Bob Goodlatte

Mr. GOODLATTE

Mr. GOODLATTE. Mr. Chairman, I move to strike the requisite number of words. Mr. Chairman, I rise in opposition to this amendment. The effect of this amendment would be to say in a case where somebody loses a lawsuit for whatever reason that not only are their attorney fees limited in the fashion they have already been limited in the bill, and we have limited them in several respects: First of all, we have limited them to 10 days before the trial through the trial, and we have done that for good reason. It has been pointed out that a party to a lawsuit through the discovery process could drive up the amount of attorney fees by loading up the other party with discovery motions, and depositions and so on. So we limit it to 10 days before trial through the trial, which is the time when one is, generally speaking, preparing for trial and preparing the case. Second, we have limited it so that the losing party would not be required to pay the prevailing party more than the attorney fees that the prevailing party is--the losing party is paying their own attorney. The fact of the matter is that that also has a good purpose in the bill because it prevents the deep pockets that so many on the other side have talked about from loading up the attorney fees by bringing four attorneys into trial and so on. They cannot, by adding costs on their side, make the nonprevailing party, the losing party, pay more costs because it is limited that they cannot pay the other side more than they pay their own attorney. So they have the ability to some extent to control and to limit that. Finally, we have in this bill a provision which allows the court in its discretion to not apply the provisions of this bill under two circumstances. One circumstance is where it finds that it would be manifestly unjust to do so, and that certainly gives the court discretion. In addition, the court can find that the case presents a question of law or fact that is novel and important and that substantially affects nonparties, and if a--and can exempt it for that reason as well. This amendment will take that 75 percent further. Three quarters of the attorney fees that are provided for that are left in this bill would be taken out of the bill with this amendment. It is not a good amendment from that standpoint. It is not reasonable to think that just the 25 percent will have the kind of effect that we need to have on frivolous lawsuits, fraudulent lawsuits, nonmeritorious lawsuits, and not the kind of effect we need to have that is provided in this bill to encourage greater settlement of these cases. The effect of this will be say, ``Yes, you might have to pay a little bit of attorney fees, but it's going to be you don't have to pay a lot.'' For those reasons I would strongly urge that my colleagues defeat this amendment. This is not a good amendment from the standpoint of trying to do something about the explosion of litigation in this country. The fact is that the Girl Scouts; we have talked about all these big corporate defendants in this country. Well, one of the organizations that supports the legal reforms we have are the Girl Scouts, and the Girl Scouts' counsel here in Washington, DC, says that the first 87,000 boxes of Girl Scout cookies that they have to sell goes to raise the $120,000 to pay their liability insurance. The effect of that is that, before one penny can be spent to help Girl Scouts with all the wonderful programs that Girl Scouts have, not one penny can be spent until they sell 87,000 boxes and raise $127,000 to deal with the liability. Little Leaguers are opposed, are in favor, of legal reforms because they know that it is becoming increasingly difficult to get people to participate in allowing them to use their fields for ball diamonds because of the fact that they face greater and greater exposure to lawsuits, and the loss of insurance, and the risk of being brought in as parties to these cases. This is not a problem that deals with corporate America alone. It certainly does add to the cost of consumer goods when corporations raise those prices to consumers. It certainly does have an effect on insurance companies when they raise insurance premiums to all Americans for their automobiles, for homeowners insurance, for any kind of insurance that we want to name. The costs are going up, and they are going up rapidly. Mr. Chairman, the cost of our litigation system in this country is rising at a faster rate than the cost of our medical system in this country, which we spent all of last year addressing----

Mr. GOODLATTE. If the gentleman would yield further, the gentleman is correct, but in tort cases I think he would find the overwhelming majority, if not all of them, are going to be on a contingency fee basis. I am sure there are a few that are not, but very, very few. What we are really talking about are other types of contract actions and so on where that would be the case, but then again that would be true of both parties facing that liability under the circumstances that the gentleman describes. My amendment would cure the difficulty that we are talking about here.

Mr. GOODLATTE. That is correct.

Mr. GOODLATTE. Let me say to the gentleman from Indiana, let us not forget that under the current system that exists right now that the circumstances the gentleman just described where a judge or a jury unfairly ruled against a party, if they rule against a defendant, they are stuck right now paying attorney fees, and substantial attorney fees. Under a contingency fee case the gentleman describes, that would not be true of a plaintiff; you see? So there is a definite disparity in the law as it exists right now.

Mr. GOODLATTE. Mr. Chairman, will the gentleman yield further?

Mr. GOODLATTE. I yield to the gentlewoman from Colorado.

Mr. GOODLATTE. It would be my hope that we could work something out along the lines of the amendment that I suggested there which would help out in the case where a plaintiff actually got a judgment against a defendant, but the defendant offered more under the proceeding that is provided for in the bill than what the plaintiff got from the jury, and under those circumstances, because a case is really two parts; it is part liability and part proving damages, and clearly the plaintiff would have proven liability in those circumstances. Then there is an argument to be made that it should be less than 100 percent. It would make it 50 percent. If the gentleman would work with us along those lines and withdraw his amendment, it would be very helpful.

Mr. GOODLATTE. Mr. Chairman, would the gentleman yield further?

Mr. GOODLATTE. Mr. Chairman, the gentleman from Indiana [Mr. Burton] and I have been discussing since last night the gentleman's concerns, and what I would first say to the gentleman is that let us not forget that we are talking about diversity cases in Federal district court. We are not talking about, by any means, all tort cases. In fact, what we are really talking about are the vast majority of these cases not being the kind of tort cases the gentleman described. They are being mostly contract cases and issues----

Mr. GOODLATTE. Mr. Chairman, will the gentleman yield?

Mr. GOODLATTE

Mr. GOODLATTE. Absolutely. I acknowledge it is there. I would hope the gentleman from Texas would acknowledge that it is used very, very seldom.

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

Mr. GOODLATTE. Mr. Chairman, will the gentleman yield?

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

Mr. GOODLATTE. In my opinion it is used very, very seldom because judges are former attorneys and they say, ``There but for the grace of God go I.'' They do not want to put an attorney under rule 11 sanctions in an embarrassing situation with their client. The fact of the matter is there are far more frivolous and fraudulent cases. George McGovern says there are one out of four cases that are frivolous and fraudulent. Surely rule 11 does not apply in one out of four cases.

Mr. GOODLATTE. The gentleman is correct. While the idea underlying this has a good purpose of attempting to encourage settlement, it is an unfair situation to impose upon the parties to lawsuits because of the fact that it has many unintended consequences and, finally, because of the fact that, when an attorney has somebody walk in the door, they do not know whether it is a good case or not. They have to conduct a lot of investigation in these cases, and, when they do that, they never get compensated for the cases that do not have any merit. They are taking a risk in practicing that type of law, and I think that we want the people to take risks. This is counter to the purpose of the loser pays amendment in that respect, but it is separate and apart. I would not say it does anything to loser pays. It creates a separate mechanism, but one that, I think, is fraught with a lot of unintended consequences, and I would urge my colleagues to vote against it.

Mr. GOODLATTE. I yield to the gentleman from Wisconsin.

Mr. GOODLATTE. Mr. Chairman, I move to strike the requisite number of words. Mr. Chairman, I rise in opposition to this amendment. I do so with some reluctance because I appreciate the gentleman's efforts, but I think that this is pure and simple price controls, and the problem with price controls is this: ``Whenever you have them, there are all kinds of unintended consequences that emanate from those price controls. For example, what happens to the defendant in a case where because the insurance company representing the defendant, let's say it's a doctor accused of medical malpractice wants to go ahead and settle the case in the 60- mechanism, and the doctor said, `I don't want any offer made at all because I didn't commit malpractice. I wanted to have my day in court.''' Mr. Chairman, I would ask the gentleman from Ohio what does that doctor do when that insurance company sends him a letter advising him that he is not negotiating in good faith and that, if he does not accept the offer, he will be responsible for any additional amounts that are recovered? The same thing happens on the plaintiff's side. What happens when the plaintiff turns down the settlement offer, and he wants to go on to court, but his attorney said, ``Well, the original contingency fee will justify the cost, but now the case is only worth an additional $25,000 above the $50,000 offered. I don't think he should go ahead.'' He says, ``I don't care. I want to go ahead with the case.'' The attorney does not want to go ahead. What happens in the case of fraud where you have an incentive now for people to go out and create an accident by running in front of a vehicle, getting it in, making that early--making the demand upon the defendant, and the insurance company has 60 days to rush in and make a settlement. This is going to encourage all kinds of behavior that does not make sense. It will encourage fraud. It will encourage poor representation of clients. It will drive a wedge between plaintiffs and their attorneys. It will drive a wedge between defendants and their insurance companies. I believe that there is also a problem here in that the matter does not require that the defendant admit liability when they make this offer so that when the defendant makes the offer and the plaintiff turns it down because he low-balls it, the result of the thing is that then the plaintiff's attorney will have a limited contingent fees only on the amount they improve the case, but the plaintiff's attorney still has to not just improve the value of the case and the damages and get a contingency fee on that, but also has to prove liability, and that is where the contingency is founded. It is founded on the principle that you take a risk. Some cases you prove liability. Some cases you won't. Just because the defendant makes a settlement offer and does not concede liability does not mean there is not a risk of proving liability in the case. Finally, the provisions of this amendment are flawed in this respect. It says 60 days after the date of the initial contact by the plaintiff. Well, at that point most cases have not been filed in court. The initial demand is made before suit is filed, and we do not know whether this was in State court or Federal court as to whether or not this provision would even apply.

Mr. GOODLATTE. Mr. Chairman, I demand a recorded vote.

Mr. GOODLATTE. If the gentleman would yield further on that interesting point, the testimony we heard during the hearing was that before rule XI was amended and weakened a couple of years ago, during the 10-year time frame before that, there were a total of 3,000 cases. That is 300 each year for 10 years, divided into 100 different district court systems in the Federal District Court system in the country. So on average, it is not being used very often.

Mr. GOODLATTE. Rule XI is on average applied in each district court system in this country, the Western District of Virginia, for example, where I practiced, very, very rarely, maybe once or twice or three times on average in a year out of all the cases that are filed.

Mr. GOODLATTE. All of those things play a role in the case, and all of those things need to be taken into account, as they are taken into account right now when you look at determining whether or not you make a settlement offer in a case. The same thing is true right now. If you know that the judge generally tends to favor the plaintiff or the judge generally tends to favor the defendant, you are going to structure your settlement offer differently as a result of that. If you think you have a good jury in a case, you are going to make a good settlement offer than otherwise. All of those factors are true right now. What we are saying is right now there should not be the atmosphere that says there are some litigants in court who are approaching it from the standpoint that it is risk free, either because they are claiming fraud or have a frivolous suit.

Mr. GOODLATTE. It is the overload in the courts and the fact that a lot of those cases that were settled were settled for nominal sums of money where one party or the other feels the other party was not acting reasonably. This gives a defendant in a case the opportunity to say I am not liable, I am not going to offer settlement, and if I go to court, I am entitled to bring something from somebody who brought a suit against me, made me go to great expense, and they are not having to pay anything because they may or may not have the case on a contingent fee basis.

Mr. GOODLATTE. If the gentleman will yield, that is limited by the amount that the plaintiff is paying their own attorney's fees in this case. Do not forget this is also applying to a defendant and also applies not just to tort cases. In fact, the vast majority of the cases, diversity cases, are going to be contract actions between people suing each other for debt, and there recover attorney fees from the defendant.

Mr. GOODLATTE. That could arise.