10/27/2005
CONTACT: Michael J. Donohue, (202) 554-9000
Lawsuit Abuse Reduction Act of 2005, backed by NFIB and more than 300 organizations, goes to U.S. Senate
WASHINGTON, D.C. — The National Federation of Independent Business, the nation’s largest small-business advocacy group, today praised passage of legislation in the U.S. House of Representatives designed to prevent the filing of frivolous lawsuits and reduce abusive, job-destroying litigation. The bipartisan bill, H.R. 420, the Lawsuit Abuse Reduction Act of 2005 (LARA), passed the House on a bipartisan 228-184 vote.
“This is a victory for Main Street job creators who can no longer afford to be preyed upon by lawyers who target small businesses,” said NFIB Executive Vice President Dan Danner. “Litigation is big business, and it’s killing small business. NFIB strongly endorsed H.R. 420 because, if signed into law, the legislation will significantly reduce the culture of predatory lawsuits harming our small businesses, communities and economy. Small-business owners urge the Senate to take up this common-sense legislation.”
Litigation is both time-consuming and expensive for small-business owners. NFIB research shows that a single lawsuit costs the average small-business owner $5,000 just to settle. Typically, they do not have legal departments with in-house counsels, the resources to hire attorneys or even the time to spend away from their businesses fighting frivolous lawsuits. As a result, small businesses are viewed as targets of frivolous suits because trial lawyers know that the likelihood of settlement is much higher from a small-business owner than a large corporation.
The Lawsuit Abuse Reduction Act will help to reduce the number of frivolous lawsuits and the exorbitant costs that can drive small businesses to financial ruin. In a 2004 NFIB Research Foundation survey, small-business owners ranked the “cost and availability of liability insurance” as the second most important problem facing small-business owners today.
In summary, H.R. 420, the Lawsuit Abuse Reduction Act of 2005:
- Permits judges to order plaintiffs to reimburse reasonable litigation costs, including attorney’s fees
- Makes sanctions mandatory against attorneys or parties who file frivolous lawsuits rather than discretionary
- Removes a “safe harbor” provision that allows plaintiffs and their attorneys to avoid sanctions for frivolous suits by withdrawing them within 21 days
- Reduces “court-friendly shopping” by requiring that plaintiffs in civil tort actions sue only where they live or were injured, or where the defendant's principal place of business is located.
The National Federation of Independent Business is the nation’s largest small-business advocacy group. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its 600,000 members in Washington, D.C., and all 50 state capitals.
