05/17/2007
Urges Congress to Pass Legal Reform that Protects Small Firms from Frivolous Lawsuit Abuse
CONTACT: Melissa Sharp, 202-314-2068
WASHINGTON, D.C.--The National Federation of Independent Business, the nation's leading small-business advocacy group, today testified before the U.S. House Committee on Small Business as part of a hearing on liability reform.
As the voice of small business, NFIB Legal Foundation Executive Director Karen Harned provided testimony regarding the tremendous negative effects lawsuits, and the fear of lawsuits, are having on the millions of small-business owners in America.
"NFIB members, and the millions of small businesses across the country, are prime targets for frivolous liability suits because they do not have the resources to defend them. Small businesses cannot pass on to consumers the costs of liability insurance or the costs of paying large lawsuit awards without suffering significant losses," said Harned. "Problems with our civil justice system can no longer be ignored while unscrupulous lawyers continue to target and manipulate small employers. We urge Congress to pass legal reform that makes Rule 11 sanctions mandatory for frivolous lawsuit filers."
Key issues Harned highlighted in today's hearing include:
- Small-business owners rank the "Cost and Availability of Liability Insurance" as the second-most important problem facing small business today, according to a 2004 survey by the NFIB Research Foundation. The only problem that ranked higher is health-care costs.
- According to a 2002 NFIB Research Foundation survey on liability, the primary reasons small-business owners fear lawsuits are: (1) their industry is vulnerable to suits; (2) they are often dragged into suits in which they have little or no responsibility; and (3) suits occur frequently.
- For the small business with five employees or less, the problem is the $5,000 and $10,000 settlements, not the million dollar verdicts. When you consider that many small businesses gross $350,000 or less a year, which does not include the additional expenses of running a business, such as payroll, rent, cost of goods sold, or regulatory costs, $5,000 – $10,000 can significantly impact a small-business owner's bottom line.
- Harned provided examples of small-business stories of lawsuit abuse including the now famous Washington, D.C. dry cleaner's pants suit case, where the plaintiff, Administrative Law Judge Roy Pearson, is suing the family-owned dry cleaner shop for $65 million over a lost-and-found pair of pants. On May 14 the NFIB Legal Foundation wrote a letter to the D.C. Office of Administrative Hearings, opposing the reappointment of ALJ Pearson due to his unjustifiable actions in this case.
- Legislation is sorely needed to reform our nation's civil justice system. Since 1993, Rule 11 has been hamstrung by changes that diluted its ability to prevent frivolous lawsuits. In order to help restore fairness to the legal system, Congress should pass legal reform that makes Rule 11 sanctions mandatory for frivolous lawsuit filers.
- NFIB also supports legislation that would prevent frivolous food lawsuits, reform our nation's product liability laws, close the loophole in the Equal Access to Justice Act, curb excessive punitive damage awards, and abolish joint-and-several liability.
For a copy of NFIB's testimony or to speak with Karen Harned, please contact Melissa Sharp at 202-314-2068.
NFIB is the nation's leading small-business advocacy association, with offices in Washington, D.C. and all 50 state capitals. Founded in 1943 as a nonprofit, nonpartisan organization, NFIB gives small- and independent-business owners a voice in shaping the public policy issues that affect their business. NFIB's powerful network of grassroots activists send their views directly to state and federal lawmakers through our unique member-only ballot, thus playing a critical role in supporting America's free enterprise system.
NFIB's mission is to promote and protect the right of our members to own, operate and grow their businesses. More information about NFIB is available online at www.NFIB.com.
The NFIB Legal Foundation is a 501(c)(3) organization created to protect the rights of America's small-business owners by providing advisory material on legal issues and by ensuring that the voice of small business is heard in the nation's courts.
