Smith & Grassley Introduce Lawsuit Abuse Reduction Act

Washington, D.C. - House Judiciary Committee Chairman Lamar Smith (R-Texas) and Senate Judiciary Committee Ranking Member Chuck Grassley (R-Iowa) today introduced legislation to reduce frivolous lawsuits that plague our legal system. The Lawsuit Abuse Reduction Act imposes mandatory sanctions for lawyers who file meritless suits in federal court. Federal rules mandating sanctions for frivolous suits were watered down in 1993, resulting in the current crisis of widespread lawsuit abuse. The Lawsuit Abuse Reduction Act restores the mandatory sanctions which hold attorneys accountable for lawsuit abuse.

Chairman Smith:  “Lawsuit abuse has become too common in American society 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 the choice of years of litigation, high court costs and attorneys’ fees or a settlement. Our legal system encourages frivolous lawsuits while defendants are left paying the price even when they are innocent.  Many of these cases have cost innocent people and business owners their reputations and hundreds of thousands of dollars.

“The Lawsuit Abuse Reduction Act restores accountability to our legal system by reinstating mandatory sanctions for attorneys who file meritless suits. Though LARA will not stop all lawsuit abuse, it encourages attorneys to think twice before filing a frivolous lawsuit.”

Ranking Member Grassley: “Without the serious threat of punishment for filing frivolous lawsuits, innocent individuals and companies will continue to face the harsh economic reality that simply paying off frivolous claimants through monetary settlements is often cheaper than litigating the case.  This perverse dynamic not only results in legalized extortion, it leads to businesses spending money to defend against baseless lawsuits rather than to create new jobs.”

Every year, billions of dollars are wasted on frivolous lawsuits, costing jobs and damaging the economy.  According to one analysis, the 2002 tort system’s direct costs were $233 billion, the equivalent of a 5 percent tax on wages.  Today that number is even higher; the annual direct cost of American tort litigation exceeds $250 billion.
The Lawsuit Abuse Reduction Act takes three strong steps to help thwart frivolous lawsuits.  

Reinstates the requirement that if there is a violation of Rule 11, there are sanctions (Rule 11 of the Federal Rules of Civil Procedure was originally intended to deter frivolous lawsuits by sanctioning the offending party).

Requires that judges impose monetary sanctions against lawyers who file frivolous lawsuits.  Those monetary sanctions will include the attorney’s fees and costs incurred by the victim of the frivolous lawsuit.   

Reverses the 1993 amendments to Rule 11 that allow parties and their attorneys to avoid sanctions for making frivolous claims by withdrawing them within 21 days after a motion for sanctions has been served.

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Bill Text PDF: Lawsuit Abuse Reduction Act