Bob Goodlatte

Mr. GOODLATTE

Mr. GOODLATTE. That is correct. You can limit your exposure substantially the way we designed this bill now, compared to the original loser-pays provision in the original bill.

Mr. GOODLATTE. If the gentleman will yield further, I would like to point out to the gentleman that attorneys fees are limited not only in respect to not paying more than you pay your own attorney's fee or the value of what you would have paid based on an hourly rate, it is also limited to not more than 10 days before trial through the trial. So all the earlier discovery in the case and that sort of thing, you are not exposed to paying for that either, so long as you are making a good faith settlement offer, which essentially can be any settlement offer up to 10 days before the trial.

Mr. GOODLATTE. If the gentleman will yield further, the gentleman makes a good point that the further away from the settlement and the further away from the defendant's last offer the plaintiff is perhaps the less reasonable he is and that the percentage might vary. If the gentleman has some kind of a sliding scale for that type of case, I would be happy to work with the gentleman to do that. I am not sure that a flat percentage would be applicable in every case, because what about the case where he asks for $100,000, the defendant offers $50,000, and the jury awards him $2,000 because there is some minor aspect of the case he is right about. But he should not have brought the whole case into court, and left $50,000 on the table to get $2,000.

Mr. GOODLATTE. The bill does not work based on percentage. It bases on a reasonable value and the hourly rate of----

Mr. GOODLATTE. The bill provides a mechanism for calculating a reasonable value for those attorney fees if the case was brought on----

Mr. GOODLATTE. He is only liable with the defense's legal fees to the extent that they do not exceed his own legal fees. He cannot pay any more than he pays his own lawyer.

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

Mr. GOODLATTE. Mr. Chairman, what I am neglecting to say here is that the American rule that is championed by some on the other side applies in that example that I just gave where the jury comes back with an award between $100,000 and $50,000. Neither party pays the other party's attorney fees because neither of them has a claim that they made an offer better than what the other party finally achieved in the case.

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

Mr. GOODLATTE. Let me finish that point. They are correct that there are circumstances where a plaintiff in a case could get a judgment under these circumstances and wind up paying attorney fees for the defendant, but under the current bill, as it is formulated, that only occurs if they are way off in their settlement negotiations. So, for example, if that plaintiff is at $100,000 in the case, and the defendant is offering $50,000, and they do not get any further, under the current rule in this bill only if the plaintiff recovers more than $100,000 will the defendant pay the plaintiff's attorney fees; only if the plaintiff gets less than $50,000, or $50,000 less than the plaintiff's last offer, would the plaintiff pay the defendant's attorney fees because the plaintiff was not reasonable in negotiations. The proof of the reasonableness is in the jury's final award, and that is the basis of this mechanism. It will push parties together to settle cases. I think that the amendment offered by the gentleman from Pennsylvania [Mr. Gekas] is well intentioned, but I think it may be too razor sharp for the comfort of some on the other side.

Mr. GOODLATTE. Mr. Chairman, I am also interested in finding ways to encourage more reasonableness in litigation and to encourage more settlement of cases. I think that is the intent of the amendment of the gentleman from Pennsylvania [Mr. Gekas], but quite frankly--and also let me say that we will find out, if this passes and becomes law, and despite all the apocalyptic statements of many on the other side, this applies to about 1 or 2 percent of all the civil litigation in this country, so we are going to find out, without endangering all those rights, whether or not this does work. But if it does, then I think we answer one of the objections they have by not taking the Gekas procedure and splitting the difference between the two parties, wherever they end up, and saying that, for example, the plaintiff last offered $100,000, and the defendant last offered $50,000, putting it at $75,000, so that if the plaintiff gets $75,001, the plaintiff wins and pays--the defendant pays attorney fees. If the plaintiff gets $74,999, the plaintiff wins but pays the defendant's attorney fees. Their objection to that is that that is not fair that the winner pays.

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

Mr. GOODLATTE. We are not talking about the plaintiff----

Mr. GOODLATTE. I thank the gentleman for yielding. Mr. Chairman, yes, I will freely confess that I want to encourage settlement of lawsuits. The fewer of them brought into court the better. Every lawsuit has a solution to it. We want the parties to find that solution before they get into court. And the best way to do that is to give the parties incentives to find those solutions on their own before they get into court. The defendant always faces that incentive because a defendant always has to pay their attorneys on a hourly basis. That does not happen in contingent fee cases for plaintiffs, where, as I have said before, you look in the phone book and you will find ad after ad or watch television, ``No fee if no recovery.'' That is what is driving litigation. I am in favor of contingent fees because it helps a lower-income person get into court. But the problem is that we should never ever say there is no risk attached to bringing the case in court. That is what this does.

Mr. GOODLATTE. I thank the gentleman for yielding. Mr. Chairman, what is being overlooked here is we are talking about a mechanism that encourages reasonable settlements of lawsuits by imposing risks on all the parties in the case. And we limit that risk for those who talk about the deep pockets. Nobody has to pay the other side's attorneys' fees whether the other side is the very poor person or the other side is General Motors or whoever. No one has to pay them any more than they pay their own attorney. What we are doing here is creating incentives for parties to settle cases that should be settled by letting them know that there is a risk to not settling it and creating reasonable behavior on the part of parties. If we accept the Berman amendment, we will have lost all that effort to discourage lawsuits from going to trial in cases and adding to the cost of litigation in this country. I urge opposition to this amendment.

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

Mr. GOODLATTE. Not the plaintiff.

Mr. GOODLATTE. Not if it is a contingent case.

Mr. GOODLATTE. I thank the gentleman for yielding. This does not just deal with frivolous cases. This is intended to encourage settlement in all cases by imposing risk on all parties. We talk all the time here about somebody risking loss, but nobody talks about the fact that if you are the defendant in a lawsuit and you are an individual or you are a small businessperson and you have to spend a fortune in attorneys' fees, that happens to you whether you win the case or lose the case under our current law. All we are doing is saying we are making the risk equal between the plaintiffs and defendants.

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

Mr. GOODLATTE. What I am saying is, if a defendant is brought into court in a nonmeritorious, frivolous or fraudulent lawsuit and has to defend that case, unless there are provisions that provide attorney's fees and that defendant, win or lose, that defendant has to bear the cost. So what I am saying is that the plaintiff right now, if they are on a contingent fee basis, has no risk. You look in the phone book. You will see all the people that will tell them there is no risk in the case. The defendant always has risk.

Mr. GOODLATTE. Will the gentleman yield on that point, Mr. Chairman?

Mr. GOODLATTE. I thank the gentleman for yielding. If the gentleman from Texas would also call attention to this, what the gentleman from Texas just described as the so-called winner pays rule is exactly what is included under Federal law right now, because rule 68 of the Federal Rules of Civil Procedure allows a defendant in a case to make an offer of judgment which, if the plaintiff does not accept it and goes into court and receives a judgment, a verdict in his favor for an amount that is less than that offer in judgment, the plaintiff can be required by the court to pay the attorney's fees of the defendant, just like this in this case.

Mr. GOODLATTE. The cost can be very substantial in some cases. Mr. Chairman, I move to strike the requisite number of words. Mr. Chairman, in response to the colloquy that just took place on the other side, let me point out that this is a case of any kind of nonmeritorious claim being exposed to a risk for attorney's fees for the plaintiff or the defendant, so a plaintiff who is viewing their case as having merit is not going are going to take that diversity jurisdiction, with the intent to force the other side to pay attorney's fees, unless they reasonably offer settlement offers. That is what this mechanism does. With regard to the contention that this changes the English rule, and the gentleman from California [Mr. Berman] is somehow abhorrent of that, I would point our that the gentleman from California voted for this change in the Committee on the Judiciary. Therefore if he really does not like that, I think he has contradicted himself. The fact of the matter is that this is simply modeled after rule 68, but it expands it. It makes it better, not worse, because under rule 68, only a defendant who is liable can avail themselves of the mechanism of the so-called winner pays described by the gentleman from Texas. Under this plan, a defendant who is not liable, who says ``I didn't do anything wrong, I should not have been dragged into court,'' they also can avail themselves of those privileges, and the plaintiff can avail themselves of that by making reasonable settlement offers.

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