Bills to Curb Frivolous Suits Introduced in Congress

With the Republicans in control of the House, many were wondering about the prospects for tort reform at the federal level.  Indeed, President Barack Obama observed in his State of the Union address on January 25, 2011, “I am willing to look at . . . ideas to bring down costs including reform to rein in frivolous lawsuits.” 

House Judiciary Committee Chairman Lamar Smith (R-Texas) earlier this month introduced legislation to reduce frivolous lawsuits. Senate Judiciary Committee Ranking Member Chuck Grassley (R-Iowa) then introduced a companion bill in the Senate (S.533).

The Lawsuit Abuse Reduction Act (LARA), H.R. 966, would impose mandatory sanctions for plaintiff lawyers who file merit-less suits in federal court. 

Chairman Smith argued that lawsuit abuse has become too common in American society partly because the lawyers who bring these cases have everything to gain and nothing to lose. Plaintiffs' lawyers can file frivolous suits, no matter how absurd the claims, without any penalty. Meanwhile defendants are faced with the choice of years of litigation, high court costs and attorneys' fees or a settlement. Our legal system encourages frivolous lawsuits while defendants are left paying the price even when they are innocent. Many of these cases have cost innocent people and business owners their reputations and hundreds of thousands of dollars.

Ranking Member Grassley noted that 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. "This perverse dynamic not only results in legalized extortion, it leads to businesses spending money to defend against baseless lawsuits rather than to create new jobs."

The Lawsuit Abuse Reduction Act would take three steps to help thwart frivolous lawsuits.

* Reinstates the requirement that if there is a violation of Rule 11, there will be sanctions.

* Requires that judges impose monetary sanctions against lawyers who file frivolous lawsuits.

* Reverses the 1993 amendments to Rule 11 that allow parties and their attorneys to avoid sanctions for making frivolous claims by withdrawing them within 21 days after a motion for sanctions has been served.

The House Judiciary Committee has already held a hearing on the House version, at which witnesses included Elizabeth A. Milito of the NFIB Small Business Legal Center, Professor Lonny Hoffman of the University of Houston Law Center, and Victor E. Schwartz, well known tort reform advocate.


 

Chamber Releases State Liability Systems Ranking Study

The Institute for Legal Reform of the U.S. Chamber of Commerce has released its 2010 State Liability Systems Ranking Study.  The study was conducted for the U.S. Chamber to explore how reasonable and balanced the states’ tort liability systems are perceived to be by U.S. business. Participants in the survey were comprised of a sample of 1,500 in-house general counsel, senior litigators or attorneys, and other senior executives who indicated they are knowledgeable about litigation matters at companies with at least $100 million in annual revenues.

The 2010 ranking builds on seven previous surveys in which all 50 states were ranked by those familiar with the litigation environment in that state.  The State Liability Systems Ranking Study basically aims to quantify how corporate attorneys view the state systems.  Overall, more than two in five (44%) senior attorneys view the fairness and reasonableness of state court liability systems in America as excellent or pretty good, up slightly from the last survey in 2008 (41%).  A majority
(56%) view the systems as only fair or poor. Two-thirds (67%) report that the litigation environment in a state is likely to impact important business decisions at their companies, for instance, where to locate or do business, an increase from 63% in 2008 and 57% in 2007.

Respondents were asked to give jurisdictions a grade (A, B, C, D or F) in each of the following areas:

  • Having and enforcing meaningful venue requirements;
  • Overall treatment of tort and contract litigation;
  • Treatment of class action suits and mass consolidation suits;
  • Damages;
  • Timeliness of summary judgment or dismissal;
  • Discovery;
  • Scientific and technical evidence;
  • Judges’ impartiality;
  • Judges’ competence; and
  • Juries’ fairness.

These elements were then combined to create an overall ranking.

The worst jurisdiction in the survey was Chicago/Cook County, Illinois,  followed by Los Angeles,
California, the state of California in general, the state of  Texas in general, and Madison County, Illinois.  Your humble logger's home turf of Philadelphia was ranked 13th worst.

The best? Survey says:

1. Delaware
2. North Dakota
3. Utah
4. Nebraska
5. Iowa