House Panel OKs Bill Mandating Sanctions On Frivolous Suits

Law360, Washington (February 2, 2017, 4:56 PM EST) -- Sanctions for frivolous federal lawsuits could become mandatory again, if a bill passed by a House panel Thursday makes it through the rest of Congress.

The Lawsuit Abuse Reduction Act of 2017 from Rep. Lamar Smith, R-Texas, would change Rule 11 of the Federal Rules of Civil Procedure to remove judicial discretion from the decision to impose sanctions when a party makes a frivolous claim in court. The bill, which passed the House Judiciary Committee on a 17-6 vote, would also remove a 21-day period where a party could avoid sanctions by correcting or withdrawing a pleading.

According to the bill, at minimum, a party would be awarded “reasonable expenses incurred as a direct result of the violation, including reasonable attorneys’ fees and costs,” once a judge rules that a suit was frivolous, with additional sanctions left to the judge’s discretion. One of the bill’s main backers, Rep. Bob Goodlatte of Virginia, chairman of the committee, said the bill should allow for a major reduction in meritless suits meant to clog the judicial system.

“The current lack of mandatory sanctions leads to the regular filing of lawsuits that are baseless,” Goodlatte’s statement said. “So many frivolous pleadings currently go under the radar because the lack of mandatory sanctions for frivolous filings forces victims of frivolous lawsuits to roll over and settle the case, because doing that is less expensive than litigating the case to a victory in court.”

Goodlatte, along with the bill’s sponsor Smith, said that the lack of mandatory sanctions has prevented many litigants from pursuing litigation to declare a suit or pleading frivolous — they see no reason to pursue it.

Under the current rules, a party has to make a motion for the judge in a proceeding to find a submission made by the other side — including complaints, motions and other filings — as frivolous, without merit or lacking any evidentiary support. The judge then makes a determination and has a further determination about whether or not to impose sanctions.

Smith said that the bill would reduce the burden a party needs to clear to achieve relief when it faces a frivolous suit and “for too long bad actors have used our justice system to abuse innocent parties.”

Meanwhile, Democrats blasted back that the changes would remove judicial discretion and reopen many of the abuses seen under a 1983 version of Rule 11 that required similar sanctions. The committee’s ranking member, Rep. John Conyers, D-Mich., said that under that version of the rules “each party had a financial incentive to tie up the other in Rule 11 proceedings,” to the point that a significant amount of federal litigation concerned Rule 11 proceedings.

In addition, Conyers said he was worried that the change to Rule 11 made by Congress rather than the Federal Judicial Conference, a series of committees that normally approves federal rule changes, would tamp down on civil rights suits.

“Civil rights cases often raise novel legal arguments, which make such cases particularly susceptible to sanction motions under the 1983 rule,” Conyers said.

Democrats offered a series of amendments, including ones to allow the Federal Judicial Conference to study the impact of the rule, to delay its implementation or otherwise exempt specific categories of suits. All were voted down.

Smith’s bill is one of a series of litigation-changing measures on tap this Congress for Goodlatte’s committee. At Thursday’s hearing the committee also discussed, but did not pass two other bills: one to forbid government settlements requiring donations to third parties and another to impose punishments on the joinder of third parties to litigation that is ultimately deemed frivolous.