"Lawsuit Abuse Reduction Act of 2004" Referred to Senate for Approval

By: Wells Marble & Hurst, PLLC
www.wellsmar.com

In an attempt to curtail lawsuit abuse, the House of Representatives took an unusual move when it recently passed an amendment to Federal Rule of Civil Procedure 11, which governs lawyers’ conduct in bringing lawsuits and allows for imposition of sanctions on lawyers who violate the rule.  The bill, House Resolution 4571, would amend the current Rule 11, which gives a court discretion to impose sanctions, by imposing mandatory sanctions on lawyers who violate Rule 11 by filing frivolous lawsuits.  The amendment would also eliminate the current rule’s 21-day grace period, during which a lawyer threatened with sanctions can withdraw or correct the offending suit and avoid the sanctions.  Additionally, the amended Rule 11 would establish a “three-strikes rule” requiring a one-year mandatory suspension of lawyers who violate Rule 11 three times in a single Federal district court.

A controversial provision of the amendment would extend the applicability of Rule 11 to state court cases involving matters affecting interstate commerce.   Under the amended rule, a State court, on motion by a party, would determine whether or not the suit affects interstate commerce. Upon a finding that it does, Rule 11 would apply to the action.  Representatives of the American Tort Reform Association maintain that this provision would help small businesses, which often suffer from the costs of defending or settling frivolous lawsuits brought in state court and are currently without a Federal Rule to offer protection.  Opponents suggest that extending the coverage of the rule to state cases raises Constitutional issues and interferes with the proper distribution of power between the federal and state governments.

The legislation amending Rule 11 also attempts to prevent “forum shopping” by including new provisions regarding where a plaintiff may file suit.   Under the House Resolution, a personal injury claim filed in either State or Federal court can only be filed where the plaintiff lives or was allegedly injured, or where the defendant’s principal place of business is located.  This provision is an attempt by the bill’s supporters to prevent plaintiffs from seeking out certain jurisdictions that become known for favoring plaintiffs and filing suit there.

The bill, which was sponsored in the House by Texas Representative Lamar Smith, passed in the House 229-174, and has been referred to the Senate.  Unlike previous tort reform legislation, the Senate did not introduce a companion bill to this House proposal, so whether or not the Senate will approve the bill is uncertain.

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