Lawsuit Abuse Reduction Act Would Mandate Sanctions for Frivolous Claims

by Jones Day
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IN SHORT

The Action: By a 230–180 vote, the U.S. House of Representatives has passed the Lawsuit Abuse Reduction Act of 2017.

The Effects: If enacted, the bill would reintroduce mandatory sanctions for filing a frivolous claim and remove the 21-day safe harbor provision, thereby undoing amendments to Rule 11 of the Federal Rules of Civil Procedure.

Looking Ahead: Proponents and detractors are arguing the merits of the bill, which has been referred to the Senate Judiciary Committee.

On March 10, 2017, the U.S. House of Representatives passed the Lawsuit Abuse Reduction Act of 2017 ("LARA") by a vote of 230–180. 163 Cong. Rec. H2025-03, H2025. The bill seeks to undo the 1993 amendments to Rule 11 of the Federal Rules of Civil Procedure by reintroducing mandatory sanctions for filing a frivolous claim and removing Rule 11's 21-day safe harbor provision. Id. LARA's proponents claim that the bill would compensate victims of frivolous litigation and reduce frivolous claims by adding teeth to the threat of sanctions. Id. Conversely, its opponents have claimed that it will increase federal congestion by encouraging satellite litigation. Opponents have also claimed that it will chill civil rights litigation because those cases are more likely to propose new and novel theories of law. 163 Cong. Rec. H2025-03, H2027.

Changes to Rule 11

Currently, Rule 11 gives the courts discretion to order sanctions against an attorney or litigant who brings a frivolous claim. Fed. R. Civ. P. 11. Under LARA, in such a case, the court would be required to order sanctions in the form of "the amount of the reasonable expenses incurred as a direct result of the violation, including reasonable attorneys' fees and costs." H.R. 720, 115th Cong. § 2(a)(3) (2017). The courts would retain their discretion to order additional sanctions, but LARA clarifies what those additional sanctions might be: "striking the pleadings, dismissing the suit, or other directives of a non-monetary nature, or, if warranted for effective deterrence, an order directing payment of a penalty into the court." Id. Of course, courts would retain their discretion to deem the claim frivolous (or not) in the first instance.

LARA's second major change to Rule 11 would be to remove the 21-day safe harbor period that was introduced in 1993. Currently, prior to filing a claim of frivolous pleadings, a challenged party must receive notice (from the complaining party) and has 21 days to amend or withdraw a challenged claim before sanctions may be imposed. Fed. R. Civ. P. 11. LARA would remove this provision. H.R. 720, 115th Cong. § 2(a)(2) (2017).

The bill would also change the stated goal of judicial sanctions. Where sanctions are currently "limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated," LARA would introduce a second purpose: "to compensate the parties that were injured by such conduct." H.R. 720, 115th Cong. § 2(a)(3) (2017).

Reactions to the Bill

LARA's proponents have said that the bill will reimburse victims of frivolous lawsuits and cut down on the number of frivolous lawsuits filed in federal courts by adding a real risk of sanctions against lawyers who bring the suits. 163 Cong. Rec. H2025-03, H2025. Conversely, its detractors have claimed that in fact it will increase litigation by creating an incentive to bring satellite litigation to determine whether a claim is frivolous. 163 Cong. Rec. H2025-03, H2027.

Additionally, detractors argue that the bill will have a chilling effect on civil rights litigation, because those cases often have a goal of changing or extending the law and therefore are arguably not "warranted by existing law." 163 Cong. Rec. H2025-03, H2026. However, the bill does not change the provision of Rule 11 that allows for "a non-frivolous argument for extending, modifying, or reversing existing law or for establishing new law." Fed. R. Civ. P. 11. Furthermore, the bill adds a rule of construction: "Nothing in this Act or an amendment made by this Act shall be construed to bar or impede the assertion or development of new claims, defenses, or remedies under Federal, State, or local laws, including civil rights laws, or under the Constitution of the United States." H.R. 720, 115th Cong. § 2(b) (2017). The bill's proponents also pointed out in floor debate that while the bill would make sanctions mandatory once a claim is found frivolous, it does not change the standards, or remove judicial discretion, in determining whether a lawsuit is frivolous in the first place. 163 Cong. Rec. H2025-03, H2026.

On Monday, March 13, 2017, the Bill was received in the Senate, sponsored by Senators Grassley and Rubio, and was referred to the Senate Judiciary Committee. Similar bills have been passed by the House in the past but have not made it to a Senate vote. See, e.g., H.R. 758, 114th Cong. (2015).

KEY TAKEAWAYS:

  1. Passed by the U.S. House, the  Lawsuit Abuse Reduction Act of 2017 has moved on to the Senate Judiciary Committee.
  2. The bill would undo the 1993 amendments to Rule 11 of the Federal Rules of Civil Procedure by reintroducing mandatory sanctions for filing a frivolous claim.
  3. The bill would also remove Rule 11's 21-day safe harbor provision and introduce a second  stated goal of judicial sanctions, that is, "to compensate the parties that were injured by such conduct."
  4. Proponents claim the bill would reduce frivolous claims and compensate victims. Opponents say it will encourage satellite litigation while also potentially curbing civil rights lawsuits.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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