Howard Berman

Mr. BERMAN

Mr. BERMAN. I yield to the gentleman from Texas.

Mr. BERMAN. Actually what I think, to reclaim my time, what I think is this bill is a warning to plaintiffs throughout the United States: Do not bring your case under the diversity statute, because the risks of any award against you are so great for the shifting of attorney's fees, whether you win or whether you lose, that you have lost.

Mr. BERMAN. If the gentleman will allow me to use my time, it has nothing to do with winning or losing. If the jury award comes in $1,000 under what that particular defendant offered, then fees are shifted, unless the court somehow, under guidelines which are incredibly onerous and draconian, finds that it was manifestly unjust to shift the fees.

Mr. BERMAN. The gentleman from Pennsylvania does not understand the basic framework of this bill. This is not limited to whether you lose the case. This bill, as it is now written, deals with you sue perhaps a number of defendants under diversity jurisdiction. As to one defendant who makes an offer, you come in let us say $50,000 less than that offer, but with hundreds of thousands of dollars of jury award as to you, because we have eliminated joint and several liability now under this bill.

Mr. BERMAN. I yield to the gentleman from Pennsylvania.

Mr. BERMAN. The gentleman's point is so well taken. Remember, this was all patterned after an English rule, an English rule which, by the way, the bastion of British conservatism, the Economist Magazine, has said led to many unfair results, but that English rule exempts anyone who is represented by the Legal Aid Society, anyone who needs assistance with legal services.

Mr. BERMAN. I yield to the gentleman from Michigan.

Mr. BERMAN. Let me respond to the gentleman. Just in response to the gentleman from Texas, he could win, he could have a meritorious case but perhaps against that particular defendant the award was somewhat less than the very final offer. This would bring into play the fee shifting without regard to how meritorious it was, or without regard to the ability of the plaintiff to pay. The thing that galls me is it keeps being argued, the proponents keep talking about the frivolous case, the nonmeritorious case, but they will not put into the bill limitations that would restrict this to the frivolous or nonmeritorious case. This would be a very simple issue to deal with. You can set up a standard, you can set up a guideline in here that would give the judge the guidelines and the congressional intent to only have this apply in the case of frivolous actions, nonmeritorious actions, refusals to accept reasonable offers, but there is no effort to amend the bill to do that. That gives me the problem.

Mr. BERMAN. It gets even more complicated and in a sense unfair than he wins a jury award.

Mr. BERMAN. The gentleman from Texas is absolutely right. Ironically, in the one hearing we had in front of the subcommittee that is chaired by my friend from California, the witness, the law professor testifying in favor of the concept of loser pays, said there should be guidelines to limit this to the frivolous and nonmeritorious cases. This is what the proponent said, not the opposition.

Mr. BERMAN. I yield to the gentleman from Texas.

Mr. BERMAN. I would like to reclaim my time to make a few points. The proponents of this bill, if you keep talking about it as a way to deal with the frivolous, nonmeritorious case or in a way that would protect, because of this subsection 6, the indigent or almost indigent plaintiff, then all I would ask you to do is amend your bill to put those tests in. Do not say, this will only apply to deter the frivolous case and provide fee shifting in the nonmeritious case when your bill makes no effort to limit it to that.

Mr. BERMAN. Well, if I may reclaim my time, that is not correct. There are only a few specified statutes, for instance, civil rights cases, where you automatically provide prevailing costs for the plaintiff.

Mr. BERMAN. Let us create a hypothetical here. Let us understand what we are talking about. A suit is brought in Federal court under the diversity statute by a plaintiff who is making $20,000 a year, based on the negligence of an out-of-state corporation and offers go back and forth. He decides the last offer is not acceptable. They go to a month-long trial. And the jury awards an amount to the plaintiff that is less than the defendant's last offer. In that situation, it is possible, under this statute, for the court to decide that the cost of that entire month-long trial and all the other costs of the 10 days prior to that trial would be shifted to the plaintiff and that that would be an enforceable judgment, that the defendant could than go and seek to execute through garnishment of wages, through attaching the car and executing on it, through doing all of the traditional devices that can be utilized to collect a sum owed. Is that not a fair statement?

Mr. BERMAN. Let us talk about it in the context of a plaintiff who has a legitimate case. It is not frivolous. He decides not to accept the offer. He could have his, by virtue of this fee shifting provision, he could have his wages garnished, his automobile attached, other assets foreclosed on because he was not in the, he was not able to pay the court-ordered shifted fee costs of the defendant who could be a multimillion dollar corporation. Is that not a fair statement of possibilities?

Mr. BERMAN. Is it the gentleman's contention that ability to pay is one of the criteria that the court should look to in determining whether shifting costs would make it manifestly unjust?

Mr. BERMAN. ``With respect to a claim or claims, that the judgment, verdict or order finally obtained is not more favorable to the offeree with respect to the claim or claims than the last offer, the court shall order the offeree,'' that is, in most cases but not all cases, the plaintiff, ``to pay the offeror's,'' that is the defendant in most cases, ``costs and expenses, including attorney's fees, incurred with respect to the claim or claims from the date the last offer was made, unless the court finds that requiring that payment of such costs and expenses would be manifestly unjust.'' Is that a fair reading of the words?

Mr. BERMAN. Section 2, (e)(6). Let me just read that, ``if the court finds, pursuant to a petition filed under paragraph (5),'' that is a petition to shift costs, as I understand it.

Mr. BERMAN. Section 6. My bill only has five sections.

Mr. BERMAN. I yield to the gentleman from Virginia.

Mr. BERMAN. Mr. Chairman, I move to strike the last word. Mr. Chairman, I would like to use my time, if I could, to ask a few questions of either the gentleman from California, the gentleman from Virginia, if I might. As I understand the principle of this bill, initially, was to follow the English rule. It has been modified somewhat. As I understand it now, that if offers and counteroffers keep going on between the plaintiff and defendant, the time for legal fees to be assessed against the losing party starts conceivably as little as 10 days before the trial and covers the duration of that trial; is that correct?

Mr. BERMAN. It does not restrict to diversity cases. It is the exact terms, word for word, of the McHale amendment, only in section 2 instead of as an addition to the what I view as very unfortunate loser pays concept that is in the base bill. I urge an aye vote on this amendment.

Mr. BERMAN. If I may reclaim my time, the gentleman from Pennsylvania does not understand the new basic structure.

Mr. BERMAN. Reclaiming my time, let us say the defendant had a car. Let us say the defendant made--the plaintiff, talking about here--the plaintiff made $20,000.

Mr. BERMAN. Mr. Chairman, reclaiming my time, I yield to the gentleman from California [Mr. Moorhead].