.
This provision addresses the growing problem of attorneys who
shop around the country for judges who routinely award
plaintiffs excessive amounts.
Mr. Chairman, the Lawsuit Abuse Reduction Act is sensible
reform that will help restore confidence in our economy, our
communities, and in our justice system as well.
And Mr. Chairman, I will yield back the balance of my time.
Chairman Sensenbrenner. The gentleman from Michigan, Mr.
Conyers.
Mr. Conyers. Thank you very much.
The reason I ask what are the reasons that so many
organizations oppose this bill, including the United States
Judicial Conference, the National Association for the
Advancement of Colored People, the Alliance for Justice, Public
Citizen, People for the American Way, the American Association
of People with Disabilities, the Lawyers Committee for Civil
Rights in Law, the American Bar Association, the National
Conference on State Legislatures, National Partnership for
Women, the National Women's Law Center, the Center for Justice
and Democracy, Consumers Union, the National Association of
Consumer Advocates, and the NAACP Legal Defense Fund--well,
it's because this legislation would have an adverse impact on
the ability of civil rights plaintiffs to seek recourse in the
courts. And by requiring a mandatory sanctions regime that
would apply in these kinds of cases, H.R. 420 will chill many
legitimate and important civil rights actions.
This is due to the fact that much, if not most, of the
impetus for the 1993 changes stem from abuses by defendants in
civil rights cases, namely, civil rights defendants were
choosing to harass civil rights plaintiffs by filing a series
of rule 11 motions intended to slow down and impede cases that
clearly had merit.
Now, although the bill states that the proposed rule 11
changes shall not be construed to bar or impede the assertion
or development of new claims or remedies under Federal, State,
and local civil rights law, the language does not clearly and
simply exempt civil rights and discrimination cases, as should
be the case. Determining what a new claim or remedy is could be
a daunting and complex issue for most of the courts and clearly
does not cover all civil rights cases in any event.
Section 4. The forum-shopping provision would operate to
provide a litigation and financial windfall to foreign
corporations at the expense of their domestic competitors.
This is because instead of permitting claims to be filed
wherever a corporation does business or has some contact, as
most State long-arm statutes, so called, provide, the bill only
permits the suit to be brought where the defendant's principal
business is located. In the case of a foreign corporation that
obviously wouldn't exist inside the United States.
So if a United States citizen is harmed by a product
produced or manufactured by a foreign competitor, under this
measure proposed, the harmed citizen would likely have no
recourse against a foreign corporation, whereas he or she would
have recourse against a comparable United States company.
This is unfair to both our citizens and to our corporations
that are in competition, and so that's why we have this long
list--and I didn't mention them all--or organizations who don't
have an ax to grind, who are not being partisan, who are trying
to give us their point of view, and I'm happy to have had this
chance to let you know how many people are hoping that the
majority of us will turn back the Lawsuit Abuse Reduction Act
of 2005.
Thank you, Mr. Chairman.
Chairman Sensenbrenner. Without objection, all Members'
opening statements will appear in the record at this point.
Are there amendments? Gentleman from Florida.
Mr. Keller. Mr. Chairman, I have an amendment at the desk.
Chairman Sensenbrenner. The clerk will report the
amendment.
The Clerk. Amendment to H.R. 420 offered by Mr. Keller of
Florida. At the end of the bill add the following new section.
Mr. Keller. Mr. Chairman, I ask unanimous consent that the
amendment be considered as read.
Chairman Sensenbrenner. Without objection, so ordered, and
the gentleman from Florida is recognized for 5 minutes.
[The amendment follows:]
Mr. Keller. Thank you, Mr. Chairman. This is a three-
strikes-and-you're-out amendment. I'd like to explain it, give
a brief history of it, and talk about why it's needed.
The three-strikes-and-you're-out amendment, essentially
says this. If a Federal judge determines that an attorney has
violated rule 11 in that Federal District Court three times,
the attorney shall be suspended from practicing law in that
Federal District Court for 1 year. It is the identical language
that was used in the last Congress. At Mr. Berman's request
during the last markup, we added language to this provision
that says the attorney may appeal the suspension and that the
suspension shall be stayed during the appeal. This is the
identical language that I'm offering today, the same language
that passed this Committee by a 20 to 6 vote, and passed the
House as part of the Lawsuit Abuse Reduction Act.
Let me walk through just a brief history of the three-
strikes-and-you're-out concept, and I have a chart over to my
right that some of you will be able to see, others on the TV.
Let me tell you who supports it. First, George W. Bush. On
February 9, 2000 he issued a campaign press release where he
said, quote, ``As President I will bring common sense to our
courts and curb frivolous lawsuits. If a lawyer files three
junk lawsuits he'll lose the right to appear in Federal Court
for 3 years, three strikes and you're out.''
The Austin American Statesman, the local newspaper, the
next day on February 10, 2000 said, quote, ``Bush's plan
includes stiffer penalties for lawsuits determined by judges to
be frivolous, including a three strikes you're out rule for
lawyers who repeatedly file such claims.''
This enjoys bipartisan support. Former Senator John
Edwards, himself a personal injury attorney for many years
before of course becoming a U.S. Senator and Democratic nominee
for Vice President, said to Newsweek on December 15, 2003:
Frivolous lawsuits waste good people's time and hurt the real
victims. Lawyers who bring frivolous cases should face tough
mandatory sanctions with a three strikes penalty.
Senator John Kerry, the Democrat nominee for President,
told the Associated Press 1 month before the election on
October 10, 2004: Lawyers who file frivolous cases would face
tough mandatory sanctions including a three-strikes-and-you're-
out provision that forbids lawyers who file three frivolous
cases from bringing another suit for the next 10 years.
Yesterday, Tuesday, May 24 at approximately 3:00 p.m., I
personally met with the President of the United States in his
residence at the White House. And I handed him this quote that
you see on the chart, and asked him, ``Mr. President, do you
still stand by this and support three-strikes-and-you're-out?''
He told me, yes, he stands by the three-strikes-and-you're-out
concept, yes, he supports three-strikes-and-you're-out, and
yes, that language of three-strikes-and-you're-out will not be
vetoed.
Action by Congress on this identical amendment was as
follows last time. This Committee on September 8 approved it 20
to 6; 100 percent of Republicans present voted for it, several
Democrats voted for it including Mr. Berman, Ms. Lofgren and
Mr. Schiff. It then comfortably passed the U.S. House of
Representatives, a part of the underlying Lawsuit Abuse
Reduction Act, with 16 Democrats voting for it.
In a nutshell let me explain why it's needed. Under
existing rule 11 law, if a court determines that there's a rule
11 violation, the court may impose a sanction and may determine
the type of sanction. Under Chairman Lamar Smith's base bill,
there is a good improvement. Under this bill the judge shall
impose a sanction if there's a violation, but he may determine
what those sanctions are. He may award expenses which could be
50 cents sanction for postage and photocopying expenses. He may
award attorneys' fees which is substantially more, or he may
determine that a verbal reprimand is sufficient to deter
repetition of the bad conduct and no compensation is needed.
The base bill needs additional teeth. 50 cents or a verbal
reprimand won't get some attorneys' attention. A three-strikes-
and-you're-out penalty will. The goal of the three-strikes-and-
you're-out legislation is to prevent frivolous lawsuits from
being filed in the first place. The three-strikes-and-you're-
out concept to crack down on frivolous lawsuits is a common
sense bipartisan idea that deserves our support again today.
It's supported by President Bush, Senator Edwards, Senator
Kerry, this Committee and the U.S. House, and I ask my
colleagues once again to vote yes on the three-strikes-and-
you're-out amendment.
Mr. Chairman, before yielding back I ask unanimous consent
to include in the record the articles and press release I
referenced earlier from President Bush, Senator John Edwards
and Senator Kerry regarding three-strikes-and-you're-out.
Chairman Sensenbrenner. Without objection.
[The information follows:]
Chairman Sensenbrenner. The gentleman from Virginia, Mr.
Scott.
Mr. Scott. Thank you. Move to strike the last word, Mr.
Chairman.
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes.
Mr. Scott. Mr. Chairman, this is one of the--this mandatory
provision on line 11 is the troubling part. The change in
present law is simply that if a 1-year suspension in practice
is the appropriate sanction, the judge can issue whatever
sanction he wants under a contempt of court citation. If a 1-
year suspension doesn't make any sense, then this mandatory
minimum requires it. The judge has great latitude, Mr.
Chairman, on what he can do to someone who is in contempt of
court. He doesn't need a mandatory suspension as part of that.
I would hope that we would defeat this amendment, allow the
judge to use common sense and not force the judge to impose
sanctions when the sanctions in fact violate common sense. This
amendment would force the judge to violate common sense if it's
an inappropriate punishment, and therefore it's inappropriate
and I yield back the balance of my time.
Ms. Jackson Lee. Mr. Chairman--would you yield?
Mr. Scott. I yield to the gentlelady from Texas.
Ms. Jackson Lee. I thank the distinguished gentleman.
Let me just say that I take issue. I'd like to read in full
context the statements of Senator Kerry and Senator Edwards,
but I think that--I'm not sure where the 6 votes came from, but
I think that this is a slap in the face of justice, and I'd
hope my colleagues would consider opposing this amendment.
I agree with my colleague from Virginia that the judges
already have the discretion, and frankly, that anyone who has
practiced in Federal courts will now, that judges don't
tolerate frivolous cases and have their own ways of sanction.
This added extra burden simply closes the door of the
courthouse to people who are the least empowered.
I would ask the gentleman rhetorically, and I'd be
delighted--it's not my time--is whether or not we have
frivolous defenses. I frankly believe that we should have equal
time. Frivolous plaintiffs and petitioners, frivolous defenses,
and they occur on many occasion.
So I'd ask my colleagues to consider the devastating aspect
of this as it relates to an equal access to the courthouse and
as well that this is redundant and repetitive because judges
already have the authority. I yield back.
Mr. Scott. Reclaiming my time, and I would like to take the
opportunity, Mr. Chairman, to offer into the record a
resolution from the Conference of Chief Justices and a letter
from the Judicial Conference of the United States, which says--
which refers to a report that they did that makes it clear that
the vast majority of Federal judges believe that the proposed
changes to rule 11 will not help deter litigation abuses but
will increase satellite litigation costs and delays. They point
out that the bill will amend rule 11 to restore the 1983
version of the rule 11 by removing a court's discretion to
impose sanctions on a frivolous filing, and by eliminating rule
11's--the present rule's safe harbor provisions.
The Judicial Conference opposed the Lawsuit Abuse Reduction
Act of 2004, the predecessor to H.R. 420. The Conference based
its position on the problems caused by the 1983 version of rule
11, which H.R. 420 would restore. The Conference noted these
problems: one, the problems were creating a significant
incentive to file unmeritorious rule 11 motions by providing a
possibility of monetary penalty, endangering potential--
engendering potential conflict of interest between clients and
their lawyers who advised withdrawal of particular claims, but
despite the client's preferences; exacerbation of tensions
between lawyers; and providing little incentive and perhaps a
distinct disincentive to abandon or withdrawal and thereby
admit error on pleadings or a claim after determining that it
was no longer supported by the facts.
Finally, the judges' experience of the 1993 version of the
rule 11, which would point to marked decline in rule 11
satellite litigation without any noticeable increase in the
number of frivolous filings, H.R. 420 would effectively
reinstate the 1983 version of the rule proved so contentious
and wasted so much time and energy of the bench and bar.
I'd ask unanimous consent that these two letters, Mr.
Chairman, be entered into the record.
Chairman Sensenbrenner. Without objection.
[The information follows:]
Mr. Scott. And I yield back the balance of my time.
Mr. Weiner. Mr. Chairman?
Chairman Sensenbrenner. The gentleman from New York, Mr.
Weiner.
Mr. Weiner. Mr. Chairman, I'd be inclined to support Mr.
Keller's thrust, except I'm concerned that--I'm not quite sure
I understand why this isn't going to lead to a whole spate of
additional litigation around these rule 11 proceedings. If all
of these things now have a mandatory penalty and the base bill
takes away discretion from a judge, you are going to have--and
this was described briefly by Mr. Scott--it seems to me that
you're going to have all kinds of litigation within litigation
over rule 11 proceedings. Whereas now that a judge can
essentially say what Ms. Jackson Lee suggested, ``This is
baloney, I'm dismissing this claim because it's frivolous.
Let's move on.'' Or allow a safe harbor where a lawyer could
withdraw a claim if they had second thoughts about it.
It seems we are taking mandatory sanctions and then making
them even more final with Mr. Keller's proposed amendment, and
I think it's just going to lead people just to dig in and
litigate to the Nth degree every one of these rule 11
proceedings. And I'm not sure that that's going to do anything
other than just clog up the courts with a whole different set
of litigation.
Now, if we didn't have H.R. 420 in front of us and Mr.
Keller said, ``I want to follow the quotes that are on that
board from some other famous people,'' and say, ``Listen, let's
have a three-strikes-and-you're-out,'' I would be inclined to
say, you know what? That's not a bad idea. If you have
discretion, and when people are showing that discretion, they
continually rule that at a particular attorney is operating
outside of rule 11, that seems like okay. But if you have a
scenario like this, I think what's going to wind up happening
with the bill, even without Mr. Keller's amendment, is you are
going to have all kinds of litigation based on rule 11
proceedings.
And you know what? We have a certain level of experience
with this in the pre-1993 rules, where we kind of experimented
with this ethos to see how it would work, and I think the
country decided, you know what, this isn't working so great;
let's go back to the idea of giving some discretion to judges.
The irony is just too sweet for me. You know, here it is
the Republicans in the Senate and the President of the United
States are putting in all of these judges that suit their
political ideology, and now they're saying, we don't trust them
at all to make any of these decisions. We're going to put in
guys that we like. We're going to say how great they are, their
great jurisprudence they've demonstrated, what great
temperament they have, and at every possibility we, with
mandatory minimums or provisions like this that take away any
discretion from a judge to run his or her courtroom, we seem to
be saying we don't trust them to do a very good job.
Why don't we create good judges? Why don't we have good
laws as best we can, and then let's let these judges kind of
figure out the way to deal with the sanctions within their
courtroom, because they might know much better than we, and I
tell you something, I think that the Keller amendment is going
to reinforce what is a defect in this bill, which is that we
take away discretion from the people that should have it, and
we take away the right of someone sitting on the bench to have
an expeditious proceeding, and that doesn't even--we're not
even touching on the whole idea of like, you know, everything
is novel to begin with, every new case creates a certain level
of novelty to begin with.
And if people were afraid to bring novel claims, then we
wouldn't--perhaps no one would have thought to sue for civil
rights violations, no one would have thought to sue for the
tobacco lobby or others that turned out to be ground-breaking
proceedings that now everyone believes are not frivolous at
all, but actually make some sense.
So let's give back the responsibility for the courts to the
judges and----
Mr. Cannon. Would the gentleman yield?
Mr. Weiner. Yeah. Let me just make one rhetorical flourish
if you don't mind.
I also think that we should acknowledge as elected
officials that a couple of hundred thousand people vote for us,
that we think they're smart enough to figure out. Why is it
that we assume they're too dumb to figure anything else out?
Why is the only decision we think they're right about is the
one that put us in Congress, and we don't trust the idea that
you can have a jury that knows what they're doing or a judge
that knows what they're doing?
And I'll be glad to yield to my friend from Utah.
Mr. Cannon. I thank the gentleman. Three quick points. In
the first place, in response to Ms. Jackson Lee's question, as
I understand this bill, it does deal with defenses, frivolous
defenses as well as other things.
Mr. Weiner, I'm deeply concerned about the same kinds of
things you're concerned about, and suspect that this will
actually lead to a great deal of litigation, I think you said
litigation to the Nth degree, and that is--that's a
possibility. The problem is that judges have had the discretion
to do fines under rule 11 for a very long time, and almost none
have happened. And so I'm concerned about getting to a point
where we motivate them to be thinking about this and then
rethink the rule at some time in the future. But there are many
frivolous lawsuits that don't have a response.
And then finally, I would just point out to the gentleman
that we're actually not worried about the new judges that this
Administration would appoint, but the judges that have been
appointed in the past, some by both Administrations of both
parties. Thank you.
Mr. Weiner. If I can have unanimous consent of an
additional minute just to respond?
Chairman Sensenbrenner. Without objection.
Mr. Weiner. Let me just say it's--I guess so then it was
last year's citizens that weren't smart enough to figure out,
but this year's have finally sorted it out in electing all of
us.
But let me just say this. You know, there is a couple of
ways that you can look at the idea that there aren't a lot of
sanctions under rule 11. Call me crazy. One of the ways might
be that a judge in a courtroom decided, you know what, this
wasn't a frivolous case? You have different interpretations of
the outcome. You have different interpretations of the
evidence. But you do have judges that might say there aren't
that many frivolous cases.
Now it could just be--call me crazy--that there aren't as
many frivolous lawsuits as you and the President and some would
have us believe, and that's further argument for why we don't
need this bill, and I'll be glad to----
Chairman Sensenbrenner. The time of the gentleman has once
again expired.
The gentleman from California, Mr. Berman.
Mr. Berman. Thank you, Mr. Chairman. If I could try to put
a different kind of garnish on this rhetorical flourish.
I actually think strengthening rule 11 is the right way to
go. The majority party wants to go every which way in the name
of dealing with, quote, ``frivolous lawsuit.'' They want to
remove State causes of action. They want to put arbitrary
limits on damages. They want to preempt courts from
jurisdiction. It seems to me the concept of rule 11 and
strengthening it is the right way to deal with what I am sure
are frivolous lawsuits, frivolous defenses, frivolous motions.
The Keller amendment makes sense to me in the form that it's
written now because in the end of the day it may be a mandatory
three strikes, but it is the judge who in his or her discretion
will decide whether or not rule 11 has been violated, and
consequences will only flow from those judicial findings.
And by the way, for the people who file frivolous rule 11
motions, they are subject to a rule 11 motion. So there is a
deterrent to frivolous rule 11 motions.
What I disagree with and what I think the majority party
and my friend the gentleman from Texas are doing here, is they
are--instead of focusing on strengthening rule 11 and creating
a system of sanctions for violations of rule 11, all of a
sudden they're grabbing all kinds of other things. We should be
regulating conduct in the Federal courts. To go into State
cases that happen to affect interstate commerce, which is--and
the only reason you have that limitation is because
constitutionally the bill would be presumably flawed
constitutionally if you didn't put such a limit in. And to get
into every single State legislature's, State judicial council's
effort to regulate the filing of frivolous State actions and
frivolous State motions makes no sense to me whatsoever.
And to regulate what the sanction should be and how many
sanctions there are at the State level makes no sense to me at
all, that that's an appropriate area for the States. Once again
the party of State's rights is federalizing everything they can
think of for no reason.
And then getting into what State venue rules for personal
injury cases, why in heaven's name are we doing that? What is
the purpose. I came in late. Maybe in the original arguments
there was a series of fact-based justifications for the Federal
Congress intruding on State venue rules, but I don't think so.
I'll vote for the Keller amendment because I think it makes
sense, but I'm sure thinking this bill as a whole is a massive
intrusion on historic State court prerogatives, and I also will
predict that this bill in this form will never survive in the
other body, and secondly, that you'll have missed an
opportunity to deal with strengthening rule 11 as the logical
deterrent to frivolous action instead of all these efforts to
wipe away jurisdiction and preempt--provide Federal preemption,
all the other overreaches that the majority party seems to make
on these issue, and you're going to lose the opportunity to
deal with what to me makes the most sense, which is providing a
meaningful rule 11 for Federal actions.
I yield back.
Chairman Sensenbrenner. The question is on the amendment--
the gentleman from Florida, Mr. Wexler?
Mr. Wexler. Just seems to be a little bit of a discrepancy
and I was wondering if I could ask Mr. Keller if he could clear
it up. The gentleman from Utah indicated that it was his belief
that the amendment does apply equally--I don't want to
paraphrase him, but I believe he said he believes the amendment
does apply equally to three frivolous defenses as it would to
three frivolous claims by plaintiffs.
Mr. Keller. Would the gentleman yield?
Mr. Wexler. Yes.
Mr. Keller. Yes. Rule 11, section (b)(2) is unchanged by my
amendment, and yes, it applies to defenses as well, so a
defense attorney who repeatedly files frivolous defenses would
also be subject to the same suspension.
Mr. Wexler. Under the same set of rules?
Mr. Keller. Same set, identical.
Mr. Wexler. Okay. Thank you.
Mr. Gohmert. Mr. Chairman, if I could move to strike the
last word very----
Chairman Sensenbrenner. The gentleman from Texas recognized
for 5 minutes.
Mr. Gohmert. This will be very brief. Rule 11 says if a
pleading, motion or other paper is signed in violation of this
rule, it applies to pleadings filed in the lawsuit, to motions.
I appreciate the gentleman from New York's repeated invitation
to call him crazy, but---- [Laughter.]
But if one looks at this, you realize it applies to defense
motions. He had a concern that it would create more litigation
when someone was sanctioned for filing a frivolous suit the
third time or frivolous pleading the third time, and the fact
is that anybody that files one of those in a case that's
clearly frivolous will subject themselves to further sanction.
And I can tell you from State court discovery rules, where
it took me three times of sanctioning people for discovery
abuse to where people didn't do it any more. And it cut out
tremendous amount of frivolous motions, and they were from both
plaintiff and defense side. This will help cut out unnecessary
filings from both sides. And I support this amendment and
original motion.
Chairman Sensenbrenner. The question is on the amendment
offered by the gentleman from Florida, Mr. Keller. All those in
favor will say aye.
Opposed no?
The ayes appear to have it. The ayes have it. The amendment
is agreed to.
For what purpose does the gentleman from Texas, Mr. Smith,
seek recognition?
Mr. Smith of Texas. Mr. Chairman, I have an amendment at
the desk.
Chairman Sensenbrenner. The clerk will report the
amendment.
The Clerk. Amendment to H.R. 420 offered by Mr. Smith of
Texas. Page 2, strike line 2 and all that follows through line
12 on page 3, and insert the following. Section 2----
Chairman Sensenbrenner. Without objection, the amendment is
considered as read, and the gentleman from Texas is recognized
for 5 minutes.
[The amendment follows:]
Mr. Smith of Texas. Mr. Chairman, this amendment will
improve the bill in several ways. First, it makes a technical
fix in the wording of section 2 to clarify that appropriate
sanctions against the filer of a frivolous lawsuit may include
an order to pay the other party or parties for their reasonable
expenses incurred as a direct result of the filing of their
frivolous lawsuit.
Second, the amendment excludes discovery requests and
responses from being sanctioned under rule 11. Some sanctions
for discovery abuse are already available under current law in
Federal Rule 37. To include discovery abuse under rule 11
sanctions would be duplicative in many instances and cause
unnecessary confusion.
Third, it will amend section 3 of the bill so that
mandatory sanctions will apply to frivolous lawsuits that a
State judge determines, quote, ``substantially affects,'' end
quote, interstate commerce. This change was made to track the
language used in the most recent Supreme Court decisions
regarding Congress's interstate commerce powers.
Last, section 4 is amended to clarify that if a defendant
is an individual person rather than a corporation, that
defendant may be sued where they reside among the other
appropriate sites for a lawsuit as provided in the underlying
bill.
Mr. Chairman, I would also like to have unanimous consent
to add the names of over 120 organizations that have endorsed
this underlying bill, most recently the American Medical
Association.
[The information follows:]
Chairman Sensenbrenner. Without objection.
Mr. Smith of Texas. Mr. Chairman, finally, just to
alleviate the concerns of some of my colleagues and also to set
the record straight, I'd like to just read a short finding of a
1990 poll that was taken by the Federal Judicial Center. This
was a survey of 751 Federal judges, and it found that an
overwhelming majority of Federal judges believed, based on
their experience under both a weaker and a stronger rule 11,
that a stronger rule 11 did not impede development of the law,
95 percent; the benefits of the rule outweighed any additional
requirement of judicial time, 72 percent; the stronger version
of rule 11 had a positive effect on litigation in the Federal
courts, 81 percent; and the rule should be retained in its then
current form, 80 percent. Note that of the 751 judges surveyed
in 1990, 583 responded in this very positive way.
Mr. Scott. Would the gentleman yield? What year was that?
Mr. Smith of Texas. That was 1990. And if I can anticipate
maybe the next question that's coming, Mr. Chairman, and as
long as I have time remaining, let me say that the Federal
Judicial Center's recent 2005 survey of U.S. district court
judges will be misused by opponents of legal reform as the
evidence of frivolous lawsuits are not a problem. However, the
survey of the Federal Judicial Center shows nothing of the
sort, and let me give a little bit of historical background
here.
The Lawsuit Abuse Reduction Act would largely restore
Federal Rule of Civil Procedure 11 to what it was before 1993.
Prior to the adoption of weakening amendments in that year,
which eliminated mandatory and serious sanctions against those
who file frivolous lawsuits, rule 11 was widely popular among
Federal judges, and it served to significantly limit lawsuit
abuse. And in regard to the 2005 survey, the most recent one,
only 278 judges responded to that Federal Judicial Center's
latest survey. Half of the judges surveyed and over half of the
judges that responded to the survey had no experience with the
stronger version of rule 11. They had nothing to compare it to.
I would also say that that survey--and this skewed the
results--included specifically a sample of over 200 district
judges who were appointed to the bench after January 1, 1992.
So that skewed the results as well.
Mr. Chairman, I will yield back----
Mr. Berman. Would the gentleman yield?
Mr. Smith of Texas.--the balance of my time.
Mr. Berman. Would the gentleman yield?
Mr. Smith of Texas. Mr. Chairman, I will yield to the
gentleman from California, Mr. Berman.
Mr. Berman. Did either the 1990 survey or the 2005 survey
indicate that the Federal judges believed that Federal Rule 11,
which only applied to Federal cases, should be mandated on
every State in the country and all State courts involving any
lawsuit----
Mr. Smith of Texas. I'll reclaim my time----
Mr. Berman.--affecting interstate commerce?
Mr. Smith of Texas.--and say to the gentleman from
California, the survey questions were pretty clear and the
results of the judges' feelings were pretty clear, too. There
was no question that resulted in less than about an 80 percent
positive reaction to rule 11----
Mr. Berman. I'll take that as an answer that they did not--
--
Mr. Smith of Texas. I don't know whether they polled on
that specific question or not.
Mr. Scott. Will the gentleman yield? Will the gentleman
yield?
Mr. Smith of Texas. I'll be happy to yield to the gentleman
from Virginia, yes.
Mr. Scott. Maybe I missed something. You said the 1990
survey--if it was taken in 1990, they wouldn't have had an
opportunity to compare the 1983 version to the 1993 version.
The 2005 survey presumably allows them to compare both the 1983
and '93. The overwhelming preference was to leave----
Chairman Sensenbrenner. The time of the gentleman has
expired. Without objection, he will be given an additional
minute.
Mr. Scott. Thank you. The overwhelming preference is to
leave things as they are, having been improved in 1993.
Wouldn't the 1995 survey, with a lot of judges presumably
having experience with both rules, be more valuable?
Mr. Smith of Texas. Let me reclaim my time. That's exactly
the point I was making a while ago. In the 1995 survey, by
specific direction, there were 200 judges that had no
experience whatsoever with the former strong interpretation of
rule 11, and that's why that result was totally skewed, and
that's why the earlier survey was much more accurate. And I
yield back the balance of my time.
Chairman Sensenbrenner. The question is on the amendment
offered by the gentleman from Texas, Mr. Smith. Those in favor
will say aye? Opposed, no?
The ayes appear to have it. The ayes have it. The amendment
is agreed to.
Are there further amendments? The gentleman from New York,
Mr. Nadler.
Mr. Nadler. Thank you. Mr. Chairman, I have an amendment at
the desk.
Chairman Sensenbrenner. The clerk will report the
amendment.
Mr. Nadler. This is the one that says ``ban on
concealment.''
The Clerk. Amendment to H.R. 420, offered by Mr. Nadler of
New York. At the end of the bill, add the following new
section: Section-Ban on Concealment of Unlawful Conduct. (1) In
General.--In any case concerning rule 11----
Chairman Sensenbrenner. Without objection, the amendment is
considered as read, and the gentleman from New York will be
recognized for 5 minutes.
[The amendment follows:]
Mr. Nadler. Thank you. Mr. Chairman, this is--this is
similar to--it's a modified version of the amendment I've
offered the last few years, which the Chairman supported not
last year but the year before last. Very often in civil
litigation, the company may have an unsafe product or an unsafe
procedure, and rather than go to trial, the company settles
with the plaintiff. The company usually pays the plaintiff a
certain amount of money because the plaintiff was injured by
this unsafe product. Many times the condition of the settlement
is that the records will be sealed and no one will ever talk
about it. So both the plaintiff and the defendant go to the
judge and say, Your Honor, we have a settlement to the case,
and we both ask that you seal the record, and the judge will
order the record sealed because both cases have asked--both
sides have asked for it.
Unfortunately, this often perpetuates a situation where the
unsafe product is continued to be marketed and nothing changes
because the company making the unsafe profit--product has, in
effect, bought into a cover-up. This type of settlement in
secrecy often keeps vital health and safety information out of
the public's reach. It leads to more needless injuries and
deaths caused by defective products.
Secrecy orders should not be enforced unless they meet
stringent standards to protect the public interest. This
amendment is tailored to address the problem.
Now, it is different from last year's amendment. Last
year's amendment required that a judge in the case concerning
rule 11 must make a finding of fact where a gag order is
requested, and if he finds that the privacy interests
outweigh--that the privacy interest outweighs the public
interest, then the judge must allow the gag order and the
secrecy.
Here it says--in this amendment we've said that the court
may not order that a court record be sealed or subjected to a
protective order unless the court makes a finding of fact that
identifies the interest that justifies the order and determines
that that interest outweighs any interest in the public health
and safety that the court determines would be served by not
sealing or restricting the court record.
So we've made the amendment somewhat more restrictive than
last year's amendment after some discussions with Mr. Smith.
This does not prohibit the sealing of the record. This simply
says that if you want the record sealed, the judge takes a look
at the interest why you say the record should be sealed, and at
any public interest for public health and safety, limited to
public health and safety, and he makes a determination which
outweighs the other. And I think it's in the public interest,
and I would hope that the amendment could be supported.
Mr. Smith of Texas. Would the gentleman yield?
Mr. Nadler. I will.
Mr. Smith of Texas. Mr. Chairman, I just want to say that I
think the gentleman from New York makes a number of good
points, or at least a sufficiently number of good points so
that he and I can come to an agreement on an amendment that
might be acceptable to the Chairman between now and the floor.
And so I appreciate the gentleman withdrawing the amendment and
look forward to working him--with him in good faith to a good
resolution.
Mr. Nadler. Well, thank you. Reclaiming my time, Mr. Smith
makes the assumption that I will withdraw the amendment. It is
indeed a good assumption. On that understanding that we'll work
on it between now and the floor, I will withdraw the amendment,
and I thank the gentleman.
Chairman Sensenbrenner. And before the amendment is
withdrawn, let the Chair state that he's amenable to helping
the two gentlemen work it out.
Mr. Nadler. I appreciate that, sir.
Chairman Sensenbrenner. The amendment is withdrawn.
Are there further amendments? The gentleman from Virginia,
Mr. Scott.
Mr. Scott. Mr. Chairman, I have an amendment at the desk.
Chairman Sensenbrenner. The clerk will report the
amendment.
The Clerk. Amendment to H.R. 420, offered by Mr. Scott of
Virginia. At the end of the bill, add the following new
section: Section-presumption of Rule 11 Violation for
Repeatedly Relitigating Same Issue. Whenever a party attempts
to----
Chairman Sensenbrenner. Without objection, the amendment is
considered as read, and the gentleman from Virginia is
recognized for 5 minutes.
[The amendment follows:]
Mr. Scott. Mr. Chairman, a lot has been said about the
increase in frivolous lawsuits. I offer this amendment to
ensure that we truly rein in frivolous lawsuits without harming
the ability of legitimate cases to be brought and to actually
ascertain whether we're serious about frivolous lawsuits.
A few months ago, a national spotlight was focused on a
case in which the defendant had successfully defended himself--
his case 19 separate times and survived multiple court reviews,
all with judgments in his favor. However, the plaintiffs
continued to retry the same case, forcing the defendant to
repeatedly defend himself and expend huge amounts of time and
money for his defense.
Mr. Chairman, that case is perhaps the best example of why
this amendment should be adopted. When a case has been decided
on the merits numerous times and each time the plaintiff
receives an adverse decision, at some point the decision should
be taken as conclusive. Bringing the case yet another time in
another court is simply an abuse. It is a waste of the court's
time and resources, and it is unfair to the person who has
repeatedly won the case, and yet is again required to defend
it, expending even more time and money.
Therefore, I propose that after three consecutive adverse
decisions on the merits, a person attempting to file yet
another claim on the same issue be saddled with a rebuttable
presumption of a rule 11 violation.
Now, it's important to note that this presumption is
rebuttable because we want to allow common sense in appropriate
circumstances. But if we are going to prevent lawsuit abuse, we
ought not allow an innocent victim to be subjected to
unnecessary and repeat litigation time and time again.
I urge my colleagues to support this amendment.
Chairman Sensenbrenner. Does the gentleman yield back?
Mr. Scott. I yield back.
Chairman Sensenbrenner. The gentleman from Texas, Mr.
Smith.
Mr. Smith of Texas. Mr. Chairman, first of all, let me
compliment the gentleman from Virginia for a particularly
creative amendment. It is so creative, in fact, that it has
caught the Chairman's attention, and he recommends that we
accept the amendment, and I will go along with his
recommendation.
Mr. Chairman, I yield back the balance of my time.
Chairman Sensenbrenner. The question is on the amendment
offered by the gentleman from Virginia, Mr. Scott. Those in
favor will say aye? Those opposed, no?
The ayes appear to have it. The ayes have it, and the
amendment is agreed to.
Are there further amendments? If there are--the gentleman
from New York, Mr. Nadler.
Mr. Nadler. Yes, I have an amendment at the desk.
Chairman Sensenbrenner. The clerk will report the other
amendment at the desk.
The Clerk. Amendment to H.R. 420, offered by Mr. Nadler. At
the end of the bill, add the following new section: Section-
Enhanced Sanctions for Document Destruction. (a) In General.--
Whoever influences, obstructs, or impedes, or endeavors to
influence, obstruct, or impede, a pending court proceeding
through the intentional destruction of documents sought in, and
high relevant to, that proceeding--(1) shall be punished with
mandatory civil sanctions of a degree commensurate with the
civil sanctions available under rule 37 of the Federal Rules of
Civil Procedure, in addition to any other civil sanctions that
otherwise apply; and (2) shall be held in----
Mr. Smith of Texas. Mr. Chairman, I'll reserve a point of
order.
Chairman Sensenbrenner. Okay. A point of order is reserved.
Without objection, the amendment is considered as read and
subject to the reservation.
[The amendment follows:]
Chairman Sensenbrenner. The gentleman from New York is
recognized for 5 minutes.
Mr. Nadler. Thank you, Mr. Chairman.
Mr. Chairman, in this bill that deals with lawsuit abuse,
this is a type of abuse in lawsuits that can be very
destructive. When corporations knowingly destroy documents and
take actions to hide evidence of their wrongful conduct, they
must be held accountable. Delays during litigation provide
ample opportunities for wrongdoers to destroy documents that
are essential to proving the claims against them. Because this
conduct can result in the complete inability to hold these
defendants accountable for their wrongful acts, parties that
engage in such flagrantly bad conduct, destroying relevant and
incriminating documents, must be severely sanctioned.
The document destruction amendment to H.R. 420 would
provide mandatory sanctions to anyone who hinders a court
proceeding by intentionally destroying documents relating to
that proceeding.
Consider some of the examples where, once a corporation
became aware of the claims against it and the information
sought by the claimant, they knowingly destroyed documents, for
example, Enron. Enron allowed corporate executives to sell
stock options at huge profit while prohibiting employees from
diversifying their 401(k) investments and conspired to hide
financial information. This resulted in the $1.3 billion loss
to thousands of employees. Despite engaging in this conduct,
company executives shredded documents and destroyed evidence of
their actions in an attempt to avoid culpability.
Arthur Andersen. The accounting company Arthur Andersen was
caught destroying documents in a class action case filed in
Texas against Enron by retirees of Enron who were losing their
pensions. Retirees had to endure a discovery delay of near one
and a half years because of the special rules that apply to
securities lawsuits. It was during this delay that Arthur
Andersen deliberately destroyed key documents necessary for the
employees to prove their case.
WorldCom. In the case of WorldCom, the Securities and
Exchange Commission learned from their experiences with the
Enron case and hired a corporate monitor in order to reduce the
chance that key documents would be destroyed. ```On day one, we
filed the lawsuit against WorldCom, and on day two, we forged
an agreement for a corporate monitor,' Mr. Breslin said. We
wanted to react to some of our experiences at Enron. We wanted
to make sure there was no document destruction in WorldCom and
no excessive compensation paid to executives at the same
time.'' That's a quote from the New York Law Journal of October
7 of last year.
So in all these cases we see deliberate destruction of
documents while the SEC's spending a lot of money because they
expect deliberate destruction of documents, and we ought to--
obviously deliberate destruction of relevant documents in a
lawsuit is subversive of justice, subversive of the rights of
the other party, whether they be plaintiff or defendant. It can
go either way. And so this amendment to increase the sanctions,
to put real teeth into the sanctions against the destruction of
relevant court documents would seem to be indicated and would
seem to fit squarely within this bill on frivolous lawsuits.
I therefore urge my colleagues to adopt the amendment. I
yield back.
Chairman Sensenbrenner. Does the gentleman from Texas
insist upon his point of order?
Mr. Smith of Texas. Mr. Chairman, I do.
Chairman Sensenbrenner. The gentleman will state his point
of order.
Mr. Smith of Texas. Thank you, Mr. Chairman.
Mr. Chairman, this amendment is too broad because it simply
goes beyond rule 11. Therefore, it's not germane, and I insist
on my point of order despite the fact that the amendment is
well intended.
Chairman Sensenbrenner. Will the gentleman repeat what he
just said?
Mr. Smith of Texas. The mike is on. Mr. Chairman, I want to
make the point again that this amendment is non-germane because
the substance of the amendment goes beyond rule 11. It deals
with rule 37 and, therefore, it's too broad, therefore, it's
not germane, and for that reason I insist on my point of order,
as well intended as the amendment might be.
Chairman Sensenbrenner. The gentleman from New York.
Mr. Nadler. I seem to recall that there are aspects of this
bill that go beyond rule 11.
Mr. Berman. Would the gentleman yield?
Mr. Nadler. Certainly.
Mr. Berman. How could any amendment to a bill that takes
every State court action and subjects it to Federal rules about
rule 11 be--how could any amendment be too broad for that bill?
Mr. Smith of Texas. If the gentleman will yield, once
again, there is nothing in the underlying bill that deals with
rule 37. But to answer the gentleman's question, his own point
was way too broad. It doesn't deal with every State court. It
only deals with State courts that had that substantial
connection to interstate commerce. So just as the gentleman's
statement was too broad, so is the amendment too broad, and for
that reason non-germane.
Chairman Sensenbrenner. The Chair is prepared to rule. In
the opinion of the Chair, the amendment offered by the
gentleman from New York is not germane for two reasons:
First of all, the bill proposes to amend rule 11 of the
Federal Rules of Civil Procedure. The amendment offered by the
gentleman from New York makes no reference to rule 11 of the
Federal Rules of Civil Procedure; rather, it makes reference to
rule 37 of the Federal Rules of Civil Procedure.
Secondly, the underlying bill is applicable to Federal
court actions and State court actions that affect interstate
commerce. The amendment offered by the gentleman from New York
does not have the restriction on State court actions that apply
to interstate commerce, but all State court actions.
For the reasons the Chair has stated, the point of order is
sustained.
Are there further amendments?
Mr. Conyers. Mr. Chairman?
Chairman Sensenbrenner. The gentleman from Michigan.
Mr. Nadler. Mr. Chairman?
Mr. Conyers. I yield.
Mr. Nadler. Mr. Chairman, I ask for--I appeal the ruling of
the Chair.
Chairman Sensenbrenner. The question is----
Mr. Smith of Texas. Mr. Chairman I'll----
Chairman Sensenbrenner. The gentleman from Texas.
Mr. Smith of Texas. I'll move to table the motion, Mr.
Chairman.
Chairman Sensenbrenner. The question is on tabling the
motion to appeal the decision of the Chair. Those in favor of
tabling will say aye? Opposed, no?
The ayes appear to have it. The ayes have it. The appeal is
tabled.
Mr. Conyers. Mr. Chairman?
Chairman Sensenbrenner. The gentleman from Michigan.
Mr. Conyers. I have an amendment at the desk.
Chairman Sensenbrenner. The clerk will report the
amendment.
The Clerk. Amendment to H.R. 420, offered by Mr. Conyers.
Page 6, after line 5, insert the following new section (and
redesignate succeeding sections accordingly). Section 5.
Limitation. The provisions of this act do not apply----
Chairman Sensenbrenner. Without objection, the amendment is
considered as read.
[The amendment follows:]
Chairman Sensenbrenner. The gentleman from Michigan will be
recognized for 5 minutes.
Mr. Conyers. Thank you, Mr. Chairman.
This amendment provides that the provisions of this act
will not apply to an action against a manufacturer, seller, or
trade association that, after this measure is passed, shifts or
transfers employment positions or facilities to a location
outside of the United States. It's an anti-outsourcing
amendment to the measure. I offer this to prevent companies
that outsource American jobs overseas from benefiting from the
liability protections in the legislation. And this provision
would send a clear, unambiguous signal that if one is selling a
product or service made in the U.S.A. and wanted to continue to
receive the extralegal liability protections in this country,
then the company cannot continue to outsource jobs. And I think
we at least owe this much to American workers everywhere.
This amendment allows ourselves to state that we can't
continue to reward those countries that outsource jobs abroad
with tax benefits, with Government contracts, and with new
legal benefits. Companies, for example, Travelocity, that close
their United States-based facilities and outsource jobs abroad
cause workers their jobs and their livelihood and contribute to
the ever-rising unemployment rate.
Furthermore, these actions perpetrate a fraud on our
citizens. They think they're buying products made in the United
States, but the product is really frequently made overseas.
Do we really want to reward those companies by increasing
their liability protections? And so we, in order to get a grip
on the subject of outsourcing, before our economy is
permanently damaged, which it already has been--we've lost
approximately $4 billion in American wages, and this is
expected to increase to a staggering $136 billion over the next
15 years.
And so I urge my colleagues to join me in protecting
Americans and American jobs and not reward outsourcing
companies with increased liability protections. Please accept
this amendment, and I return my time.
Chairman Sensenbrenner. The question is on the amendment
offered by the gentleman from Michigan, Mr. Conyers. Those in
favor will say aye? Opposed, no?
The noes appear to have it. The noes have it. The amendment
is not agreed to.
Are there----
Mr. Conyers. Yes, a record vote.
Chairman Sensenbrenner. A record vote is requested. The
question is on agreeing to the Conyers amendment. Those in
favor will, as your names are called, answer aye, those opposed
no, and the clerk will call the roll.
The Clerk. Mr. Hyde?
[No response.]
The Clerk. Mr. Coble?
Mr. Coble. No.
The Clerk. Mr. Coble, no. Mr. Smith?
Mr. Smith of Texas. No.
The Clerk. Mr. Smith, no. Mr. Gallegly?
Mr. Gallegly. No.
The Clerk. Mr. Gallegly, no. Mr. Goodlatte?
[No response.]
The Clerk. Mr. Chabot?
[No response.]
The Clerk. Mr. Lungren?
Mr. Lungren. No.
The Clerk. Mr. Lungren, no. Mr. Jenkins?
Mr. Jenkins. No.
The Clerk. Mr. Jenkins, no. Mr. Cannon?
Mr. Cannon. No.
The Clerk. Mr. Cannon, no. Mr. Bachus?
[No response.]
The Clerk. Mr. Inglis?
[No response.]
The Clerk. Mr. Hostettler?
Mr. Hostettler. No.
The Clerk. Mr. Hostettler, no. Mr. Green?
[No response.]
The Clerk. Mr. Keller?
Mr. Keller. No.
The Clerk. Mr. Keller, no. Mr. Issa?
Mr. Issa. No.
The Clerk. Mr. Issa, no. Mr. Flake?
[No response.]
The Clerk. Mr. Pence?
Mr. Pence. No.
The Clerk. Mr. Pence, no. Mr. Forbes?
Mr. Forbes. No.
The Clerk. Mr. Forbes, no. Mr. King?
Mr. King. No.
The Clerk. Mr. King, no. Mr. Feeney?
Mr. Feeney. No.
The Clerk. Mr. Feeney, no. Mr. Franks?
Mr. Franks. No.
The Clerk. Mr. Franks, no. Mr. Gohmert?
Mr. Gohmert. No.
The Clerk. Mr. Gohmert, no. Mr. Conyers?
Mr. Conyers. Aye.
The Clerk. Mr. Conyers, aye. Mr. Berman?
Mr. Berman. Aye.
The Clerk. Mr. Boucher?
[No response.]
The Clerk. Mr. Nadler?
Mr. Nadler. Aye.
The Clerk. Mr. Nadler, aye. Mr. Scott?
Mr. Scott. Aye.
The Clerk. Mr. Scott, aye. Mr. Watt?
[No response.]
The Clerk. Ms. Lofgren?
[No response.]
The Clerk. Ms. Jackson Lee?
[No response.]
The Clerk. Ms. Waters?
[No response.]
The Clerk. Mr. Meehan?
[No response.]
The Clerk. Mr. Delahunt?
[No response.]
The Clerk. Mr. Wexler?
[No response.]
The Clerk. Mr. Weiner?
Mr. Weiner. Aye.
The Clerk. Mr. Weiner, aye. Mr. Schiff?
Mr. Schiff. Aye.
The Clerk. Mr. Schiff, aye. Ms. Sanchez?
Ms. Sanchez. Aye.
The Clerk. Ms. Sanchez, aye. Mr. Smith?
[No response.]
The Clerk. Mr. Van Hollen?
[No response.]
The Clerk. Mr. Chairman?
Chairman Sensenbrenner. No.
The Clerk. Mr. Chairman, no.
Chairman Sensenbrenner. Members in the chamber who wish to
cast or change their votes? The gentleman from South Carolina,
Mr. Inglis.
Mr. Inglis. No.
The Clerk. Mr. Inglis, no.
Chairman Sensenbrenner. Further Members who wish to cast--
the gentleman from Massachusetts, Mr. Meehan?
Mr. Meehan. Aye.
The Clerk. Mr. Meehan, aye.
Chairman Sensenbrenner. Further Members who wish to cast or
change their vote? If not, the clerk will report. The gentleman
from North Carolina, Mr. Watt.
Mr. Watt. Aye.
The Clerk. Mr. Watt, aye.
Chairman Sensenbrenner. The gentlewoman from California,
Ms. Waters?
Ms. Waters. Aye.
The Clerk. Ms. Waters, aye.
Chairman Sensenbrenner. The gentleman from Maryland, Mr.
Van Hollen.
Mr. Van Hollen. Aye.
The Clerk. Mr. Van Hollen, aye.
Chairman Sensenbrenner. Further Members who wish to cast or
change their vote?
Mr. Nadler. Mr. Chairman?
Chairman Sensenbrenner. The gentleman from New York, Mr.
Nadler.
Mr. Nadler. How am I recorded?
The Clerk. Mr. Chairman, Mr. Nadler is an aye.
Mr. Nadler. I'm recorded in the affirmative?
The Clerk. Yes, sir.
Mr. Nadler. Thank you.
The Clerk. Mr. Chairman.
Chairman Sensenbrenner. The clerk will report.
The Clerk. Mr. Chairman, there are 11 ayes and 17 noes.
Chairman Sensenbrenner. And the amendment is not agreed to.
Are there further amendments? If there are no further
amendments--the gentleman from New York.
Mr. Nadler. I will have in about a minute, as soon as it
comes back from the typist, an amendment.
Well, I can--Mr. Chairman, I can move to strike the last
word in the meantime.
Chairman Sensenbrenner. The gentleman is recognized for 5
minutes. Maybe he can tell us about his amendment before----
Mr. Nadler. Yes, the amendment is identical to the
amendment I introduced a few moments ago on draft--on
prohibiting--on sanctioning destruction of relevant court
documents, with two changes. One, in accordance with the ruling
of the Chair, it limits its application to Federal courts and
State courts that substantially affect interstate commerce, the
exact language of Mr. Smith's amendment, and, therefore, would
not be out of order on that count. And, secondly, it talks
about sanctions in rule 11 rather than rule 37. Rule 11
sanctions are not as broad as rule 37 sanctions, but they're
sufficient for the job, we think. So that would eliminate the
other grounds for ruling the amendment out of order.
Substantively, it's the same amendment and we'll now have
to address the substance of the amendment. This amendment says
that we will apply sanctions to a party in a lawsuit--and I see
the amendment has just arrived.
Chairman Sensenbrenner. Does the gentleman yield back?
Mr. Nadler. Yes, I will.
Chairman Sensenbrenner. Are there further amendments? The
gentleman from New York.
Mr. Nadler. Thank you. This amendment----
Chairman Sensenbrenner. Does the gentleman from New York
have an amendment at the desk?
Mr. Nadler. I have an amendment at the desk.
Chairman Sensenbrenner. The clerk will report the
amendment.
The Clerk. Amendment to H.R. 420, offered by Mr. Nadler. At
the end of the bill, add the following new section: Section-
Enhanced Sanctions for Document Destruction. (a) In General----
Chairman Sensenbrenner. Without objection, the amendment is
considered as read.
[The amendment follows:]
Chairman Sensenbrenner. The gentleman from New York will be
recognized for 5 minutes.
Mr. Nadler. Thank you, Mr. Chairman. As you can see, it
makes two changes in the previous amendment, rule 11 sanctions
instead of rule 37 sanctions, and limits it to State courts
that substantially affect interstate commerce.
So we should now debate the substance of the bill, since
the two grounds ruling it--of the amendment, the two grounds
ruling it out of order are no longer applicable.
The substance is very simple. Someone who is sued or for
that matter is a plaintiff in a lawsuit should not deliberately
and knowingly destroy relevant documents that the other party
will have a right to see in order to frustrate proof.
This was done, as I said, in the Enron situation, in
WorldCom, Arthur Anderson, and we've all read of situations.
This is a fraud on the court. It's a fraud on the other side.
It's against justice. I can't imagine why anyone would support
deliberate destruction of relevant court documents by people
who knowingly destroy them because they know that they are
relevant. And this simply says that they should be sanctioned
under rule 11 and in addition to whatever obviously not quite
effective enough sanctions we have under current law.
Chairman Sensenbrenner. Does the gentleman yield back?
Mr. Nadler. I yield back.
Chairman Sensenbrenner. The gentleman from Texas.
Mr. Smith of Texas. Mr. Chairman, on your recommendation,
which is to accept the amendment, I will do so as well, but I
wouldn't want to encourage individuals from the other side to
think this is going to be a habit any time soon.
Chairman Sensenbrenner. Will the gentleman yield?
Mr. Smith of Texas. Yes. I'll be happy to yield.
Chairman Sensenbrenner. Well, if the gentleman will yield,
I will concur that this is not a habit-forming amendment.
Mr. Nadler. We appreciate that, sir.
Chairman Sensenbrenner. Does the gentleman yield back?
Mr. Smith of Texas. Yes, I yield back.
Chairman Sensenbrenner. The question is on agreeing to the
amendment offered by the gentleman from New York, Mr. Nadler.
Those in favor will say aye.
Opposed no.
The ayes appear to have it. The ayes have it. The amendment
is agreed to.
Are there further amendments? If there are no further
amendments, a reporting quorum is present.
The question occurs on the motion to report the bill H.R.
420 favorably as amended. All in favor will say aye.
Opposed no.
The ayes appear to have it. The ayes have it, and the
motion to report favorably is agreed to. Without objection, the
bill will be reported favorably to the House in the form of a
single amendment in the nature of a substitute----
Mr. Conyers. Record vote, sir.
Chairman Sensenbrenner. Oh. Okay. Those in favor of
reporting the bill favorably as amended will as your names are
called answer aye. Those opposed no, and the Clerk will call
the roll.
The Clerk. Mr. Hyde?
[No response.]
The Clerk. Mr. Coble?
Mr. Coble. Aye.
The Clerk. Mr. Coble, aye. Mr. Smith?
Mr. Smith of Texas. Aye.
The Clerk. Mr. Smith, aye. Mr. Gallegly?
Mr. Gallegly. Aye.
The Clerk. Mr. Gallegly, aye. Mr. Goodlatte?
[No response.]
The Clerk. Mr. Chabot?
Mr. Chabot. Aye.
The Clerk. Mr. Chabot, aye. Mr. Lungren?
Mr. Lungren. Aye.
The Clerk. Mr. Lungren, aye. Mr. Jenkins?
Mr. Jenkins. Aye.
The Clerk. Mr. Jenkins, aye. Mr. Cannon?
Mr. Cannon. Aye.
The Clerk. Mr. Cannon, aye. Mr. Bachus?
[No response.]
The Clerk. Mr. Inglis?
Mr. Inglis. Aye.
The Clerk. Mr. Inglis, aye. Mr. Hostettler?
Mr. Hostettler. Aye.
The Clerk. Mr. Hostettler, aye. Mr. Green?
[No response.]
The Clerk. Mr. Keller?
Mr. Keller. Aye.
The Clerk. Mr. Keller, aye. Mr. Issa?
Mr. Issa. Aye.
The Clerk. Mr. Issa, aye. Mr. Flake?
[No response.]
The Clerk. Mr. Pence?
Mr. Pence. Aye.
The Clerk. Mr. Pence, aye. Mr. Forbes?
Mr. Forbes. Aye.
The Clerk. Mr. Forbes, aye. Mr. King?
Mr. King. Aye.
The Clerk. Mr. King, aye. Mr. Feeney?
[No response.]
The Clerk. Mr. Franks?
Mr. Franks. Aye.
The Clerk. Mr. Franks, aye. Mr. Gohmert?
Mr. Gohmert. Aye.
The Clerk. Mr. Gohmert, aye. Mr. Conyers?
Mr. Conyers. No.
The Clerk. Mr. Conyers, no. Mr. Berman?
Mr. Berman. No.
The Clerk. Mr. Berman, no. Mr. Boucher?
[No response.]
The Clerk. Mr. Nadler?
Mr. Nadler. No.
The Clerk. Mr. Nadler, no. Mr. Scott?
Mr. Scott. No.
The Clerk. Mr. Scott, aye. Mr. Watt?
Mr. Watt. No.
The Clerk. Mr. Watt, no. Ms. Lofgren?
[No response.]
The Clerk. Ms. Jackson Lee?
[No response.]
The Clerk. Ms. Waters?
Ms. Waters. No.
The Clerk. Ms. Waters, no. Mr. Meehan?
Mr. Meehan. No.
The Clerk. Mr. Meehan, no. Mr. Delahunt?
[No response.]
The Clerk. Mr. Wexler?
[No response.]
The Clerk. Mr. Weiner?
[No response.]
The Clerk. Mr. Schiff?
Mr. Schiff. No.
The Clerk. Mr. Schiff, no. Ms. Sanchez?
Ms. Sanchez. No.
The Clerk. Ms. Sanchez, no. Mr. Smith?
[No response.]
The Clerk. Mr. Van Hollen?
Mr. Van Hollen. No.
The Clerk. Mr. Van Hollen, no.
The Clerk. Mr. Chairman?
Chairman Sensenbrenner. Aye.
The Clerk. Mr. Chairman, aye.
Chairman Sensenbrenner. Members in the chamber who wish to
cast or change their vote. The gentleman from Florida, Mr.
Feeney?
Mr. Feeney. Aye.
The Clerk. Mr. Feeney, aye.
Chairman Sensenbrenner. Further Members who wish to cast
or--the gentleman from Alabama, Mr. Bachus.
Mr. Bachus. Aye.
The Clerk. Mr. Bachus, aye.
Chairman Sensenbrenner. Further Members who wish to cast or
change their vote. If not the Clerk will report.
The Clerk. Mr. Chairman, there are 19 ayes and 10 noes.
Chairman Sensenbrenner. And the motion to--the gentleman
from New York, Mr. Weiner.
Mr. Weiner. How am I recorded?
The Clerk. Mr. Chairman, Mr. Weiner is not recorded.
Mr. Weiner. No, Mr. Chairman.
The Clerk. Mr. Weiner, no.
Chairman Sensenbrenner. The Clerk will report again.
The Clerk. Mr. Chairman, there are 19 ayes and 11 noes.
Chairman Sensenbrenner. And the motion to report favorably
as amended is agreed to. Without objection, the bill will be
reported favorably to the House in the form of a single
amendment in the nature of a substitute incorporating the
amendments adopted here today. Without objection, the staff is
directed to make any technical and conforming changes and all
Members will be given 2 days as provided by the House rules in
which to submit additional dissenting supplemental or minority
views.
[Intervening business.]
Chairman Sensenbrenner. The Chair would like to thank the
Members and staff for their patience. We have completed a very
ambitious agenda today. There will be no markup tomorrow
because the agenda has been completed, and the Committee stands
adjourned.
[Whereupon, at 3:43 p.m., the Committee was adjourned.]
Additional Views
Mr. Chairman, I would like to submit for the record the
votes I would have made had I not been unavoidably absent from
the markup proceeding on H.R. 420, May 25, 2005.
On rollcall #10, the Conyers Amendment #010 to H.R. 420 I
would have voted no.
On rollcall #11 the Motion to Report H.R. 420 I would have
voted aye.
Mark Green.
Dissenting Views
We oppose H.R. 420 because it will not reduce frivolous
lawsuits but will increase the costs of litigation at the state
and Federal level, significantly increase the complexity of all
cases, set back the cause of civil rights, and confuse entirely
Federal and state law concerning personal jurisdiction and
venue. This sweeping overhaul of our civil justice system
predicated on the thinnest conceivable record, with no hearing
and on the basis of a few anecdotes and hypothetical concerns.
The legislation is opposed by numerous civil rights,
consumer and judicial groups, including the United States
Judicial Conference, the NAACP, Public Citizen, the Alliance
for Justice, People for the American Way, the American
Association of People with Disabilities, the Lawyers' Committee
for Civil Rights Under Law, the Conference of Chief Justices,
the American Bar Association, the National Conference on State
Legislatures, National Partnership for Women, National Women's
Law Center, the Center for Justice & Democracy, Consumers
Union, National Association of Consumer Advocates, USAction,
U.S. PIRG, and the Legal Defense Fund. The legislation is also
opposed by several law professors who specialize in civil
procedure, including Thomas Rowe of Duke Law School,
Christopher Fairman at Ohio State University, Moritz College of
Law, and Jonathan Siegel at George Washington University Law
School.
For the reasons set forth herein, we respectfully dissent.
DESCRIPTION OF LEGISLATION
Section 2 of the bill makes a number of changes to Rule 11
of the Federal Rules of Civil Procedure concerning attorney
sanctions for improper pleadings and motions.\1\ First, it
would revert to the pre-1993 rules by removing a court's
discretion to impose sanctions on improper and frivolous
pleadings (e.g., it makes the sanctions mandatory, rather than
discretionary). Second, it would eliminate the current ``safe
harbor'' provision permitting attorneys to withdraw improper or
frivolous motions 21 days after they are challenged by opposing
counsel.\2\ Third, it would eliminate the provision providing
that the sanction rules do not apply to discovery
violations.\3\
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\1\ Since these changes amend the Federal Rules of Civil Procedure,
they are all subject to modification or revision by the Federal
judiciary pursuant to the Rules Enabling Act. See 28 U.S.C.
Sec. Sec. 2071-2077 (2004).
\2\ Currently, no withdrawal right exists for court-initiated
sanctions.
\3\ Such violations are already subject to mandatory sanctions
under Rule 26 (g) of the Federal Rules.
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Section 3 of the bill applies this new Federal Rule 11 to
state cases that affect interstate commerce and requires the
judges to make this determination within 30 days after the
filing of the motion for sanctions.
Section 4 of the bill alters both Federal and state
jurisdiction and venue rules. It provides that suits may
``only'' be filed in the state and county (or Federal district)
where the plaintiff resides, where the injury took place, or
where the defendant's principal place of business is located.
As such, it eliminates the possibility of a harmed victim
pursing a corporate defendant where it is incorporated and in
many states where it is found to be doing business. It also
contains a ``most appropriate forum'' provision, which mandates
dismissal of the lawsuit (rather than transfer) if the court
determines another forum ``would be the most appropriate
forum.''
Section 5 of the bill is a rule of construction, stating
that the proposed Rule 11 modifications are not to be construed
to bar or impede the assertion or development of ``new claims
or remedies under the civil rights laws.''
I. MANDATORY SANCTIONS WILL HARM CIVIL RIGHTS ACTIONS:
By requiring a mandatory sanctions regime that would apply
to civil rights cases, H.R. 420 will chill many legitimate and
important civil rights actions. This is due to the fact that
much, if not most, of the impetus for the 1993 changes stemmed
from abuses by defendants in civil rights cases--namely that
civil rights defendants were choosing to harass civil rights
plaintiffs by filing a series of rule 11 motions intended to
slow down and impede meritorious cases.
For example, a 1991 Federal Judicial Study: The Federal
Judicial Center's Study of Rule 11 found that ``The incidence
of Rule 11 motions or sua sponte orders is higher in civil
rights cases than in some other types of cases.'' \4\ Another
study showed that ``civil rights case made up 11.4% of Federal
cases filed, [and] that 22.7% of the cases in which sanctions
had been imposed were civil rights cases.'' \5\
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\4\ John Shepard et al., Fed. Jud. Ctr., Report of a Survey
Concerning Rule 11, Federal Rules of Civil Procedure 11 (1995). The
Federal Judicial Center is the educational and research arm of the
Federal judiciary. See 28. U.S.C. Sec. 620 (2004).
\5\ Lawrence C. Marshall et al., The Use and Impact of Rule 11, 86
Nw. U. L. Rev. 943 (1992).
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Another recent study found that ``revisions to Rule 11 (the
1993 amendments) alleviate what was perceived as the rule's
disproportionate impact on civil rights plaintiffs. Under the
1983 version, both the fact that sanctions were mandatory and
that there was a significant risk that a large attorney fee
award would be the sanction of choice were believed to have had
a stifling effect on the filing of legitimate civil rights
claims. . . . Furthermore, there is ample evidence to suggest
that plaintiffs and civil rights plaintiffs in particular, were
far more likely than defendants to be the targets of Rule 11
motions and the recipients of sanctions.'' \6\
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\6\ Ending Illegitimate Advocacy: Reinvigorating Rule 11 Through
Enhancement of the Ethical Duty to Report, 62 OHSLJ 1555, 1568 (2001).
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As Professor Theodore Eisenberg, Professor Law, Cornell
University testified before the House Judiciary Committee
during the hearing on H.R. 4571 in the 108th Congress, ``A
Congress considering reinstating the fee-shifting aspect of
Rule 11 in the name of tort reform should understand what it
will be doing. It will be discouraging the civil rights cases
disproportionately affected by old Rule 11 in the name of
addressing purported abuse in an area of law, personal injury
tort, found to have less abuse than other areas.'' \7\
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\7\ Uncertain and Certain Litigation Abuses, 2004: Hearings on
Safeguarding Americans from a Legal Culture of Fear: Approaches to
Limiting Lawsuit Abuse, Before the House Comm. on the Judiciary, 108th
Cong. (2004) (statement of Theodore Eisenberg, Professor, Cornell
University).
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A good example of the effect of this rule on civil rights
cases was cited by the Honorable Robert L. Carter, United
States District Court Judge for the Southern District of New
York, when he stated: ``I have no doubt that the Supreme
Court's opportunity to pronounce separate schools inherently
unequal [in Brown v. Board of Education] would have been
delayed for a decade had my colleagues and I been required,
upon pain of potential sanctions, to plead our legal theory
explicitly from the start.'' \8\
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\8\ Symposium, The 50th Anniversary of the Federal Rules of Civil
Procedure, 1938-1988, The Federal Rules of Civil Procedure as a
Vindicator of Civil Rights, 137 U. Pa. L. Rev. 2179, 2193 (June 1989).
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The language in the bill that purports to mitigate the
damage to civil rights cases is not sufficient to alleviate our
concerns. Section 5 of the bill states that the proposed Rule
11 changes shall not be construed to ``bar or impede the
assertion or development of new claims or remedies under
Federal, State, or local civil rights law.'' The problem is the
language does not clearly and simply exempt civil rights and
discrimination cases, as should be the case. Determining what a
``new claim or remedy'' is will be a daunting and complex issue
for most courts and clearly does not cover all civil rights
cases in any event.
Finally, H.R. 420 does not provide an attorney with the
ability to appeal a Rule 11 sanction. History has demonstrated
that civil rights lawsuits are extremely unpopular,
particularly in certain parts of the country where some judges
almost automatically consider civil rights cases frivolous. In
such courts, plaintiffs' attorneys would unreasonably be
subject to sanctions, and even suspension, without appeal
contrary to the purpose of Rule 11.
II. FEDERAL JUDGES OPPOSE THESE CHANGES TO RULE 11:
The Federal judiciary--the individuals most affected by
these changes to Rule 11--oppose changes to Rule 11 that would
make sanctions mandatory rather than discretionary. On May 17,
2005, the Judicial Conference of the United States wrote a
letter to Chairman Sensenbrenner stating, in no uncertain
terms, that ``the proposed changes to Rule 11 will not help
deter litigation abuses, but will increase satellite
litigation, costs, and delays.'' \9\ The letter includes a
report by the Federal Judicial Center: ``Report of a Survey of
United States District Judges' Experiences and Views Concerning
Rule 11, Federal Rules of Civil Procedure.'' The report,
prepared at the request of the Judicial Conference's Advisory
Committee on Civil Rules, surveyed trial judges who apply the
rules. The survey included judges who have had experience under
both the 1983 version and the 1993 version, as well as judges
with experience under the 1993 version only.\10\ As the letter
states, the report ``shows a remarkable consensus among Federal
district judges supporting existing Rule 11 and opposing its
amendment.'' \11\
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\9\ Letter from Leonidas Ralph Mecham, Secretary, U.S. Judicial
Conference, to Honorable F. James Sensenbrenner, Jr., Chairman, House
Committee on the Judiciary, May 17, 2005.
\10\ Id. at 2.
\11\ Id. (emphasis added).
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Specifically, ``the survey's findings include the following
highlights:
More than 80 percent of the 278 district
judges surveyed indicate that ``Rule 11 is needed and
it is just right as it now stands'';
87 percent prefer the existing Rule 11 to the
1983 version or the version proposed by legislation
(e.g., H.R. 4571 or H.R. 420);
85 percent strongly or moderately support
Rule 11's safe harbor provisions;
91 percent oppose the proposed requirement
that sanctions be imposed for every Rule 11 violation;
84 percent disagree with the proposition that
an award of attorney fees should be mandatory for every
Rule 11 violation;
85 percent believe that the amount of
groundless civil litigation has not grown since the
promulgation of the 1993 rule, with 12 percent noting
that such litigation has not been a problem, 19 percent
noting that such litigation decreased during their
tenure on the Federal bench, and 54 percent noting that
such litigation has remained relatively constant; and
72 percent believe that addressing sanctions
for discovery abuse in rule 26(g) and 37 is better than
in Rule 11.'' \12\
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\12\ Id. at 3.
As the Federal Judicial Center's study shows, ``federal
district judges [are] united [in] opposition to amending Rule
11.'' \13\
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\13\ Id.
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III. THE FORUM SHOPPING PROVISION WILL UNFAIRLY BENEFIT FOREIGN
CORPORATIONS TO THE DISADVANTAGE OF THEIR U.S. COMPETITORS:
Section 4 of the bill would recast state and Federal court
jurisdiction and venue in personal injury cases. The provision
would operate to provide a litigation and financial windfall to
foreign corporations at the expense of their domestic
competitors. This is because, instead of permitting claims to
be filed wherever a corporation does business or has minimum
contacts, as most state long-arm statutes provide, Section 4
only permits the suit to be brought where the defendant's
principal place of business is located.\14\ This means that it
will be far more difficult to pursue a personal injury or
product liability action against a foreign corporation in the
United States.
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\14\ As a threshold, it is quite problematic even determining how
the forum shopping provision would apply. Depending upon the meaning of
the term ``only'' in the phrase ``may be filed only in the state . . .
,'' the provision could be read as (1) creating a new grant of
jurisdiction and venue, or (2) merely limiting the current rules to the
specified new rules. If it is a new grant of jurisdiction and venue,
the section would serve to authorize suits wherever plaintiffs reside
or were injured, even if there are no minimum contacts with the
defendant. This would lead to an explosion in cases, and would decimate
years of Supreme Court decisions holding that defendants may only be
sued where jurisdiction lies (Pennoyer v. Neff, 20 A.L.R. 3d (1201)) or
where the defendant has minimum contacts (International Shoe Co. v
Washington, 326 U.S. 310 (1945)). If the provision operates as a limit
on the current rules, it would represent a significant Federal
usurpation of state court rules, possibly in violation of the Commerce
Clause and the Tenth Amendment. See, e.g., United States v. Morrison,
529 U.S. 598 (2000) and United States v. Lopez, 514 U.S. 549 (1995),
striking down the Violence Against Women Act and the Gun Free School
Zone Act as unconstitutional, holding that Congress lacked the
authority to pass laws that have only an attenuated affect on
interstate commerce. This point is highlighted in a letter analyzing
the bill from Professor Christopher Fairman of the Ohio State
University, Moritz College of Law. In his letter, Professor Fairman
states that ``the venue provision of section 4 has absolutely no
constitutional anchor. Quite simply, Congress does not have the
authority under the Constitution to impose a venue statute on personal
injury litigants who file their claims in state court.''
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Consider the case of a U.S. citizen that is harmed by a
product produced or manufactured by a foreign competitor. If
that foreign company transacts business or has minimum contacts
in a state other than the state of the plaintiff's residence or
where the injury occurred, as is often the case, any suit
against the foreign company would be banned by H.R. 420. In
other words, the harmed U.S. citizen would have no recourse
against a foreign corporation, whereas he or she would have
recourse against a comparable U.S. corporation. This is unfair
to both the U.S. citizen and all U.S. companies that compete
against the foreign firm. It is hard for us to understand why
the Congress would want to pass a law that grants foreign
companies such a financial windfall at the expense of U.S.
firms.
IV. SECTION 4 WILL PLACE VICTIMS AT A SIGNIFICANT LITIGATION
DISADVANTAGE COMPARED WITH CORPORATE DEFENDANTS:
It is difficult to consider H.R. 420 as even-handed
litigation reform, when it is drafted to so obviously benefit
corporate defendants. Consider the operation of subsection (b),
requiring a court to dismiss properly filed legal claims if it
determines another forum would be ``the most appropriate.''
There is no legal precedent for a court having such open-ended
authority to dismiss lawful actions. The problems and
unfairness with this provision are many. First, of course, is
the ambiguous, open-ended wording. The legislation gives
absolutely no guidance as to what a court is to take into
account in determining which court is ``most appropriate.'' Is
it nexus to the injury, the plaintiff, the defendant or the
bulk of other claims? Until this issue is worked out,
significant hardships will no doubt result. While defendants do
not mind waiting, the confusion would work a significant
disadvantage to harmed victims in immediate need of
compensation. Moreover, beyond this ambiguity, mandating
dismissal would seem to be an extreme and costly remedy as
compared to simply transferring the case to another court.
Section 4 suffers from an overall ambiguity in drafting.
First, it is unclear whether the finding of the first court
that a second court is most appropriate binds the second court
under general rules of preclusion. If it is binding, the first
court might make an egregious error that would inappropriately
transfer a case to a second court a case, leaving that the
parties no recourse. However, if the decision is not binding,
then plaintiffs' lawsuits could get bounced around by a string
of courts, all asserting that another court is most
appropriate. Further adding to confusion, it is also unclear
whether a dismissal is appealable, which could cause huge
delays. Even more problematic, the provision is unclear as to
whether the statute of limitations would be tolled during such
appeal (the statute is tolled until the claim is dismissed
under the bill, but what about afterwards until a new claim is
filed?). The provision will also cause delay because it
requires the state court to make another time consuming and
costly determination before accepting or dismissing the case.
Again, while these delays may not burden a defendant,
plaintiffs, who may be in drastic need of medical attention and
expenses, are deprived of timely adjudication of their claims.
Moreover, it seems fundamentally unfair for Section 4 to
apply only to personal injury lawsuits when studies show that
business lawsuits are far more prevalent and costly. In fact, a
study by Public Citizen shows that businesses file four times
as many lawsuits as do individuals represented by trial
lawyers.\15\ Another paper, reported by the National Law
Journal in November 2003, showed that of the top ten jury
verdicts rendered thus far that year, 8 of the 10 involved
businesses suing other businesses--accounting for $3.12 billion
of the total $3.54 billion awarded by the ten juries. Only two
of the ten cases were brought by individuals for personal
injuries.\16\ If the Majority believes so strongly in the
efficacy of this forum shopping provision, they should be
willing to apply it across the board.
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\15\ America's Litigious Businesses, September 2004, study on file
with Judiciary Committee.
\16\ It is worth noting that Public Citizen's survey of the 100
most recent decisions by Federal judges finding Rule 11 violations
found that businesses were almost twice as likely as personal injury
plaintiffs to be sanctioned for engaging in frivolous litigation.
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CONCLUSION
Says one briefing book for House Republicans: ``attacking
trial lawyers is admittedly a cheap applause line, but it
works. It's almost impossible to go too far when it comes to
demonizing lawyers.'' \17\ H.R. 420, The ``Lawsuit Abuse
Reduction Act of 2005,'' is single-mindedly obsessed with a
litigation crisis that simply does not exist. All empirical
evidence suggests that the number of lawsuits are declining,
that jury awards are shrinking, and that the costs of
litigation to small businesses and to the overall American
economy are slight if at all significant. H.R. 420 would
confuse Federal jurisdiction jurisprudence, have a chilling
effect on civil rights litigation, and enact sweeping changes
to the Federal judiciary with little discussion or
deliberation. For these reasons, we respectfully dissent.
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\17\ Frank Lutz, Language of the Twenty-First Century (1997)
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DESCRIPTION OF AMENDMENTS OFFERED AT MARKUP
During the markup four amendments were offered by
Democratic Members:
1. Nadler Amendment
Description of Amendment: The amendment would prohibit a
court from ordering a court record sealed or subjected to a
protective order, or otherwise to restrict access to taht
record, unless the court makes a finding of fact that
identifies the interest that justifies the order and determines
that the interest outweighs any interest in the public health
and safety that the court determines would be served by not
sealing or restricting the court record.
Vote on Amendment: The amendment was withdrawn after
Representative Nadler and Representative Smith agreed to work
on the language before the bill comes up before the full House.
2. Scott Amendment
Description of Amendment: The amendment would rein in
frivolous lawsuits without harming the ability of legitimate
cases to be brought. The amendment proposed that after three
consecutive adverse decisions on the merits, a person
attempting to file yet another claim on the same issue be
saddled with a rebuttable presumption of a Rule 11 violation.
The amendment would have applied to the Terri Schiavo case, in
which multiple courts ruled against the plaintiffs.
Vote on Amendment: The amendment was agreed to by voice
vote.
3. Nadler Amendment
Description of Amendment: The amendment provides that
whoever influences, obstructs or impedes, or endeavors to
influence, obstruct or impede, a pending court proceeding
through the intentional destruction of documents sought in and
highly relevant to that proceeding shall (1) be punished with
mandatory civil sanctions and (2) be held in contempt of court
and, if an attorney, referred to one or more appropriate State
bar associations for disciplinary proceedings. The amendment
applies to any court proceeding in Federal or State court.
Vote on Amendment: The amendment was agreed to by voice
vote.
4. Conyers Amendment
Description of Amendment: The amendment would exempt from
the provisions of the Act actions against a manufacturer,
seller, or trade association that, on or after the date of
enactment, shifts or transfers employment positions of
facilities to a location outside the United States. The
amendment was designed to ensure that companies that relocate
offshore do not receive the benefit of the liability
limitations in the Act.
Vote on Amendment: The amendment was defeated by a party-
line vote of 17-11. Ayes: Representatives Conyers, Berman,
Nadler, Scott, Watt, Waters, Meehan, Weiner, Schiff, Sanchez,
Van Hollen. Nays: Representatives Sensenbrenner, Coble, Smith,
Gallegly, Lungren, Jenkins, Cannon, Inglis, Hostettler, Keller,
Issa, Pence, Forbes, King, Feeney, Franks, Gohmert.
John Conyers, Jr.
Howard L. Berman.
Jerrold Nadler.
Robert C. Scott.
Melvin L. Watt.
Sheila Jackson Lee.
Maxine Waters.
Martin T. Meehan.
William D. Delahunt.
Robert Wexler.
Anthony D. Weiner.
Linda T. Sanchez.
Chris Van Hollen.