Congress Passes Lawsuit Abuse Reduction Act of 2004

The Act, H.R. 4571, would amend Rule 11 of the Federal Rules of Civil Procedure to make sanctions against attorneys or parties who file frivolous lawsuits mandatory rather than discretionary; remove a “safe harbor” provision that allows plaintiffs and their attorneys to avoid sanctions for frivolous suits by withdrawing them within 21 days; permit judges to order plaintiffs to reimburse reasonable litigation costs, including attorneys' fees; reduce “court-friendly shopping” by requiring that plaintiffs in civil actions sue only where they live or were injured, or where the defendant's principal place of business is located; and mandate a 1-year suspension of a law license after a lawyer has filed 3 or more frivolous lawsuits in the same federal court.

The Act, if approved by the Senate in substantially unchanged form, would apply not only to federal court actions but also to suits brought in state court, if the court first determines upon motion that the lawsuit affects interstate commerce. The language authorizing such state-court application of the Act will allow a finding that a suit affects interstate commerce if it would impact the interstate economy (for example, by causing the loss of jobs) were the relief requested granted. Co-sponsor Rep. Randy Neugebauer (R-TX) said in this regard, “People trying to cash in on the lawsuit lottery are causing doctors to stop practicing and forcing many small businesses to eliminate jobs or even shut down. At a time when businesses are working to create jobs so every American can work, they should be spending money on employee salaries, not legal fees to fight claims that have no basis in fact.”

Democrat Point of View

Democrats, by-and-large, are against the bill, which they see as unnecessarily deterring plaintiffs from taking their legitimate claims to the courthouse. It is feared that some attorneys will be reluctant to take on all but the most open-and-shut cases for fear of finding themselves subject to mandatory sanctions. Similar mandatory penalties for filing frivolous lawsuits were imposed in the 1980s but repealed in 1993, largely because the law created further unnecessary litigation. At present, judges have discretion to seek penalties against overzealous attorneys.

The Senate, which will be in session only for a few more weeks, is not likely to take action on the Act before recessing.

On Sept. 14, the Republican-led House passed a bill dubbed the Lawsuit Abuse Reduction Act of 2004 that aims to do just that: deter attorneys and their clients from bringing unfounded suits. The vote was 229-174 for the bill that would impose sanctions on lawyers who bring suits that are deemed unfounded.

The bill's sponsor, Rep. Lamar Smith (R-TX), has complained that, at present, “almost any party can bring any suit in almost any jurisdiction. That's because plaintiffs and their attorneys have nothing to lose. All they want is for the defendant to settle. This is legalized extortion.” Smith asserts that frivolous lawsuits wreak havoc on the reputations of individuals and organizations, drive up insurance costs, and cost those who are sued so much in legal fees and court costs that bankruptcy can result.

The Act

The Act, H.R. 4571, would amend Rule 11 of the Federal Rules of Civil Procedure to make sanctions against attorneys or parties who file frivolous lawsuits mandatory rather than discretionary; remove a “safe harbor” provision that allows plaintiffs and their attorneys to avoid sanctions for frivolous suits by withdrawing them within 21 days; permit judges to order plaintiffs to reimburse reasonable litigation costs, including attorneys' fees; reduce “court-friendly shopping” by requiring that plaintiffs in civil actions sue only where they live or were injured, or where the defendant's principal place of business is located; and mandate a 1-year suspension of a law license after a lawyer has filed 3 or more frivolous lawsuits in the same federal court.

The Act, if approved by the Senate in substantially unchanged form, would apply not only to federal court actions but also to suits brought in state court, if the court first determines upon motion that the lawsuit affects interstate commerce. The language authorizing such state-court application of the Act will allow a finding that a suit affects interstate commerce if it would impact the interstate economy (for example, by causing the loss of jobs) were the relief requested granted. Co-sponsor Rep. Randy Neugebauer (R-TX) said in this regard, “People trying to cash in on the lawsuit lottery are causing doctors to stop practicing and forcing many small businesses to eliminate jobs or even shut down. At a time when businesses are working to create jobs so every American can work, they should be spending money on employee salaries, not legal fees to fight claims that have no basis in fact.”

Democrat Point of View

Democrats, by-and-large, are against the bill, which they see as unnecessarily deterring plaintiffs from taking their legitimate claims to the courthouse. It is feared that some attorneys will be reluctant to take on all but the most open-and-shut cases for fear of finding themselves subject to mandatory sanctions. Similar mandatory penalties for filing frivolous lawsuits were imposed in the 1980s but repealed in 1993, largely because the law created further unnecessary litigation. At present, judges have discretion to seek penalties against overzealous attorneys.

The Senate, which will be in session only for a few more weeks, is not likely to take action on the Act before recessing.