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Proposed “Lawsuit Abuse Reduction Act” Short Circuits Judges

This week, Rep. Lamar Smith of Texas introduced into Congress a bill entitled the “Lawsuit Abuse Reduction Act” (“LARA”). If passed, this bill will amend Rule 11 of the Federal Rules of Civil Procedure to remove federal judges’ discretion in awarding sanctions for improper pleadings and remove the “safe harbor” provision of the rule which allows parties or lawyers to voluntarily withdraw or amend pleadings when the other party has filed a motion for sanctions. While the purpose of this bill is purportedly to combat “lawsuit abuse,” its only effects will be to clog our courts with unnecessary hearings and to increase litigation costs for both plaintiffs and defendants.

Rule 11 allows a federal court to issue sanctions against a party or lawyer whom it finds filed a lawsuit or other pleading for an improper purpose or without conducting a reasonable inquiry into whether the legal contentions are warranted or the factual allegations have evidentiary support. If so, Rule 11 currently gives the court discretion as to whether to award sanctions. Rule 11 allows the person filing the pleading 21 days to withdraw the pleading rather than face sanctions-this is what is called “safe harbor” provision, and allows the filer an “out” if an impropriety is called to his attention.

LARA would change this by making sanctions mandatory if the court finds pleadings improper and would take away the “safe harbor” provision. As a result, the federal trial court judge, who is in the best position to determine whether sanctions are proper, will no longer have the discretion not to award sanctions. Without the “safe harbor” provision, any pleading puts the filer at risk for sanctions even if the pleading is improper due to an honest mistake.

LARA is touted as another attempt at “tort reform” and is designed to protect defendants from perceived “lawsuit abuse” by plaintiffs. However, the authors of this act may not be doing defendants any favors-unlike the Texas Rules of Civil Procedure, the federal rules hold defendants to the same “reasonable inquiry” standard when denying a plaintiff’s allegations. A defendant who denies a plaintiff’s allegations without investigating them or who raises a frivolous defense also faces a much greater risk of sanctions under the “Lawsuit Abuse Reduction Act.”

Rule 11 sanctions are rarely sought and even more rarely awarded. This is as it should be-the litigation process is contentious enough without parties and lawyers tossing motions for sanctions at one another. The authors of LARA are apparently frustrated that there isn’t enough sanction litigation in our federal courts. This would seem to run counter to “tort reformers'” usual claim that they seek to unclog the courtroom and reduce litigation costs.

What LARA’s proponents fail to tell you is that this has already been tried. Similar reforms to Rule 11 were imposed in 1983. The result was a dramatic increase in motions for sanctions, leading to a rash of costly satellite litigation which had nothing to do with the merits of the cases. This is why the 1983 amendments were scrapped in 1993.

Unfortunately, it may be too much to ask for LARA’s authors to learn from history. Hopefully, cooler heads in Congress will prevail.

If you or someone you know is involved in potential business or other civil litigation dispute, contact the attorneys at Abraham, Watkins, Nichols, Agosto, Aziz & Stogner by calling 713-396-3964 or 800-594-4884.

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