The letter of support was signed by the Business Council of Alabama and dozens of other groups. The BCA is Alabama’s exclusive affiliate to the U.S. Chamber of Commerce and the National Association of Manufacturers.
H.R. 2655 sponsored by U.S. Rep. Lamar Smith, R-Texas, will help reduce the number of frivolous lawsuits and reimburse tremendous costs associated with defending them, costs that can drive many businesses to financial ruin, NAM said.
“Businesses, particularly small businesses, continue to be targets of frivolous lawsuits,” the letter states. “As a result, resources are used to fight or settle baseless claims and diverted from investments in jobs and growth.”
H.R. 2655 will provide businesses with a reasonable opportunity if hit with a frivolous lawsuit to seek reimbursement for legal expenses. Since lawsuits have value to someone, even if an invalid lawsuit is dismissed a defendant can easily have to spend thousands of dollars in attorney fees and court costs or settle the lawsuit to end it.
In today’s economy frivolous lawsuit expenses can result in lost jobs and can drive individuals or small businesses into bankruptcy, NAM said.
Twenty years ago the disincentive for filing frivolous lawsuits was lost in federal court when Rule 11 of the Federal Rules of Civil Procedure were changed and made ineffective. At the time federal judges could reimburse victims of lawsuit abuse. The rule change also removed the “safe harbor” provision allowing frivolous lawsuits to be withdrawn within 21 days and “discouraged” federal judges from reimbursing victims.
NAM said by gutting the rule, attorneys had no incentive to avoid frivolous filings. The bill would eliminate the 21-day safe harbor. Currently a plaintiff’s attorney can walk away from the lawsuit without a judge even considering reimbursement.
H.R. 2655 would restore the requirement that a judge must impose a sanction if he or she finds that a claim is frivolous, according to NAM. The bill also restores a federal judge’s ability to use sanctions to compensate the victim of a frivolous lawsuit with reasonable attorney fees and costs.
The House Subcommittee on Constitution and Civil Justice referred the bill to the full Judiciary Committee on a 6-2 vote.