Understanding The Federal Government’s Pending Lawsuit Abuse Reduction Act Of 2017

The U.S. House of Representatives is in the process of passing H.R. 720, named the Lawsuit Abuse Reduction Act (LARA). Several years ago, the House passed a similar piece of legislation (H.R. 758); however, the Senate did not take any action on it. The new Act seeks to amend Rule 11 of the Federal Rules of Civil Procedure to hold lawyers more accountable through more stringent sanctions when frivolous suits are filed. These efforts are supposed to better limit unnecessary costs of litigation for both people and businesses. The bill has three core goals as follows:

• Reenacting required sanctions for suits deemed as frivolous that violate Rule 11
• Elimination of the “safe harbor” provision that enables parties to retract frivolous claims once a motion to apply sanctions is filed
• Makes sanctions mandatory, in addition to legal fees and costs to penalize parties bring frivolous claims

Civil matters in the U.S. District Courts are governed by The Federal Rules of Civil Procedure. The rules provide the framework for courts to efficiently manage legal actions. Rule 11 is specifically designed to prevent frivolous suits and relieve the burden upon the courts, while allowing judges to issue sanctions when needed. Many consider these sanctions somewhat ineffective because they are not guaranteed, and many defendants choose not to follow through with the required legal process for a suit to be formally ruled as frivolous. Under the “safe harbor” law, defendants must assert a motion for sanctions, and notify the plaintiff 21 days prior to filing. In this interim period, plaintiffs may simply withdrawal their claim if they feel they are at risk for sanctions. Proponents of LARA wanted to strengthen the process of actually having the sanctions imposed.

The existing version of Rule 11 was adopted in 1993. Prior to 1993, it did contain required sanctions with no “safe harbor” provision. Surprisingly, three years prior to the change, a study among Federal judges reported the following:

• 95% felt Rule 11 did not hamper progress of the law
• 72% thought the rule was beneficial and was worth any additional time it consumed
• 81% felt it positively impacted the court and that it should remain

Bloomberg recently reached out to those on both sides of the issue. The bill has been formally supported by the U.S. Chamber of Commerce, the National Federation of Independent Business, and the National Manufacturers Association. Other bill supporters cited that plaintiff attorneys seem to be engaged in filing too many unsubstantiated cases. Those opposed to the Act say that the rule is functioning well in its current form. Cary Silverman, a defense attorney, says that the frivolous suits result in too much expense and often the publicity unfairly hurts small businesses. Silverman feels that the reimplementation of mandatory sanctions will hold plaintiffs more accountable.