Lawsuit Abuse Reduction Act of 2005
LAWSUIT ABUSE REDUCTION ACT OF 2005 -- (House of Representatives - October 27, 2005)
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Mr. NADLER. Mr. Chairman, I yield myself such time as I may consume.
Mr. Chairman, I oppose this bill because it will not reduce frivolous lawsuits, but will instead increase the cost of litigation at the State and Federal level, set back the fairness of civil rights litigation, and favor foreign corporate defendants at the expense of their domestic competitors. As a result of this misguided legislation, satellite litigation, costs and delays will result, and litigation abuses will not be reduced.
H.R. 420 makes significant changes to Rule 11 sanctions without following the statutory rulemaking process. The Association of Chief Justices of the States and the Federal Judicial Council have both criticized skipping the statutory rulemaking process. This bill would revert Rule 11 back to the 1983 version and unduly affects plaintiffs in civil rights cases. The current Rule 11 was adopted in 1993 specifically to correct abuses by defendants in civil rights cases. By rolling back this rule and requiring a mandatory sanctions system to civil rights cases, H.R. 420 will chill many legitimate and important civil rights actions.
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, or local civil rights law,'' the language does not clearly and simply exempt civil rights and discrimination cases, as it should. 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.
The Honorable Robert Carter, United States District Court Judge for the Southern District of New York, who was one of the pioneers in civil rights legislation and worked on the Brown v. Board of Education case, 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.'' This is a good example of the dreadfully detrimental effect of this rule on civil rights cases.
Furthermore, this bill will operate to benefit foreign corporate defendants at the expense of their domestic counterparts. 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 minimum contacts, as most State long-arm statutes provide, the bill permits the suit to be brought only where the defendant's principal place of business is located. In the case of a foreign corporation, that does not exist in the United States. If a U.S. citizen is harmed by a product manufactured by a foreign competitor, under this bill the injured U.S. citizen would have no recourse against a foreign corporation, whereas he or she would have recourse against the comparable U.S. corporation. This is unfair to both the U.S. citizen with no recourse and to all U.S. companies that must compete against the foreign firm. Consequently American employers and employees would be put at an unfair disadvantage vis-a-vis their foreign counterparts, not exactly what we would want to be doing not only from a standpoint of fairness, but from a standpoint of our economy.
Mr. Chairman, this bill has another deleterious effect. Because it provides for reasonable attorneys' fees in the case of a sanction, because many Rule 11 sanctions are minor, and in any complex case there are almost invariably going to be some, the current law, first of all, permits the judge discretion whether to impose sanctions or not. This makes it mandatory for even the most picayune infractions.
Second of all, the current law says that if it is pointed out to an attorney that he has done something that would fall under Rule 11, he has 21 days to correct it. If he does not correct it, he is subject to sanctions. This would say they have no time to correct it. They get automatic sanctions. That is unfair.
Thirdly, because under those circumstances this bill provides for attorneys' fees, they had better have their head examined if they want to sue a large corporation, because if they are the little guy, and they have one attorney, and he is paid a reasonable fee, and they can afford the litigation, they hope; but if they are suing the big company, and General Motors has 32 attorneys lined up over there, and they are all charging $800 an hour, then reasonable attorneys' fees are going to be a lot of money, and they have to anticipate, if they file that suit, that because of the mandatory nature of the Rule 11 sanctions that this bill would impose, because of the lack of an ability to correct it, because of the automatic sanctions and mandatory sanctions, they have to assume that they are going to have to pay those sanctions, and they are going to have to pay the mandatory attorneys' fees, so they had better not sue the big boys.
What this bill is really saying is big corporations shall be exempt from lawsuits by people who cannot afford to pay huge attorneys' fees of the big corporations, because we have to assume that will happen, and because this bill leaves no discretion to the judge.
It is no surprise that 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 of State Legislatures, National Partnership for Women, 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 all oppose the bill.
In other words, if Members care about civil rights, if they care about the ability of the consumer to have justice with a large corporation, if they care about civil liberties, if they care about people being able to use the Federal or State courts, they must vote against this bill.
I urge my colleagues to vote against this poorly drafted and unfair legislation.
Mr. Chairman, I reserve the balance of my time.
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Mr. NADLER. Mr. Chairman, I observe the gentleman tells us that President Bush assures us of the problem of frivolous lawsuits. President Bush assured us there were weapons of mass destruction in Iraq and a lot of other nonsense. So I do not give that too much credence.
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Mr. NADLER. Mr. Chairman, I yield myself such time as I may consume.
I will summarize in a few words what we are really talking about. There are frivolous lawsuits. There are also novel legal claims which some may consider frivolous, but which, in the fullness of time, yield legal progress. The claims against Plessy v. Ferguson were considered frivolous at first, but eventually the courts accepted them, and so with many other arguments.
The courts have Rule 11 sanctions available at their discretion. Any judge who thinks an attorney is being frivolous, is wasting the court's time, is wasting his adversary's time, can impose the sanctions today. The courts have not asked for further power. The courts have certainly not asked us to tie their hands and to mandate that they impose sanctions whenever they are requested and a technicality may have been violated. That is not justice, to enforce technicalities against the discretion of the judge.
The Association of State Chief Justices are not in favor of this. The Judicial Council of the United States is not in favor of this.
To mandate that attorneys be sanctioned on any technicality, to say that an attorney may not correct his own mistake, you must sanction him; to say that three sanctions on three technicalities means he cannot practice anymore is to tell attorneys, do not try novel legal arguments, do not argue new claims. To say that attorneys' fees, reasonable attorneys' fees, will be assessed mandatorily, whatever the judge thinks, whether he thinks or she thinks it is reasonable or not, is to say that you better not sue the big boys, that you better not sue General Motors, and a small business, a supplier cannot sue Wal-Mart lest the attorney violate some technicality and the attorneys' fees of Wal-Mart, with their 45 attorneys sitting there, be assessed against the small supplier.
This is not justice. What this bill is, Mr. Chairman, is another attempt, another in a series of attempts, the class action bills, the various other bills we have had here, to close the courts, to close the courts to anyone who would try to hold giant corporations accountable. That is what this is. This is a bill that says, do not try to use the courts for civil rights, do not try to use the courts to sue large corporations. We are going to make sure you do not. We are going to punish you if you do, and we are going to make sure you cannot find an attorney who will take the case because they are worried about draconian imposition of draconian attorneys' fees.
So I urge my colleagues to reject this bill. It should be rejected, because the courts ought to be opened to all people who need to use them. Otherwise there is no justice.
Ms. JACKSON-LEE of Texas. Mr. Chairman, will the gentleman yield?
Mr. NADLER. I yield to the gentlewoman from Texas.
Ms. JACKSON-LEE of Texas. Mr. Chairman, I was listening to the gentleman framing the question, and the gentleman framed the question I think in the way that we should ask our colleagues for them to give us an answer. I think what the gentleman has suggested in his very detailed and eloquent presentation, there is a judicial system in place that is functioning and functional. We should take the Boy Scouts' oath, make your camp better than you found it. Therefore, if there are issues that we can improve in the judiciary, let us do it.
But I am just looking at some information here that tells me that Federal litigation is, in fact, decreasing. A 2005 report issued by the U.S. Department of Justice says that the U.S. district courts in some areas, of course, fell 79 percent, fell 79 percent, the cases, the tort cases, between 1985 and 2003. According to the Administrative Office of the U.S. Courts, tort actions in the U.S. district courts went down from 29 percent from 2002 to 2003, so it fell 28 percent. In addition, over the last 5 years, Federal civil filings have not only decreased 8 percent, but the prefilings that are personal injury cases has also declined. State litigation is decreasing. The numbers show they are decreasing. Lawsuit filings are decreasing. As I said, tort filings have declined 5 percent since 1993. Contract filings have declined.
I do not particularly consider that a good omen. I would like people to legitimately feel they can go into the courts for their remedies. But the question is, it is not broken, and here we are putting heavier burdens on the court system that literally shuts the door closed to a number of individuals, and I think that is completely unacceptable for the responsibility of this Congress.
Mr. NADLER. Mr. Chairman, reclaiming my time, I thank the gentlewoman.
I think the gentlewoman has established not only that the system is not broken, but that any claim of an avalanche of frivolous litigation is absurd for these kinds of statistics of declining use of the courts, of declining caseloads, of declining filings. Again, the courts have not requested this, they have not said that there is any problem, there is any problem existing. This is an attempt again to shut the courthouse doors to people who need access to the courts, and on the most fundamental grounds of justice, this bill ought to be soundly rejected.
Mr. Chairman, I yield back the balance of my time.
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AMENDMENT NO. 1 OFFERED BY MR. SMITH OF TEXAS
Mr. SMITH of Texas. Mr. Chairman, I offer an amendment.
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Mr. NADLER. Mr. Chairman, I am pleased that Chairman Sensenbrenner has included in the manager's amendment two provisions that I offered in the Judiciary Committee markup of the bill, and I thank the chairman for his support.
The first amendment included in the manager's amendment provides for mandatory sanctions for destroying documents relating to a court proceeding. Delays during litigation provide ample opportunities for wrongdoers to destroy incriminating documents. Because this can result in the complete inability to hold these defendants accountable for their wrongful acts, parties who knowingly destroy relevant and incriminating documents should be severely sanctioned.
Secondly, the second amendment bans the concealment of unlawful conduct when the interests of public health and safety outweigh the interest of litigating parties in concealment. Very often in civil litigation, a company producing an unsafe product or an unsafe procedure will settle with the plaintiff.
The settlement will include a payment of a sum to the defendant, but will also often include an agreement that the records will be sealed and no one will ever talk about it. That is the condition that the defendant company puts on it.
So the defendant pays the money, the plaintiff gets the settlement, everybody keeps quiet. But meanwhile, hundreds of thousands of people may continue to be injured by that product in the future.
The defendant company forces the plaintiffs never to discuss the problems with anyone else, no one knows about it, and more people keep getting hurt because the product remains on the market.
When it comes to public health and safety, people must have access to information about an unsafe product, not only to protect themselves but also to serve as a deterrent against companies that may continue to place the public in harm's way.
Secrecy agreements should not be enforced unless they meet stringent standards to protect the public interest and the public health. This amendment prevents this harmful practice. The amendment says that an agreement to keep a settlement secret, the terms and conditions of settlement secret, cannot be approved by the court unless the court determines that the interests of the parties in secrecy, perhaps legitimate interests outweigh the interests of the public in knowledge of whatever it is.
If the court so determines, the court can order the secrecy upheld. But if the court determines that the interest and the public knowledge outweigh the secrecy, then the court must say that and disapprove the concealment agreement.
I support the manager's amendment because it includes these two amendments and other good ideas. But these changes are not enough for me to support final passage of what is still an egregious bill.
Again, I would like to thank Chairman Sensenbrenner for working together in addressing these issues. I believe the manager's amendment provides some positive changes in what is otherwise an egregious bill.
I urge my colleagues to vote for the manager's amendment, but against the final bill.
Mr. Chairman, I yield back the balance of my time.
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