Bob Goodlatte

Mr. GOODLATTE

Mr. GOODLATTE. Reclaiming my time, Mr. Chairman, the principle is the same, and the amount of those court costs can vary dramatically from case to case, as can the amount of the attorney's fees, but the same principle applies either way, and the fact of the matter is that the rule 68 is in the Federal Rules of Civil Procedure to encourage settlement of cases, and this will take that one step further, make that process not only available to defendants, but also available to plaintiffs and also available to defendants who are not liable. This is only available to the defendant who is at fault. Why not also make it available to the defendant who is not at fault, and says ``I have been dragged into court, I had no choice in this matter, I won the lawsuit, and now I have to pay substantial attorney's fees,'' whereas the plaintiff in a particular case may have taken no economic risk in proceeding to court, and their case is very different than that of the defendant, who always has to pay, win or lose.

Mr. GOODLATTE. We have limited those attorney's fees so they can not exceed the amount the plaintiff is paying, or the defendant, if the defendant is the loser, cannot exceed the amount you are paying your own lawyer, so you cannot have a deep pocket come in and overload the costs by bringing in four lawyers to try the case. Also, we have limited it to just 10 days before trial through the trial, so a party cannot overload the other party with discovery, whether it is necessary or unnecessary, and then collect attorney's fees for all that discovery that was done. This is a very reasonable way to impose some risk on the parties in cases, to encourage settlement and reduce the number of frivolous, fraudulent, and I would say to the gentleman from California [Mr. Berman], nonmeritorious cases.

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

Mr. GOODLATTE. I do not believe that is the gentleman's definition.

Mr. GOODLATTE. I yield to the gentleman from Pennsylvania for a clarification.

Mr. GOODLATTE. Mr. Chairman, I move to strike the requisite number of words. Mr. Chairman, I rise in strong opposition to the Berman amendment to the McHale amendment. This would have the effect of eliminating all of the effort that has been made in putting into this case incentives for parties to settle the case, incentives the gentleman from California himself voted for in the committee on this bill. And if we were to adopt this in the manner that the gentleman from California [Mr. Berman] suggests, that is all we will accomplish. We will go back to having a situation where we have rule 11 and only rule 11 with a mechanism added by the gentleman from Pennsylvania who is acting, I think, in very good faith to provide an additional mechanism to act within 90 days of a suit being brought, but you will still have the situation where it will always be in the hands of the judge to decide what a frivolous case is, what a nonmeritorious case is, what a fraudulent case is, and only in those cases will there be any recompense to the prevailing party. The result of that will be the same that we have right now with rule 11 of the Federal rules of civil procedure. It is seldom imposed on any of the parties in the cases. We are attempting here to say that when somebody brings an action in Federal court under the diversity law that they will understand that it is not a risk-free proposition. They should make sure that they have confidence in their case and understand that if they do not offer to settle the case in good faith that the case will result in their being forced to pay attorneys' fees to the party that was forced to defend the case, or in the case of a defendant who is defending the case in bad faith, they will be forced to pay attorneys' fees to the plaintiff who brought a good case that should have been settled before it ever got to trial. If the gentleman from California is successful in his motion, we will not have any provisions in the bill which say that the loser of the lawsuit based upon the merits of the case and the loser not having any merits, because the jury found his claim to be nonmeritorious, or he did not negotiate reasonably in the case and, therefore, an award was granted below what the defendant last offered in the case and, therefore, the plaintiff should have taken that award, under those circumstances, we will not have any of those incentives for settling the case if this amendment were adopted. Now, the gentleman from Pennsylvania has, I think, a good proposal to expedite bringing to the attention of the court frivolous cases, but he does not have any way of defining what a frivolous case is or defining what a nonmeritorious case is or defining what a fraudulent case is, and the mechanism that we have in the bill now does define what a nonmeritorious or lesser, if you want to accept the gentleman's contention that there are cases that are not frivolous but are close calls, the jury finds them nonmeritorious, as the other gentleman from Texas described them earlier. Under those circumstances, there is a risk of paying attorneys' fees. That will be gone if the amendment offered by the gentleman from California to the amendment offered by the gentleman from Pennsylvania [Mr. McHale] is adopted.

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

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

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

Mr. GOODLATTE. Mr. Chairman, the reason that is in there is to limit the exposure of parties that may be lower-income parties because the converse is true as well. If the defendant prevails, the plaintiff cannot pay any more than he pays himself.

Mr. GOODLATTE. I would leave that entirely to the discretion of the court. I think that in some circumstances, it might be appropriate to award attorney's fees regardless of those circumstances. In others, I feel that it might not. It is not my intention to define that in that fashion.

Mr. GOODLATTE. Mr. Chairman, if the gentleman will continue to yield, it could be the defendant.

Mr. GOODLATTE. I was hoping you would place some faith in George McGovern's judgment.

Mr. GOODLATTE. Right.

Mr. GOODLATTE. That is correct.

Mr. GOODLATTE. The fact of the matter is he turned down a $100,000 settlement offer. His $300,000 last offer was four times what the jury finally gave him.

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

Mr. GOODLATTE. Mr. Chairman, there are two objectives of this provision in the bill. One is to discourage the bringing of frivolous, fraudulent, and nonmeritorious claims. The other is to encourage settlement of cases. That is correct.

Mr. GOODLATTE. I am aware of that fact.

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

Mr. GOODLATTE. Mr. Chairman, I thank the gentleman for yielding. It is actually worse than he described, because what happens is the contingent fee is limited to only the additional amount that is added to the case when a final verdict comes in.

Mr. GOODLATTE. Mr. Chairman, I thank the gentleman for yielding. First, let me say is it not that the situation a defendant is placed in right now, they have absolutely no choice about being brought into court? They are made a defendant, and even whether the case is frivolous or has a close call, they have to bear risk, they have to bear attorneys' fees, no matter what their background is. They may be poor, they may be middle class, they may be a small business, they may be a large business. They still have to bear that risk. In a contingent fee case, you see the ads in the paper all the time now, no fee if no recovery. No risk is the message, and do you not think there should be something on that situation that the plaintiff has to look at?

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

Mr. GOODLATTE. Thank you.

Mr. GOODLATTE. The gentleman's point is correct. The same thing is true of a defendant, whether that be an individual, regardless of their economic background, whether that be a small business person whose business could be lost, the bringing of the lawsuit imposes risk upon that party; it does not impose risk upon the plaintiff. Now this changes that in this respect, it says that if the party, if a suit is filed, and the parties negotiated in good faith, then the losing party in those negotiations will be responsible for the prevailing party's attorneys' fees limited, as I described earlier, when it occurs that the losing party's recovery in the case either being a verdict against them or a verdict lower than the amount that was offered by the defendant occurs, and it just seems to me in every single case this would apply the defendant or the plaintiff if they do not prevail is shown to have had: First, a nonmeritorious case, and second, not to have prevailed in the case, to not having been reasonable in the case. For example, if the plaintiff sues the defendant for $100,000, the defendant offers the plaintiff $50,000, the plaintiff turns that down and goes into court, if they get an award greater than $50,000 but less than the $100,000 they sued for, there is going to be no award of attorneys fees; if they get something less than $50,000 and they were up at $100,000, they were unreasonable in their negotiations and they should be required to compensate the reasonable party that in good faith offered to settle the case or a defendant who feels there is no merit to the case and offers to dismiss the case because it has no merit and they insist on going into court, they ought to suffer some exposure for liability and not simply have the system we have right now where it is estimated, here is an article by George McGovern of all people just published in the news very recently. This was just published in the newspapers just recently, ``America Must Curb Its Lawsuit Industry.'' He says: First, we must put a stop to the frivolous and fraudulent lawsuit. It has been estimated at a meeting of the American Board of Trial Advocates that a fourth of all the lawsuits filed in the United States are either frivolous or fraudulent. Another study by Harvard University on medical injury and malpractice litigation found that 80 percent of the participants in those suits suffered no real injury as a result of medical negligence. Attorney sanctions should be strengthened to keep frivolous or fraudulent cases out of court. Mr. McGovern speaks from his own personal experience. He started a business in Connecticut. He had a small hotel there, and, after successfully defending against two slip-and-fall cases at the hotel, discovered that, while he was successful in defeating each one of these cases that did not have merit, he in each case spent large sums of money defending the case which never should have been brought in the first place. So, Mr. Chairman, it seems to me that we are being entirely reasonable and we are doing this for the benefit of all parties involved, plaintiffs and defendants, and, more importantly, we are doing this for the benefit of consumers because, if we use this to encourage settlement of cases, to cut down on the amount of litigation, to cut down on the amount of court time, and, if we can use this to encourage or discourage the bringing of frivolous suits and fraudulent suits, the price of goods and services are going to be reduced in this country because anybody who offers a product for sale has to factor into the price that they sell that product for the insurance they pay and the other legal costs they have attendant to that, and in addition, Mr. Chairman, the cost of insurance would be reduced if these cases could be screened out. This is an effective mechanism for screening them out, and I urge the passage of this bill.