Congress is poised to interfere with the Federal Rules of Civil Procedure by reintroducing a bill that would return Rule 11 largely to its 1983 version. The 1983 version of Rule 11 was amended in 1993, in part, to allow litigants to “cure” a filing prior to the filing of a Rule 11 motion and provide district courts discretion regarding the imposition of an appropriate sanction under the circumstances.
The proposed Lawsuit Abuse Reduction Act (“LARA”) would remove the opportunity for litigants to cure a filing before facing a sanctions motion and strip away courts’ discretion to select the appropriate sanction for the circumstance. Sponsors of the House and Senate bills tout LARA’s benefits as deterring frivolous lawsuits, responding to the concerns of small businesses and responding to the desires of federal judges. Each is a myth.
What Is the Proposed Amendment?
LARA would amend Rule 11 to make sanctions mandatory, rather than discretionary. The current Rule 11 provides that “if . . . the court determines that Rule 11(b) has been violated, the court may impose an appropriate sanction on any attorney, law firm, or party that violated the rule or is responsible for the violation.” That discretionary sanction “must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated,” and the sanction may consist of nonmonetary directives, a payment of a penalty to the court, or “if imposed on motion and warranted for effective deterrence, an order directing payment to the movant of part or all of the reasonable attorney’s fees and other expenses directly resulting from the violation.”
The Advisory Committee Notes to the Rule make clear that courts are free to consider a variety of facts and circumstances when weighing a sanctions motion, including the willfulness of the improper conduct, past bad conduct, the intent of the bad actor and the deterrence interests at stake, just to name a few. In other words, the current Rule 11 provides courts the discretion to manage the cases assigned to them.
LARA ignores these important considerations and instead mandates a one-size-fits-all sanction. It replaces the word “may” with the word “shall.” And the bill requires that all Rule 11 sanctions “consist of an order to pay to the party or parties the amount of the reasonable expenses incurred as a result of the violation, including reasonable attorneys’ fees and costs. The court may also impose additional appropriate sanctions, such as . . . an order directing payment of a penalty into the court.” Finally, it deprives litigants the opportunity to consider withdrawing and/or correcting arguments the opposing party claims to be frivolous.
Legal Cases That Would Not Have Existed Under LARA
There are cases that might have been subject to mandatory sanctions, and thus not filed, had LARA existed.
The intent of LARA undoubtedly is to chill litigation brought by plaintiffs aggrieved by corporate or government misconduct, particularly in the areas of civil rights. Its passage would undoubtedly have that consequence – several recent First Amendment lawsuits might never have been filed had the plaintiff risked LARA’s mandatory sanctions:
Citizens United v Federal Election Commission, 130 S.Ct. 876 (2010): Citizens United, a nonprofit corporation, released a documentary critical of Senator Hillary Clinton at the time she was running for the democratic presidential nomination in 2008. The case presented the novel issue of whether corporations have First Amendment rights.
Rock for Life – UMBC v. Freeman Hrabowski, 2010 WL 5189456 (D. Md. Dec. 16, 2010): The University of Maryland’s speech code policy forced a pro-life student group to move its pro-life display to a desolate campus location because the display might “emotionally harass” students. The case presented the novel issue of religious discrimination against pro-life students.The University and the pro-life student group resolved the case after filing.
Parker v. Hurley, 474 F. Supp. 2d 261 (D. Mass. 2007): Parents of a Massachusetts elementary school student brought a constitutional challenge against the school district based on the use of books in the classroom portraying different types of families, including families of same-sex couples. The case presented the novel issue of whether parents have a right to notice and exempt their children from such school instruction. The case was dismissed and the Supreme Court denied plaintiff’s writ of certiorari.
Further, consider whether Brown v. Board of Education would have been subject to Rule 11 and its mandatory sanctions if LARA existed at the time. For nearly 60 years, racial segregation issues were controlled by the Supreme Court’s Plessy v. Ferguson “separate but equal” decision. The Brown plaintiffs challenged this precedent, seeking to have the Topeka, Kansas, Board of Education end its policy of racial segregation. The lower courts ruled against the plaintiff, relying on the Supreme Court precedent set forth in Plessy. A unanimous Supreme Court rejected separate but equal, at least as applied in education, holding that even if segregated schools were of equal quality, segregation in and of itself is a violation of the Fourteenth Amendment.
At the time Brown was filed, the legal theory being advanced was contrary to well-settled law. If LARA existed and the district court found plaintiff’s argument frivolous, mandatory sanctions would have issued. And while the Brown case undoubtedly would have been brought anyway, litigants wishing to bring about social change through the courts should not face mandatory sanctions.
Myths Surrounding the Need for LARA
As is so often the case, the myths surrounding the need for LARA abound.
Here are some of them:
Myth #1: The threat of lawsuits is a major concern of small businesses.
Debunking the myth: A 2012 National Federation of Independent Business survey of the greatest threats facing small business owners ranked the “costs and frequency of lawsuits/threatened lawsuits” as #71 out of 75 potential concerns.
Myth #2: Judges want to return to the 1983 version of Rule 11.
Debunking the myth: Most federal judges believe the current Rule 11 adequately addresses the purpose of forcing attorneys to “stop and think” before filing. Eighty percent of judges surveyed believe the current Rule 11 strikes the right balance. Eighty-seven percent of judges surveyed prefer the current Rule 11 over the 1983 version Rule 11 – the one that LARA would reenact.
Myth #3: Rule 11 is the only tool judges have to dismiss frivolous lawsuits.
Debunking the myth: Judges have many tools to dismiss frivolous cases, including motions brought pursuant to Rules 8 and 12. And the current version of Rule 11 provides a tool for Judges to sanction attorneys in appropriate circumstances.
Myth #4: Tort cases against businesses comprise a large percentage of the court docket.
Debunking the myth: Tort cases comprise a small percentage of cases brought against corporations. Businesses suing other businesses account for the vast majority of filed cases and verdict amounts. Further, cases for breach of contract, which are more likely to involve businesses than individuals, substantially outnumber tort cases. The National Law Journal reports that seven out of 10 cases filed are business versus business cases, and these cases account for more than $3 billion in verdicts. Tort case filings declined by 25 percent between 1999 and 2008; breach of contract filings increased by 63 percent over that same time period. The National Center for State Courts reports that tort cases comprise only 4.4 percent of the civil caseload.
Myth #5: LARA applies to demand letters.
Debunking the myth: LARA proponents suggest the bill would curtail the alleged practice of plaintiffs’ attorneys sending demand letters rather than filing suits to extract money from potential defendants. This argument is a red herring; Rule 11 only applies to court filings. Thus, Rule 11 sanctions would not apply to demand letters, whether sanctions are discretionary or mandatory.
In sum, LARA is no good for the civil justice system and it is justified on faulty premises that will discourage legitimate legal claims. Congress should let courts manage their own dockets and deal with frivolous filings using the tools that already adequately serve this purpose.
- National Federation of Independent Business, 2012 Small Business Problems and Priorities http://www.nfib.com/portals/0/pdf/allusers/research/studies/small-business-problems-priorities-2012-nfib.pdf
- Federal Judicial Center, Report of a Survey of United States District Judges’ Experiences and Views Concerning Rule 11, at 2, https://bulk.resource.org/courts.gov/fjc/rule1105.pdf
- Top 100 Verdicts of 2006, National Law Journal http://www.takejusticeback.com/sites/default/files/AAJ%20Trial%20The%20web%20of%20tort%20%E2%80%98reform%E2%80%99.pdf
- Center for Justice & Democracy at New York Law School, Fact Sheet: Tort Litigation in the United States http://webcache.googleusercontent.com/search?q=cache:dtq7T00hyloJ:https://centerjd.org/content/fact-sheet-tort-litigation-united-states+&cd=1&hl=en&ct=clnk&gl=us