Statement of Judiciary Committee Chairman Lamar Smith Full Committee Markup of H.R. 966, the “Lawsuit Abuse Reduction Act”

Statement of Judiciary Committee Chairman Lamar Smith
Full Committee Markup of
H.R. 966, the “Lawsuit Abuse Reduction Act” 

Chairman Smith: In March, I reintroduced H.R. 966, the Lawsuit Abuse Reduction Act.  Senator Chuck Grassley, the Ranking Member of the Senate Judiciary Committee, has introduced the same bill in the Senate.

The Lawsuit Abuse Reduction Act, known as LARA, is just over a page long, but it would prevent the filing of hundreds of thousands of pages of frivolous legal pleadings in federal court.

In recent years, frivolous lawsuits have been filed against the Weather Channel for failing to accurately predict storms and against television shows people claimed were too scary.

More and more playgrounds are shutting down because of liability concerns, and fast-food companies are being sued because inactive children gain weight.

Lawsuit abuse has become too common 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 years of litigation and attorneys’ fees.

These cases, and many like them, have wrongly cost innocent people and business owners their reputations and their bank accounts.  According to the respected research firm Towers Perrin, the annual direct cost of American tort litigation now exceeds $250 billion a year.

When Business Week wrote an extensive article on what the most effective legal reforms would be, it stated what's needed are "Penalties That Sting."

Business Week recommended, "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, an obscure branch of the courts, made penalties optional.  This needs to be reversed ... by Congress."

Just a few years ago, the nation’s oldest ladder manufacturer, a family-owned business near Albany, New York, filed for bankruptcy protection and was forced to sell off most of its assets because of litigation costs, even though the company had never lost a court judgment.

As Bernie Marcus, co-founder and former chairman of The Home Depot, has said, “The cost of even one ill-timed abusive lawsuit can bankrupt a growing company and cost hundreds of thousands of jobs.”

In his 2011 State of the Union Address, President Obama said “I’m willing to look at other ideas to … rein in frivolous lawsuits.”  The President should support mandatory sanctions for frivolous lawsuits if he wants to avoid making frivolous promises.

LARA would require monetary sanctions against lawyers who file frivolous lawsuits.  It would reverse the amendments to Rule 11 that made Rule 11 sanctions discretionary rather than mandatory.

It would also reverse the rule that allows parties and their attorneys to avoid sanctions for making frivolous claims by withdrawing them within 21 days after a motion for sanctions has been filed.
Today, Rule 11 is as porous as the Southern border.  LARA would get rid of the “free pass” lawyers now have to file frivolous lawsuits in federal court.

Further, LARA expressly provides that “Nothing in” the changes it makes to Rule 11 “shall be construed to bar or impede the assertion or development of new claims, defenses, or remedies under Federal, State, or local laws, including civil rights laws.”  Consequently, the development of civil rights law would not be effected in any way by LARA.

LARA applies even-handedly 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.

The American people are looking for short and simple legislative responses to clear problems like lawsuit abuse.  LARA restores accountability to our legal system by reinstating mandatory sanctions for attorneys who file meritless suits. Though it will not stop all lawsuit abuse, LARA encourages attorneys to think twice before filing a frivolous lawsuit.

All Members who oppose frivolous lawsuits and want to protect the reputations and bank accounts of innocent Americans should support the Lawsuit Abuse Reduction Act.