March 06, 2012 2:22 pm ET by David Lyle
In a recent Des Moines Register op-ed, Senator Chuck Grassley (R-IA) misdiagnoses a principal cause of the nation's economic struggles ("frivolous lawsuits") and offers a supposed cure, the Lawsuit Abuse Reduction Act (LARA), which could have side effects worse than any theoretical good it might do. The threat of lawsuits is not holding back the economy, as polls show that small businesses rank potential lawsuits near the bottom of their list of concerns regarding the economic outlook. Furthermore, judges have made clear that rules currently in place streamline litigation and give them the tools they need to deter meritless lawsuits more effectively than LARA would.
In the op-ed, "Put Brakes on Frivolous Lawsuits," Senator Grassley writes that "billions of dollars are wasted on frivolous lawsuits that siphon money away from job creation. Frivolous claims also clog an already burdened legal system and delay the resolution of lawsuits that have merit."
But when pollsters ask business people what their problems are, they give a different answer. Polls conducted on behalf of business organizations demonstrate that potential lawsuits are a minor-at-best concern. Only five percent of small businesses said "litigation" was the issue posing the greatest threat to their business in a 2011 Small Business Outlook Survey produced for the U.S. Chamber of Commerce by Harris Interactive. The option "none of these," chosen by 18 percent of respondents, was far ahead of litigation. A similar poll of U.S. Chamber small business members released in January 2012 produced almost the same result, with only six percent of respondents identifying litigation as the biggest issue facing them. In addition, small business owners ranked "costs and frequency of lawsuits/threatened suits" near the bottom (65th out of 75 possible choices) in a 2008 National Federation of Independent Business (NFIB) survey that ranked the biggest threats facing small business owners. In the face of this polling by the Chamber of Commerce and NFIB, LARA seems to be a solution in search of a problem.
But is LARA really a solution at all? Judges - the people with the greatest incentive to see truly frivolous lawsuits eliminated, while suits with merit go forward - think that it would do more harm than good. The Judicial Conference's Committee on the Rules of Practice and Procedure, the body charged by the federal judiciary with monitoring and advising on the procedural rules that govern the courts, opposes LARA. It does so because the bill would return the procedural rules for the federal courts (specifically Rule 11, which deals with sanctions for frivolous conduct) to an earlier version of the rule that existed before reforms were put in place in 1993. Federal judges, having lived under both versions of Rule 11, want to keep the reforms in place, and not turn back the clock to the pre-reform era as LARA would do.
A summary of The Committee on the Rules of Practice and Procedure's analysis of LARA is below the fold.