ATRA Urges Enactment of Lawsuit Abuse Reduction Act

July 22, 2004

The American Tort Reform Association (ATRA) is urging enactment of a federal bill that would reportedly remove two of the biggest thorns in the side of the U.S. judicial system – frivolous claims and forum shopping.

ATRA (www.atra.org) General Counsel Victor Schwartz was to urge enactment of H.R. 4571, the Lawsuit Abuse Reduction Act of 2004, during a hearing today on small business liability reform before the U.S. House Subcommittee on Regulatory Reform and Oversight of the Committee on Small Business. The bill was introduced last month by Representative Lamar Smith (R-Texas) and would reinstate the original intent of Rule 11 of the Federal Rules of Civil Procedures.

“Reinstating Rule 11 will hold personal injury lawyers accountable to basic, fair standards by mandating sanctions against lawyers who abuse the civil justice system,” ATRA President Sherman Joyce commented.

The bill also would put a halt to nationwide forum shopping to “Judicial
Hellholes®.” Plaintiffs would be permitted to sue where they lived, where they were injured, or in the defendant’s principal place of business. “There is no reason for cases to be brought elsewhere unless one is seeking to find a biased forum for a case to be heard,” Schwartz said.

Judicial Hellholes are state trial court jurisdictions where ATRA believes that impartial justice is unavailable. Personal injury lawyers reportedly seek out these jurisdictions and file cases there because they know they will receive a large reward, a favorable precedent, or both.

Schwartz was to explain how the bill would reinstate mandatory sanctions against lawyers filing frivolous lawsuits and reinstate sanctions for abuses during discovery, including when a defendant is asked to produce materials that have nothing to do with the merits of a case.

Currently in Judicial Hellhole Madison County, Illinois, a plaintiff’s lawyer in an asbestos case is reportedly trying to discover the names of civil justice organizations to which the defendants are affiliated and how much money is given to those organizations. “These kinds of discovery abuses are nothing but scare tactics that unfortunately can force unfair settlements,” Schwartz explained.

Provisions of Rule 11 that would be reinstated under the bill include:

” Making Rule 11 sanctions against attorneys or parties who file
frivolous lawsuits mandatory rather than discretionary;
” Removing Rule 11’s “safe harbor” provision that currently 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;
” Allowing for Rule 11 sanctions for frivolous or harassing conduct
during discovery; and
” Allowing monetary sanctions, including attorneys fees and
compensatory costs, against a represented party.

The Lawsuit Abuse Reduction Act also would include:

” Extending Rule 11 sanctions to state cases that affect interstate
commerce; and
” Reducing forum shopping in state and federal courts by requiring
that a plaintiff in a civil tort action may sue only where he or she lives or was injured, or where the defendant’s principal place of business is located.

Rule 11 was weakened by amendments in 1993 by the Civil Rules Advisory Committee, despite wide judicial support of the existing rule. Prior to the amendments, a Federal Judicial Center study revealed that more than 80 percent of 751 federal judges said the rule had a positive effect on litigation in the federal courts and that it should be retained in its then-current form.

“Lawsuit abuse is a barrier to economic growth,” Joyce said. “Each year, every U.S. citizen pays more for frivolous litigation and other abuses of our civil justice system.”

The cost of lawsuit abuse is reportedly at an all-time high. Today, the average family of four pays a $3,236 annual “tort tax,” a cost added to the price of products and services needed to cover the costs of litigation. No other industrialized country reportedly pays more as a percentage of its Gross Domestic Product.

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