Bob Goodlatte

Mr. GOODLATTE

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

Mr. GOODLATTE. That is correct.

Mr. GOODLATTE. I would agree it stimulates negotiation. Let me say that the concern I have is that the difference between the Michigan rule that the gentleman is articulating very accurately here and the bill, as it is currently drafted, is that under the current circumstances only when the Plaintiff meets or exceeds the amount of their demand will they get attorney fees. Only when the defendant keeps the plaintiff below the amount of their settlement offer will the defendant get attorney fees, and in the area in between that $50,000 to $100,000 no one, no party, pays the other party's attorney fees as the bill is written. I say to the gentleman, ``You would make it razor sharp by saying, if it's 75 thousand and one dollar, the plaintiff prevails, and the defendant pays his attorney fees. if it's $75,999, the defendant prevails, and the plaintiff pays his attorney fees,'' and I really don't think the merit of whether or not a case was reasonable ought to fall on one dollar. That can never happen.

Mr. GOODLATTE. Reclaiming my time, Mr. Chairman, the gentleman is correct, but the difference is that in my case the plaintiff is at $100,000 in the case, and the defendant is at $50,000 in their settlement offer, so if the plaintiff recovers $49,999, if the gentleman will, the plaintiff was off by $50,000 in terms of their offer, and there is that $50,000 gap between when one side has to pay attorney fees and when the other side has to pay attorney fees. In the gentleman's case there was a $1----

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

Mr. GOODLATTE. I do not know that it is more likely to deter frivolous suits, but I do think it is more fair in the sense that one dollar should not decide the difference between who gets attorney fees and who does not, and that is the effect of that adding that additional point in there in the Michigan----

Mr. GOODLATTE. Yes, that amendment would be helpful, and I think it is a good amendment.

Mr. GOODLATTE. I thank the gentleman for yielding me the time. The gentleman is correct. This bill has been very grossly mischaracterized by the other side. The whole purpose of this provision is to promote reasonableness in bringing lawsuits, reasonableness in settling lawsuits, and will have the ultimate effect of seeing more suits settled and fewer frivolous and nonmeritorious suits brought. This will not have the effect of depriving anything from any plaintiff who brings a meritorious suit in court and it in fact will have, I think, a very positive effect on the cost of goods and services for people who are low income as well as the cost of insurance for people who are low income, auto insurance, homeowners' insurance, et cetera. This bill is designed to say that you cannot come into court under the pretense that there is no risk to bringing a lawsuit. That is exactly what this does, and it counters the ads that we see time and time again in the Yellow Pages and elsewhere that say no recovery, no fee. That is, there is no risk to you to bringing a lawsuit. So come on in. Well, there is a risk to society, there is a risk to defendants who are unfairly sued, and that is what this is designed to correct and it will correct it in a way that is fair by limiting the attorney's fees to just those 10 days before trial, through trial, and it will limit it to not more than the losing party pays their own attorney's fees so you do not have the possibility of a deep-pocket corporate party to a suit that wins the case overloading the other party with enormous attorney's fees that they cannot match. It cannot be more than they are paying their own attorney's fees, and for that reason I think this is an entirely reasonable provision that discourages suits from being brought that are nonmeritorious.

Mr. GOODLATTE. Mr. Chairman, I offer an amendment.

Mr. GOODLATTE. Mr. Chairman, the purpose of this amendment is to enhance provisions of the bill that deal with making offers of settlement. The way the bill currently reads, the parties can limit their exposure to attorneys' fees by making offers of settlement. However, it is the party that makes their own offer that can cut off the exposure of attorneys' fees for the other side, and we want to reverse that so that each party will have an incentive to make offers of settlement, because the more they offer to settle, the more likely it is they will be able to recover attorneys' fees. So by making this contingent upon the last offer by the nonprevailing party in a case rather than the last offer by the prevailing party, we will have the effect of allowing each party to make offers of settlement in order to cut off their exposure for attorneys' fees. Now, this exposure for attorneys' fees can be limited to less than 10 days before trial through the trial itself, and, therefore there is a limitation on how long you can make these offers which cut off at 10 days before trial for the purpose of making sure that there are some risks attached to bringing a lawsuit which turns out to not have merit. So I would encourage all of us who want to promote settlement of lawsuits and want to promote reasonableness to adopt this amendment. The effect of not changing this will be essentially to have parties having a disincentive to make additional offers of settlement, because if they can control when their opposing parties' attorneys' fee is cut off, they will have to add that additional calculation as to the worth of those attorneys' fees in determining whether or not to offer a settlement, an increased settlement offer. So, for example, if there is the likelihood of recovering $10,000 of attorneys' fees in a case and a party feels they have a 75 percent chance of winning, they may feel that they are not only making an additional offer of settlement but they are also giving up the value, whatever they may place on it, of those attorneys' fees. We want to turn that around. We want the parties to have an incentive to make settlement offers so if we allow them to cut off their own exposure for attorneys' fees through the date of that settlement, by making a settlement offer, we will accomplish our goal of encouraging more settlement in these cases.

Mr. GOODLATTE. I thank the gentleman for yielding. Mr. Chairman, this is indeed a part of the process of refining these bills and making them of such a nature that they try to be as fair as possible to all parties. But the real purpose here is to encourage settlement of lawsuits and discourage the bringing of lawsuits that do not have merit.

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

Mr. GOODLATTE. I thank the gentleman for yielding. Mr. Chairman, this is, I believe, a very good model for handling the problem we have in this country with frivolous lawsuits, fraudulent lawsuits, and the fact that so many people are forced in the courts to defend cases that do not have merit and have to expend a great deal of money to do so. The effect here will be to set a model that the State legislatures can look at to apply in the State courts. This only applies in diversity cases in the U.S. district courts. Earlier there was mention by one of the parties on the other side regarding the effect on civil right cases. This does not apply in Federal question cases, only on diversity cases in Federal court. Diversity cases make up about 20 percent of the Federal docket, and the Federal docket amounts to about 5 percent of all the lawsuits brought in the country. So this will be a good test of whether the Congress has come up with a way to provide incentives for parties to be reasonable when they bring lawsuits. We do not want anybody in this country who has a meritorious claim not to bring that claim in a State or Federal court as they deem appropriate. But we want them to do so after they have fully evaluated the merits of a case. We do not want them to do so if their purpose is fraud; we do not want them to do so if the purpose is to be frivolous. This will have the effect of making them think about that before they bring the action, and it encourages reality in these cases by requiring that the parties understand that they have an obligation to negotiate settlement resolution of these cases in good faith; that they not tie up our Federal court system with a case that really should be settled. By having this mechanism whereby if a party makes an offer to settle the case, as this amendment provides, they can have the ability to reduce their exposure for attorneys fees by doing that up until 10 days before trial. We will promote that settlement opportunity. So, again, I urge my colleagues to support this amendment and to support the underlying bill.

Mr. GOODLATTE. I thank the gentleman for yielding further. In terms of looking at this provision in this bill from the standpoint of the effect that it will have on the plaintiff in a case, I think that it has a great deal of merit for the plaintiff as well, because the effect will be to say that if you indeed do have merit to your case, if you know that the defendant in this case is liable for a harm that has been caused to you, you know there is going to be increased pressure on that defendant to settle the case because that defendant will then be put in the position of knowing that they will have to pay the plantiffs' attorney's fee if the plaintiff prevails. So, this is not something that is in favor of defendants as opposed to plaintiffs or in favor of corporate defendants as opposed to individual plaintiffs or individual defendants. This will have the effect of making everybody who looks at a case, looks at it carefully, makes a study of the case and understands that when the defendant takes a case into court they will have to always bear the cost of their attorneys' fees. No longer will we have a situation where we will read in the telephone books of the country, no recovery. If there is no fee, there is no recovery. In other words, there is no risk for bringing a lawsuit. There should be a risk for every party in the case. There also should be a reward for everybody in the case if they are reasonable in their approach. When a plaintiff has a good case and a deep-pocket defendant is refusing to settle the case because they are a deep pocket, this plaintiff who knows that he has the case will be able to force that defendant to act because the defendant will know that they will ultimately face attorneys' fees for their failure to act.

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

Mr. GOODLATTE. Well, I would say to the gentleman, the comments of a member of his own party, George McGovern, who in 1972 was a presidential candidate, he says in an article out this weekend calling for a reform of our judicial system, that one out of four suits brought in court are either frivolous or fraudulent. If that is indeed the case, then we have a serious problem with cases that are being brought that are not meritorious.

Mr. GOODLATTE. I do not think it has that effect at all because, as I said earlier, if the plaintiff's case has merit, that is going to put greater pressure on the defendant to settle case because they know that if they lose the case, they are going to pay attorney's fees. Furthermore, because of the settlement mechanism that has been added into this bill, the effect is going to be to encourage a greater number of settlements. I would hope we would settle--if it is 90 percent now, I hope we get to 99 percent. There is always a reasonable position somewhere in the middle of these cases, and we want to have these parties to have every pressure possible to find that reasonable ground and keep them from tying up our courts with cases that do not need to be there if the parties would act rationally and settle them.

Mr. GOODLATTE. I do not have a figure. I would say it is a high percentage.

Mr. GOODLATTE. It is a high percentage. The question is what percentage of cases we have in Federal courts now that can be removed from the court system if there is a penalty for bringing a frivolous or fraudulent case? If that indeed is 25 percent, that is a substantial reduction. I think it would be greater than that. Not only will frivolous and fraudulent cases be settled, but in some cases where there is merit in the case that the parties have not been able to get together, they will get together because of the increased risk involved in the case and nonmeritorious cases will be settled or dismissed before somebody takes the risk of bringing an action all the way through the cost of the judge, the jury, and everybody else that has to be involved, and all the time involved in the case. We can reduce those by encouraging settlement. I think this is a very good vehicle to do it.

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

Mr. GOODLATTE. Yes. As a matter of fact, I do. This case comes from an article that George McGovern wrote about his experiences with a business that he started in Connecticut, a hotel. George McGovern, a couple of years ago, was quoted as saying, ``You know, I never realized until I was a small business owner, but regulations in this country are beating small businesses to death and we got to do something about it.'' Now he comes along and says not only do we have to reform the regulatory process in this country but we also need to reform the judicial process to discourage the lawsuit industry, as he calls it.

Mr. GOODLATTE. I yield to the gentleman from New York.

Mr. GOODLATTE. I thank the gentleman for his comments.

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

Mr. GOODLATTE. The gentleman is correct. English rule does not apply to those civil cases brought by an indigent plaintiff, a plaintiff represented by the legal aid society in Great Britain. Is there any provision in this bill that keeps an indigent plaintiff or a plaintiff who could in no way have the assets to pay the fee of the defendent in a contingency case, let us say, for example, from being assessed the fees that might ultimately be assessed if the final settlement comes in, the final judgment comes in higher than or less than the defendant had offered?