House Passes Bill To Reduce Lawsuits Measure Requires Loser To Pay Part Of Legal Fees, Caps Damages
Forging ahead with the GOP’s agenda, the House on Tuesday passed and sent to the Senate a bill that would require losers to pay part of the legal fees in many civil lawsuits brought in federal courts.
In overturning more than two centuries of courtroom practice, the bill’s sponsors said it would greatly reduce the number of “frivolous and fraudulent” lawsuits they say are clogging American courts.
But critics decried it as an assault on the ability of ordinary people to sue well-heeled corporations for damages caused by the companies’ alleged negligence.
Under the bill, the loser could be required to pay double the legal fees he or she would pay now.
The “loser-pays” bill, which passed 232-193, is one of three measures in the Republicans’ Contract with America that would lay down new markers for litigation in federal and state courts.
Still to be considered this week are bills that would:
Make it harder for aggrieved small investors to band together and sue stockbrokers and publicly traded corporations in federal courts for allegedly misrepresenting their prospects in order to attract investors.
Put a cap on the amount of punitive damages complainants could receive in jury awards. Damages would be limited to $250,000 or three times the amount of actual economic losses, and would apply to both federal and state cases.
President Clinton has signaled his opposition to all three of the bills, which are expected to face keener scrutiny and major revisions in the Senate.
The loser-pays bill did not amass enough votes in the House to override a possible presidential veto.
“The overuse of litigation imposes tremendous costs on American taxpayers, businesses and consumers,” said Rep. Carlos Moorhead, R-Calif., a prime sponsor. He said some 230,000 cases a year are handled in federal courts alone, causing higher expenses for all parties and long delays.
Rep. Robert Goodlatte, R-Va., said the bill was intended to crack down on flamboyant lawyers who bring frivolous suits into the courts. But he acknowledged its main purpose was to promote out-of-court settlements by threatening plaintiffs with economic sanctions if they refused to settle.
Under the bill, if a defendant makes an offer to settle and a jury later awards less than the amount of the offer, the plaintiff would have to pay at least part of the defendant’s legal fees.
Ironically, a plaintiff could “win” a case on the merits, but end up having to pay part of the defendant’s legal fees if the award was less than the defendant’s last settlement offer.
The amount of the fee-payment to the defendant could not exceed the amount the plaintiff paid to his or her own lawyer, so that complainants could not be stuck with all the huge legal costs often incurred by big corporations in some cases.
If the plaintiff’s lawyer was handling the case on a contingency basis, the loser would have to pay reasonable legal fees up to a limit of whatever his or her lawyer would have earned had the plaintiff won the case.
Opponents complained that loserpays would act as a powerful deterrent for people of ordinary means to risk filing suits against deep-pocket defendants.
In a letter to House Speaker Newt Gingrich, R-Ga., Attorney General Janet Reno insisted the GOP legislation went too far in tipping the legal balance toward wealthy litigants.
The loser-pays provision is “unfair, unnecessary and unwise” and “tilts the legal playing field dramatically to the disadvantage of consumers and middle-class families.”
Rep. John Conyers, D-Mich., contended that the approach weighed heavily in favor of well-heeled parties in lawsuits because they can afford to run the bluffs.
“The person with the greatest resources usually can win, especially when you are down to the last couple of chips,” he said.
This is similar to the “loser pays” practice under British law - a practice expressly spurned by Americans who wanted to encourage average citizens to use the civil courts to redress their grievances.
“The commoner can sue the king,” said Rep. Neil Abercrombie, D-Hawaii. “The king in this country (is) the corporations. .th.th. They have to stand in court against a small person. That’s what this is all about.”