Terrorist Penalties Enhancement Act of 2004

Mr. Speaker, pursuant to House Resolution 766, I call up the bill (H.R. 4571) to amend Rule 11 of the Federal Rules of Civil Procedure to improve attorney accountability, and for other purposes, and ask for its immediate consideration.

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, recently President Bush said, ``We must protect small business owners and workers from the explosion of frivolous lawsuits that threaten jobs across America.'' Even Senator Kerry claims to support national legislation in which ``lawyers who file frivolous cases would face tough, mandatory sanctions, including a `three strikes and you're out' provision that forbids lawyers who file three frivolous cases from bringing another suit for the next 10 years.'' Well, help is on the way.

H.R. 4571, the Lawsuit Abuse Reduction Act, would restore mandatory sanctions and monetary penalties under Federal rule 11 of the Federal Rules of Civil Procedure for filing frivolous lawsuits and abusing the litigation process. It would also extend these same protections to cover State cases that a State judge determines to have interstate effects, and it would prevent forum shopping by requiring personal injury cases to be brought only where the plaintiff lives or was allegedly injured, or where the defendant's principal place of business is located.

H.R. 4571 will also apply a ``three strikes and you're out'' rule to attorneys who commit multiple rule 11 violations in Federal district court and impose mandatory civil sanctions for willful and intentional document destruction intended to obstruct the pending court proceeding. The bill would apply to lawsuits brought by individuals as well as businesses, and it expressly precludes the application of the bill to civil rights cases if applying the bill to such cases would bar or impede the assertion or development of new claims or remedies under Federal, State, or local civil rights law.

Today, frivolous lawsuits are legalized extortion. Without the threat of certain punishment for filing frivolous lawsuits, innocent people and small businesses will continue to face the harsh economic reality that simply paying off frivolous claims through monetary settlements is always cheaper than litigating the case until no fault is found.

No part of American society rests easy in a legal culture of fear. Churches are discouraging counseling by ministers. Children have learned to threaten teachers with lawsuits. Youth sports are shutting down in the face of lawsuits for injury or even hurt feelings. Monkey bars and other once-common equipment are now endangered species at playgrounds. As a result, children stay at home and get fat, and their parents sue the restaurants that serve them. The Girl Scouts in metro Detroit alone have to sell 36,000 boxes of cookies each year just to pay for liability insurance, 36,000 boxes of cookies.

Good Samaritans are told to hit the road. When one man routinely cleared a trail after snowstorms, the county had to ask him to stop. The supervisor of district operations wrote, ``If a person falls, you are more liable than if you had never plowed at all. Crazy world. Unfortunately, the times we are in allow for a much more litigious environment than common sense would dictate.''

Because existing rules against frivolous lawsuits are ineffective, the right to sue has not only been exploited by lawyers; it has been turned into one of the most destructive business models in the American economy. Today, personal injury lawyers can gamble on taking cases on a contingency-fee basis because they only need to win one in 10 to score the big judgment that would make up for the losses in other cases. We all live with the consequences, including higher taxes and insurance rates; chaos in our schools; doctors going out of business, limiting Americans' access to health care.

Small businesses and workers may suffer the most. The Nation's oldest ladder manufacturer, the family-owned John S. Tilley Ladders Company near Albany, New York, recently filed for bankruptcy protection and sold off most of its assets due to litigation costs. Founded in 1855, the Tilley firm could not handle the cost of liability insurance, which had risen from 6 percent of sales a decade ago to 29 percent, even though the company had never lost an actual court judgment.

Sadly, the Federal rule designed to deter frivolous lawsuits was gutted over 10 years ago; and today, we live with the results. Shockingly, rule 11 of the Federal Rules of Civil Procedure does not require sanctions or even allow monetary penalties against parties who bring frivolous lawsuits. Without certain punishment for those who bring frivolous lawsuits, and the threat of monetary penalties to compensate the victims of frivolous lawsuits, there is little incentive for lawsuit victims to spend time and money seeking sanctions for lawsuit abuse.

Rule 11 also does not allow sanctions for the abuses of the discovery process. Rule 11 as currently written even allows lawyers to avoid sanctions entirely from making frivolous claims by withdrawing them within 3 weeks. Such a rule actually encourages frivolous lawsuits because personal injury attorneys can file harassing pleadings, secure in the knowledge that they have nothing to lose. If someone objects, they can simply retreat without penalty. H.R. 4571 closes all of these loopholes.

Forum shopping further encourages frivolous litigation. Lax rules regarding where a lawsuit can be brought have turned certain parts of the country into lawsuit factories, the only factories that lose jobs rather than creating them. One of the Nation's wealthiest personal injury attorneys described what he calls ``magic jurisdictions'' as follows: ``What I call the `magic jurisdiction' is where the judiciary is elected with verdict money. The trial lawyers have established relationships with the judges that are elected. It's almost impossible to get a fair trial if you're a defendant in some of these places. Any lawyer fresh out of law school can walk in there and win the case, so it doesn't matter what the evidence or law is.'' H.R. 4571 would prevent the unfair practice of forum shopping that currently allows personal injury lawyers to sue wherever the most favorable court is.

Congress cannot sit back and allow the personal injury lawyers to bankrupt the very concept of personal responsibility that has made America great. I urge my colleagues to support this bipartisan legislation that will protect both America's values and its vital small businesses.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield 6 minutes to the gentleman from Texas (Mr. Smith).

Mr. Speaker, I yield 2 minutes to the gentleman from Ohio (Mr. Chabot).

Mr. Speaker, I yield myself 1 minute.

Mr. Speaker, the Judicial Conference has amnesia and they did not look back into the history of what happened between 1983 and 1993 when the rules that this bill proposes were in place.

In 1991, the Judicial Conference Advisory Committee on Civil Rule did a survey and reviewed Rule 11. At that time 751 Federal judges found that an overwhelming majority of them, 95 percent, believed Rule 11 did not impede development of the law; 72 percent believed that the benefits of the rule outweighed any additional requirement of judicial time; 81 percent believed that the 1983 version of Rule 11 had a positive effect on litigation in the Federal courts; and 80 percent believed that the rule should be retained in its then-current form. That is what the judges who were on the bench at the time this rule was in effect said.

The Judicial Conference ought to spend their time looking back at their own records and their own surveys rather than sending these types of letters advising us that what we are doing here is no good.

Mr. Speaker, I yield 2\1/2\ minutes to the gentleman from Florida (Mr. Keller).

Mr. Speaker, I yield 3 minutes to the gentlewoman from Pennsylvania (Ms. Hart).

Mr. Speaker, I yield 2 minutes to the gentleman from Georgia (Mr. Gingrey).

Mr. Speaker, I yield myself 2 minutes.

Mr. Speaker, I respect greatly the gentleman from Massachusetts (Mr. Markey), but when he armed his cannon, he pointed it at the wrong target. This bill has nothing to do with assault weapons or tax breaks or oil prices or the 9/11 Commission or catching Osama bin Laden or casualties in Iraq or whether the North Koreans have a nuclear weapon or not; nor does it deal with legitimate meritorious lawsuits.

What it does deal with is frivolous lawsuits, frivolous lawsuits as defined by the same Federal Rule of Civil Procedure that was on the books for 10 years, between 1983 and 1993, that 80 percent of the Federal judges when they were surveyed believed should be retained in its then current form. This bill does not restrict the access to the courts to anybody who has got a meritorious claim.

But what it does do is that it sanctions those lawyers who file frivolous lawsuits and deter them from filing frivolous lawsuits again. If we did not have sanctions against people, people would ignore the law. If there were no sanctions for driving 50 miles an hour over the speed limit or running a red light, I think it would be pretty dangerous for all of us when we went home. Because the sanctions that are currently in rule 11 have no deterrent effect against filing frivolous lawsuits, there are too many of them. We have heard about them in this debate.

What this bill does is simply go back to what happened prior to 1993, prevents forum shopping and says that, if a lawyer files repeated frivolous filings in the court three times, they are out. We have got to do that if we want to have our courts be used for the administration of justice rather than being a cover for those who wish to file frivolous papers.

Mr. Speaker, I yield 3 minutes to the gentleman from Texas (Mr. Smith).

Mr. Speaker, I yield myself the balance of my time.

Mr. Speaker, the gentleman from Texas (Mr. Smith) clearly stated that there is an exemption in this bill on civil rights law and this bill does not apply to the development of new civil rights laws. Further, the survey of the judges that I have referred to in the past, 95 percent of the 751 federal judges believe that the old Rule 11, which the gentleman from Virginia complains of, did not impede the development of the law. That is, 19 judges out of 20 said that the assertion that the gentleman from Virginia made was not correct in their opinion. That is why this bill is a good one and it ought to be passed.

Mr. Speaker, I yield back the balance of my time.

Amendment In The Nature Of A Substitute Offered By Mr. Turner of Texas

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, I rise in strong opposition to this substitute amendment which guts the bill.

Where to begin? I will begin with the title of the first section of the substitute. It is entitled ``Three Strikes and You're Out.'' But it is not true when we read the substitute. In fact, the substitute provides that following three violations of this provision, the court ``shall refer each such attorney to one or more appropriate State bar associations for disciplinary proceedings.'' Three strikes and you are still in.

The Democratic substitute does not say that the attorney shall be suspended from the practice of law. That is what the base bill says. The bill says that after three strikes ``The Federal District court shall suspend that attorney from the practice of law in that Federal District Court.''

The base bill follows through on its ``three strikes and you're out'' promise. The Democratic substitute says ``three strikes and you have a foul ball.''

But it gets worse. Not only are the filers of frivolous lawsuits not out after three strikes under the Democratic substitute, but the Democratic substitute even changes what a strike is under existing law. Currently Rule 11 contains four criteria that can lead to a Rule 11 violation. The Democratic substitute references only three, kind of like shrinking the strike zone.

Currently, Rule 11 allows sanctions against frivolous filers whose denials of factual contentions are not ``warranted on the evidence'' or are not ``reasonably based on the lack of information and belief.'' The Democratic substitute removes this protection from the victims of frivolous lawsuits under existing law. The Democratic substitute for the first time without penalty allows defendants to file papers with the court that include factual denials of allegations against them that are not warranted by the evidence and not reasonably based. In other words, misleading and unfactual filings end up getting a get-out-of- jail-free card under the Democratic substitute.

Instead, the substitute provides additional protection for defendants filing frivolous defenses that are not warranted by the evidence and not reasonably based. This is a step backward for victims of frivolous lawsuits under both State and Federal law.

Further, the base bill provides that those who file frivolous lawsuits can be made to pay all of the costs and attorneys' fees that are ``incurred as a direct result of filing of the pleading, motion, or other paper, that is the subject of the violation.'' The Democratic substitute does not include that critical language, which is necessary to make clear that those filing frivolous lawsuits must be made to pay the full costs imposed on their victim by the frivolous lawsuit.

The Democrat substitute also imposes complicated mandates on each State's judicial districts, requiring them to ``develop and implement a civil justice expense and delay reduction plan.'' The Democratic substitute requires States to implement these mandates under exceedingly complex requirements that span all the way from pages 10 to page 15 of the Democratic substitute and requires things like ``systematic, differential treatment of civil cases that tailors the level of individualized and case specific management,'' whatever that means. At a minimum, this is overly burdensome, and may be unconstitutional.

The Democratic substitute requires that States ``develop and implement'' these plans when the Supreme Court has held that ``Congress may not simply commandeer the States by directly compelling them to enact and enforce a Federal regulatory program.'' That is in New York v. The United States 1992. That is exactly what the Democratic substitute does without any justification under the Commerce Clause of the Constitution.

The Democratic substitute also completely overrides State laws regarding the sealing of records in all cases, including proceedings in which State laws protect the privacy of sexual abuse victims, including children. And let me repeat this: if the Democratic substitute passes and becomes law, State laws relative to the sealing of court records on sexual abuse cases, including those against minors, can be open to public scrutiny. Shame on you. This blunderbuss provision in the Democratic substitute covers State divorce proceedings, and even all criminal cases, without a showing of why State procedures are inadequate.

The Democratic substitute also retains rule 11's current ``free pass'' provision, which allows lawyers to avoid sanctions for making frivolous claims simply by withdrawing those claims within 21 days after a motion for sanctions has been filed.

Now, let us look at that. A frivolous claim or frivolous filing has been made. You have 21 days after you make it to withdraw it. But meantime, the opposite party has got to go to the legal expense to make the motion to the court to show that the claim is frivolous. And who ends up paying the bill on that? Not the lawyer who filed the frivolous claim, but the defendant and the defendant's lawyers; and that provision actually encourages frivolous lawsuits by allowing unlimited numbers of frivolous pleadings to be filed without penalty. Talk about a loophole big enough to drive the Queen Mary through, that is it.

The Democratic substitute also does not include the bill's essential provisions to prevent the unfair practice of forum shopping.

In short, the Democratic substitute does not provide for three strikes and you are out. It provides for three strikes and you get referred to the State Bar Association that can continue to let the offending attorney practice law. The Democratic substitute even weakens existing law that protects plaintiffs from defendants that file frivolous denials that are not warranted by the evidence and are not reasonably based. The substitute also fails to provide that attorneys' fees be awarded to cover the full costs of responding to a frivolous lawsuit, and the substitute also burdens the States by directly compelling them to enact and enforce a Federal regulatory program. It overrides State procedures governing the confidentiality of documents in the course of legal proceedings. That is more than three strikes against the Democratic substitute, and it should be soundly defeated.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield 3 minutes to the gentleman from Florida (Mr. Keller).

Mr. Speaker, I yield myself 2 minutes.

Mr. Speaker, we have debated this issue extensively and the venue for these types of personal injury cases are, one, the district where the plaintiff resides; two, the district where the injury occurred; or three, where the principal place of business of the defendant is located. Any one of these three criteria would trigger the venue.

Now, it is elemental under the corporation law of all 50 States that if a corporation that is incorporated elsewhere and that includes in any one of the other 49 States or in a foreign country, wants to do business in a State, it has to get a certificate of authority and appoint an agent for the service of process. And that is what is done with practically every multinational corporation or interstate corporation that does bills in the United States.

If they do not do that, then they do not have limited liability protection of the corporation law that applies. So the entire argument that is made by the gentleman from Washington (Mr. Inslee) and the gentleman from Texas (Mr. Turner) is a complete red herring.

Now, the two gentlemen have quoted extensively from a Congressional Research Service memorandum that was dated today. And it begins, ``This rushed memorandum discusses this issue.'' Well, the CRS is wrong upon occasion. And in yesterday's extension of remarks in the Congressional Record, I inserted into the Record correspondence that indicated that a similar rushed memorandum of the Congressional Research Service on the Marriage Protection Act was erroneous in nature. Wrong once, maybe wrong again.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I am prepared to close if the gentleman from Texas will yield back.

Mr. Speaker, I yield myself the balance of the time.

Mr. Speaker, the John Kerry for President campaign has endorsed national legislation in which ``lawyers who file frivolous cases would face tough, mandatory sanctions, including a `three strikes and you're out' provision that forbids lawyers who file three frivolous cases from bringing another suit for the next 10 years.''

Unfortunately, the Democratic substitute did not listen to what the Kerry campaign said and does not forbid lawyers who file three or more frivolous lawsuits from bringing future lawsuits. The substitute only provides that on three strikes the offending attorney will be referred to a bar association, and no action need be taken by the bar to discipline the lawyer.

The base bill, H.R. 4571, on the other hand, currently provides that an attorney who files frivolous lawsuits will be suspended for at least a year and perhaps much longer if the court deems it appropriate.

I would ask all Members to reject the Democratic substitute. This quote that I have given from the Kerry for President campaign and those that the gentleman from Florida (Mr. Keller) has quoted of Senator Edwards in Newsweek magazine of last December, the Republican bill has got the type of bipartisan support that is needed to deal with this problem.

I would urge a ``no'' vote on the substitute and passage of the base bill.

Mr. Speaker, I rise in opposition to the motion to recommit.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and include extraneous material on H.R. 4571.

Mr. Speaker, the real outsourcing motion is the one which has been made by the gentlewoman from Connecticut (Ms. DeLauro). If this motion is adopted and this bill is enacted into law, it will cost American jobs. Anytime the cost of doing business in the United States goes up, the number of Americans with jobs will go down. This motion to recommit would increase the cost of doing business in this country and in the process lose American jobs.

I do not want to hear anybody who has argued in favor of this motion ever to come back and complain about the outsourcing of American jobs to foreign countries if this motion passes because this is the type of thing that will absolutely do that.

The motion to recommit defines the covered entities as those that have substantial business activities in this country, and hurting substantial business in American substantially hurts American workers. Stand up for American workers; vote down this motion to recommit. Stop the outsourcing of jobs by last-minute motions made on the floor with red herring arguments. Vote ``no'' on the motion to recommit.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.

Mr. Speaker, I yield myself such time as I may consume, and I rise to speak against the bill

Mr. Speaker, I do not support the legislation because it will have a significant adverse effect on the ability of unpopular plaintiffs to seek recourse in our courts, and it will operate to benefit foreign corporate defendants at the expense of domestic counterparts and will skew the playing field against injured victims.

Now, a lot of organizations oppose the bill, and I would like to read from a letter from the Judicial Conference of the United States, the Chief Justice of the United States presiding, in a letter to the committee chairman.

It says that ``section 2 of the bill would reinstitute a rule eliminated in 1993 upon the recommendation of the Judicial Conference, approved by the Supreme Court, and after review by Congress, because of the serious problems it engendered during a 10-year period of operation. Section 2 also would amend rule 11 of the Federal Rules of Civil Procedure in a manner consistent with the longstanding Judicial Conference policy opposing direct amendment of the Federal rules by legislation.''

The letter goes on to say that the bill ``would directly amend civil rule 11 to remove a court's discretion to impose sanctions on a frivolous filing and eliminate the rule's `safe-harbor' provisions. The bill undoes amendments to rule 11 that took effect on December 1, 1993, and would bring back the provisions that were first introduced in 1983

and removed from the rule in 1993, after a decade of signally bad experiences with the operation and effects of the 1983 rule.''

The Judicial Conference of the United States goes on to state: ``Like H.R. 4571, the 1983 version of rule 11 required sanctions for every violation of the rule. It spawned thousands of court decisions and generated widespread criticism. The rule was abused by resourceful lawyers, and an entire `cottage industry' developed that churned tremendously wasteful satellite litigation that had everything to do with strategic gamesmanship and little to do with underlying claims. Rule 11 motions came to be met with countermotions that sought rule 11 sanctions for making the original rule 11 motion.

``Some of the serious problems caused by the 1983 amendments to rule 11 included:

``Creating a significant incentive to file unmeritorious rule 11 motions by providing a possibility of monetary penalty.''

It goes on to cite other problems that occurred that were cured in 1993. The letter goes on: ``The 1993 amendments to rule 11 were designed to strike a fair and equitable balance between competing interests, remedy the major problems with the rule, and allow courts to focus on the merits of the underlying cases rather than on rule 11 motions.''

It goes on to say that the ``experience with the amended rule since 1993 has demonstrated a marked decline in rule 11 satellite litigation without any noticeable increase in the number of frivolous filings. In June 1995, the Federal Judicial Center conducted a survey of 1,130 lawyers and 148 judges on the effects of the 1993 rule 11 amendments . . . The Center found general satisfaction with the amended rule. It also found that more than 75 percent of the judges and lawyers would oppose a provision that would require a court to impose a sanction when the rule is violated. A majority of the judges and lawyers, both plaintiffs' and defendants' lawyers, believed that groundless litigation was handled effectively by judges.

``Undoing the 1993 rule 11 amendments, even though no serious problem has been brought to the Judicial Conference rules committee's attention, would frustrate the purpose and intent of the Rules Enabling Act.''

It goes on to criticize the provisions in section 3, the mandatory application to State laws, and section 4, the provision on forum shopping.

Mr. Speaker, in addition to the Judicial Conference, other organizations oppose the legislation. The NAACP, the Public Citizen, the Alliance for Justice, People for the American Way, the American Association of People with Disabilities, the Lawyers' Committee for Civil Rights Under Law, the American Bar Association, the National Conference of State Legislatures, National Partnership for Women, National Women's Law Center, the Center for Justice and Democracy, Consumers Union, National Association of Consumer Advocates, USAction, U.S. PIRG, and the NAACP Legal Defense Fund all oppose the legislation.

Mr. Speaker, one of the additional problems with the bill is the chilling effect it may have on bringing important, legitimate, unpopular actions. This is due to the fact that much of the impetus of the 1993 changes stemmed from abuses by defendants in civil rights cases, namely, that civil rights defendants were choosing to harass civil rights plaintiffs by filing a series of rule 11 motions intended to slow down and impede meritorious cases.

Although the bill states that the proposed rule 11 changes shall not be construed to ``bar or impede the assertion of new claims or remedies under Federal, State or local civil rights law,'' the language does not clearly and simply exempt civil rights and discrimination cases under current law, as should be the case. Determining what a new claim or remedy might be would just add to the litigation.

Certainly, it does not cover the fact that this bill and rule 11 do not offer an attorney the ability to appeal a rule 11 sanction. History has demonstrated that civil rights lawsuits are often extremely unpopular, particularly in certain parts of the country where some judges almost automatically consider civil rights cases as frivolous. In such courts, plaintiffs' attorneys could be unreasonably subject to sanctions, even suspensions, without appeal contrary to the purpose of rule 11.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume to comment that the letter from the Judicial Conference of the United States outlining the survey results, showed a majority of judges, lawyers, both plaintiffs and defense lawyers, believed that groundless litigation was handled effectively by the judges and preferred the 1993 amendment.

Mr. Speaker, I submit herewith the letter from the Judicial Conference for the Record.

Judicial Conference of

the United States,

Washington, DC, July 9, 2004.

Hon. F. James Sensenbrenner, Jr.,

Chairman, Committee on the Judiciary, House of

Representatives, 2138 Rayburn House Office Building,

Washington, DC.

Dear Mr. Chairman: On behalf of the Judicial Conference, I

write to urge you to reconsider your position on the

``Lawsuit Abuse Reduction Act of 2004'' (H.R. 4571). [Section

2 of the bill would reinstitute a rule eliminated in 1993

upon the recommendation of the Judicial Conference, approval

by the Supreme Court, and after review by Congress, because

of the serious problems it engendered during a ten-year

period of operation. Section 2 also would amend Rule 11 of

the Federal Rules of Civil Procedure in a manner inconsistent

with the longstanding Judicial Conference [policy opposing

direct amendment of the federal rules by legislation.]

Section 3 of H.R. 4571 would apply the revised federal Rule

11 to certain state court actions, while section 4 would

amend the venue standards governing the filing of tort

actions in both the federal and state courts: Sections 3 and

4 implicate federal-state comity interests and raise

important policy and practical concerns.

section 2

[Section 2 would directly amend Civil Rule 11 to remove a

court's discretion to impose sanctions on a frivolous filing

and eliminate the rule's ``safe-harbor'' provisions. The bill

undoes amendments to Rule 11 that took effect on December 1,

1993, and would bring back the provisions that were first

introduced in 1983 and removed from the rule in 1993, after a

decade of signally bad experiences with the operation and

effects of the 1983 rule.

Like H.R. 4571, the 1983 version of Rule 11 required

sanctions for every violation of the rule. It spawned

thousands of court decisions and generated widespread

criticism. The rule was abused by resourceful lawyers, and an

entire ``cottage industry'' developed that churned

tremendously wasteful satellite litigation that had

everything to do with strategic gamesmanship and little to do

with underlying claims. Rule 11 motions came to be met with

counter motions that sought Rule 11 sanctions for making the

original Rule 11 motion.

[Some of the other serious problems caused by the 1983

amendments to Rule 11 included:

(1) Creating a significant incentive to file unmeritorious

Rule 11 motions by providing a possibility of monetary

penalty;

(2) engendering potential conflict of interest between

clients and their lawyers, who advised withdrawal of

particular claims despite the clients' preference;

(3) exacerbating tensions between lawyers; and

(4) providing little incentive, and perhaps a distinctive

disincentive, to abandon or withdraw a pleading or claim--and

thereby admit error--that lacked merit after determining that

it no longer was supportable in law or fact.

The 1993 amendments to Rule 11 were designed to strike a

fair and equitable balance between competing interests,

remedy the major problems with the rule, and allow courts to

focus on the merits of the underlying cases rather than on

Rule 11 motions. The rule establishes a safe harbor,

providing a party 21 days within which to withdraw a

particular claim or defense before sanctions can be imposed.

If the party fails to withdraw an allegedly frivolous claim

or defense within the 21 days, a court may impose sanctions,

including assessing reasonable attorney fees.] The 1983 Rule

11 authorized a court to sanction discovery-related abuse

under Rule 11, Rule 26(g), or Rule 37, which created

confusion. Under the 1993 amendments to Rule 11, sanctioning

of discovery-related abuse was limited to Rules 26 and 37,

which provide for sanctions that include awards for

reasonable attorney fees.

The 1993 amendments to Rule 11 culminated a long, critical

examination of the rule begun four years earlier. The

Advisory Committee on Civil Rules (Advisory Committee)

reviewed a significant number of empirical examinations of

the 1983 Rule 11, including three separate studies conducted

by the Federal Judicial Center in 1985, 1988, and 1991, a

Third Circuit Task Force report on Rule 11 in 1989, and a New

York State Bar Committee report in 1987. The Advisory

Committee took note of several book-length analyses of Rule

11 case law.

The 1991 Federal Judicial Center survey noted that most

federal judges believed that the 1983 version of Rule 11 had

positive effects. But the study also noted that most judges

found several other methods more effective than Rule 11 in

handling such litigation and, most significantly, that about

one-half of the judges reported that Rule 11 exacerbates

behavior between counsel. After reviewing the literature and

empirical studies of problems caused by the 1983 amendments

to Rule 11, the Advisory Committee issued in 1990 a

preliminary call for general comment on the operation and

effect of the rule. The response was substantial, calling for

a change in the rule.

The Advisory Committee concluded that the cost-shifting in

Rule 11 created an incentive for too many unnecessary Rule 11

motions. Amendments to Rule 11 were drafted. The Supreme

Court promulgated and transmitted the amendments to Congress

in May 1993 after extensive scrutiny and debate by the bench,

bar, and public in accordance with the Rules Enabling Act

process (28 U.S.C. Sec. Sec. 2071-2077).

[Experience with the amended rule since 1993 has

demonstrated a marked decline in Rule 11 satellite litigation

without any noticeable increase in the number of frivolous

filings. In June 1995, the Federal Judicial Center conducted

a survey of 1,130 lawyers and 148 judges on the effects of

the 1993 Rule 11 amendments. About 580 attorneys and 120

judges responded to the survey. The Center found general

satisfaction with the amended rule. It also found that more

than 75 percent of the judges and lawyers would oppose a

provision that would require a court to impose a sanction

when the rule is violated. A majority of the judges and

lawyers, both plaintiffs' and defendants' lawyers, believed

that groundless litigation was handled effectively by judges.

Undoing the 1993 Rule 11 amendments, even though no serious

problem has been brought to the Judicial Conference rules

committees' attention, would frustrate the purpose and intent

of the Rules Enabling Act. Section 2 of H.R. 4571 would

effectively reinstate the 1983 version of Rule 11 that proved

so contentious and wasted so much time and energy of the bar

and bench. Section 2, indeed, in some ways seems to go beyond

the provisions that created serious problems with the 1983

rule. It may cause even greater mischief. Rule 11 in its

present form has proven effective and should not be revised.]

sections 3 and 4

[Section 3 would extend the new requirements of a mandatory

Rule 11 to all state court litigation that the state court

deems, on motion, to affect interstate commerce.] Two

features of this provision stand out. First, it would

directly regulate the practice and procedure of state courts,

mandating a federal standard for the imposition of sanctions

for the filing of frivolous or

ungrounded complaints and other papers in state court. At

present, states have been free to adopt their own rules of

practice, including a version of Rule 11, if a state so

chooses. Second, section 3 does not specify the actions to

which it would apply. Rather, it imposes on state judges a

broad generalized test to determine whether or not federal

Rule 11 would apply in a given case. If enacted, this section

could affect the cost and duration of a very large number of

civil actions in state courts.

[Section 4 seeks to prevent forum shopping by specifying

the places where a plaintiff may bring a ``personal injury''

claim by imposing a federal standard for determining the

venue of state law personal injury claims, in both state and

federal court. Such a federal standard would displace

existing state venue rules or statutes.] It would also

significantly alter the statutes in title 28, United States

Code, that now govern venue (section 1391) and transfer of

venue (section 1404) in the federal courts.

The Judicial Conference opposes the enactment of H.R. 4571

for the reasons stated above as to section 2. Sections 3 and

4 would make important changes in the administration of civil

justice in both federal and state courts. The Judicial

Conference has not had the opportunity to formally assess the

advisability or impact of these sections, but notes that they

may substantially affect federal-state comity interests and

raise important policy and practical concerns.

The Judicial Conference greatly appreciates your

consideration of its views: If you or your staff have any

questions, please contact Michael W. Blommer, Assistant

Director, Office of Legislative Affairs, Administrative

Office of the U.S. Courts, at (202) 502-1700.

Sincerely,

Leonidas Ralph Mecham,

Secretary.

Mr. Speaker, I yield 4 minutes to the gentleman from California (Mr. BERMAN).

(Mr. BERMAN asked and was given permission to revise and extend his remarks.)

Mr. Speaker, I yield 4 minutes to the gentleman from North Carolina (Mr. Watt).

Mr. Speaker, I yield 4 minutes to the gentlewoman from California (Ms. Waters).

Mr. Speaker, I yield 4 minutes to the gentlewoman from Texas (Ms. Jackson-Lee).

Mr. Speaker, I yield 4\1/2\ minutes to the gentleman from Massachusetts (Mr. Markey).

Mr. Speaker, I yield 2 minutes to the gentleman from Washington (Mr. Inslee).

(Mr. INSLEE asked and was given permission to revise and extend his remarks.)

Mr. Speaker, I yield myself the balance of my time.

Mr. Speaker, as it has been indicated, there is a serious question in some cases of whether or not the forum shopping is limited, one, to a situation where they cannot file anywhere. But I want to quote from a letter from several civil rights organizations. It states: ``More than a decade ago civil rights organizations, including several of the undersigned organizations, worked to amend Rule 11 because the old rule unfairly discouraged meritorious civil rights claims. Nationwide surveys about the former rule found that motions for sanctions were most frequently sought and granted in civil rights cases.'' This bill ``seeks to take us back to the changes made in 1993 to Rule 11 and force litigants to operate under the terms that we fear, like the former rule we worked so hard to amend, will be used to punish and deter valid claims of discrimination. But'' this bill ``goes even further. Not content with changing rules for Federal courts, the bill extends its reach to State courts,'' where the problem of biased judges would even be more acute.

I would point out again that there is no appeal to these cases and this does not apply to cases under existing law that many judges feel are frivolous.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, I thank the gentleman for yielding me time.

Mr. Speaker, there is a significant difference in the civil rights exemption in the underlying bill and this amendment. This amendment is vastly superior because it exempts all civil rights cases, not just those cases that are based on new or evolving law. Many of the cases brought under present laws are treated with hostility. Civil rights cases are often unpopular and some judges do not like to see them.

In fact, the Alliance For Justice had a report on Judge Pickering's hearing and said, ``At his hearing, Judge Pickering was asked about his record of strongly favoring defendants in employment cases. Incredibly, Judge Pickering defended his record by opining that almost no employment discrimination cases that come before the Federal courts have merit.''

Obviously, the problem is made worse when you expand the possibility to State courts, where local judges in some areas may have a civil bias. That is why the civil rights lawyers oppose the underlying bill because they do not want those kind of judges empowered to essentially allow mandatory sanctions to prevent those kind of cases from being brought in the first place.

I would hope that we would adopt the language in the substitute, but we should defeat the bill.

Mr. Speaker, I thank the gentleman from Wisconsin (Mr. Sensenbrenner), the chairman of the Committee on the Judiciary, for yielding me this time.

Mr. Speaker, frivolous lawsuits bankrupt individuals, ruin reputations, drive up insurance premiums, increase health care costs, and put a drag on the economy. Frivolous lawsuits are brought, for example, where there is no evidence that shows negligence on the part of the defendant. These nuisance lawsuits make a mockery of our legal system.

Of course, many Americans have legitimate legal grievances, from someone wrongly disfigured during an operation to a company responsible for contaminating a community's water supply. No one who deserves justice should be denied justice. However, gaming of a system by a few lawyers drives up the cost of doing business and drives down the integrity of the judicial system.

Let me give some examples. The Chief Executive Officer of San Antonio's Methodist Children's Hospital was sued after he stepped into a patient's hospital room and asked how he was doing. Of course, a jury cleared him of any wrongdoing.

A Pennsylvania man sued the Frito-Lay company, claiming that Doritos chips were ``inherently dangerous'' after one stuck in his throat. After 8 years of costly litigation, the Pennsylvania Supreme Court threw out the case, writing that there is ``a common sense notion that it is necessary to properly chew hard foodstuffs prior to swallowing.''

In a New Jersey Little League game, a player lost sight of a fly ball because of the sun. He was injured when the ball struck him in the eye. The coach was forced to hire a lawyer after the boy's parents sued. The coach settled the case for $25,000.

Today, almost any party can bring any suit in almost any jurisdiction. That is because plaintiffs and their attorneys simply have nothing to lose. All they want is for the defendant to settle. This is legalized extortion. It is lawsuit lottery.

Some lawyers file lawsuits for reasons that can only be described as absurd. They sue a theme park because its haunted houses are too scary. They sue the Weather Channel for an inaccurate forecast. And they sue McDonald's, claiming a hot pickle dropped from a hamburger caused a burn and mental jury.

Defendants, on the other hand, can unfairly lose their careers, their businesses and their reputations. In short, they can lose everything. This is not justice, and there is a remedy. The Lawsuit Abuse Reduction Act.

Mr. Speaker, this applies to both plaintiffs who file frivolous lawsuits merely to extort financial settlements and to defendants who unnecessarily prolong the legal process. If the judge determines a claim is frivolous, then they can order that person to pay the attorney's fees of the party who is the victim of their frivolous claim. This will make a lawyer think twice before he or she brings a lawsuit.

In addition, this legislation prevents forum shopping. It requires that personal injury claims be filed only where the plaintiff resides, where the injury occurred, or where the defendant's principal place of business is located. This provision addresses the growing problem of attorneys who shop around the country for judges who routinely award excessive amounts.

One of the Nation's wealthiest trial lawyers, Dickie Scruggs, has told us exactly how this abuse occurs, and the chairman of the Committee on the Judiciary used this example a while ago, but, quite frankly, it is just too good not to repeat.

Here is what one of the king of torts says about forum shopping: ``What I call `the magic jurisdiction.' It's where the judiciary is elected with verdict money, the trial lawyers have established relationships with the judges that are elected; they've got large populations of voters who are in on the

deal, they're getting their piece in many cases. It's almost impossible to get a fair trial if you're a defendant in some of these places. Any lawyer fresh out of law school can walk in there and win the case, so it doesn't matter what the evidence or law is.''

Mr. Speaker, I do not know how anyone can justify the continuation of this kind of abuse. One of these magic jurisdictions where trial lawyers flock is in my home State of Texas in Jefferson County. The Austin American Statesman noted that trial lawyers claim this is where ``juries pass down sizable judgments.'' Soaring medical liability insurance rates have followed, which has caused doctors to flee the area.

Mr. Speaker, forum shopping is a part of lawsuit abuses and we must pass legislation to stop it from occurring. The following organizations support H.R. 4571: American Tort Reform Association, National Association of Home Builders, National Association of Manufacturers, National Restaurant Association, National Federation of Independent Business, American Insurance Association, and the U.S. Chamber of Commerce.

Also, I might add, both Republican and Democratic presidential and vice presidential candidates are on record as wanting to stop frivolous lawsuits. So the Lawsuit Abuse Reduction Act is sensible reform that will help restore confidence to America's justice system.

Mr. Speaker, I want to add one point and address a concern that was raised by my friend from Virginia and that had to do with a letter he raised from the Judicial Conference. Well, the Judicial Conference does not exactly enhance their credibility when they take a position contrary to the judges that they purport to represent. And, in fact, in surveys taken by the Judicial Conference before the rule was changed in 1993, it found that 80 percent of the judges favored the rule that we seek to go back to. After the rule was changed and weakened, which we opposed, they took another survey and found a majority of judges, in fact almost a majority of trial lawyers, liked the original rule that we seek to go back to in this legislation.

So, Mr. Speaker, I urge my colleagues to support this bill.

Mr. Speaker, I thank the gentleman from Wisconsin for yielding me this time.

Mr. Speaker, let me respond to some of the concerns voiced by some of those who think they might oppose this bill. First of all, if a foreign corporation is involved, that does not prevent someone from having their day in court. The bill clearly says that it is where the plaintiff lives, and if one is a U.S. citizen, most likely they are going to live in the United States, or where the injury occurred, and the injury would have occurred in this country. So that takes care of their concerns there.

Another previous speaker from Massachusetts started off by talking about the ban on assault weapons. This bill has nothing to do with that, but we do attempt to ban frivolous lawsuits, and in that we are successful. But the gentleman from Massachusetts did make a good point, and I will embrace it entirely, and that is he acknowledged, which I thought was quite an admission, that today there are, in fact, even by his own standards, 11,000 frivolous lawsuits a year. He said they have come down. That is because of the asbestos lawsuits working their way through the various courts. Eleven thousand frivolous lawsuits filed today. I guarantee my colleagues that 99 percent of the American people think 11,000 frivolous lawsuits a year today is 11,000 frivolous lawsuits too many.

Another point I want to respond to, Mr. Speaker, was made by a gentleman who was concerned about the effect of this legislation on civil rights cases that might be filed. I want to assure him and others who might have that similar concern that if they look at section 5 of this bill, it reads: ``Nothing in this bill shall be construed to bar or impede the assertion or development of new claims or remedies under Federal, State, or local civil rights law.'' The reason it says ``new claims'' is because claims that already exist under current law obviously are not frivolous. There is a basis in law for filing those lawsuits. So we protect anybody who might file a civil rights lawsuit in this legislation. Furthermore, if there was some concern about that, one would think that it would have been raised in the full Committee on the Judiciary consideration of this bill. It was not mentioned and no amendments were offered on that point.

Lastly, Mr. Speaker, I also want to reassure not only my colleagues but those who might be listening to this debate that this is not a bill trying to

impugn the motives of all trial lawyers. In fact, the great majority of trial lawyers serve their profession and serve Americans honorably. We are talking about a very few attorneys who, quite frankly, abuse the system, who engage in legalized extortion, who file lawsuits for no other reason than they think someone can settle out of court and they are trying to extract money from them. That is the type of abuse we seek to stop in this bill, and that is the kind of abuse we intend to.

Finally, there are many pieces of legislation considered by this body where we can see where half of the American people might benefit, half might not benefit. But in this case we have at least 99 percent of the American people on one side and just a few lawyers on the other side. And it is very rare, I think, that we would have the vast majority of the American people so clearly favoring one cause, and that is the cause of trying to reduce frivolous lawsuits.

Mr. Speaker, I thank the chairman for yielding me this time.

Mr. Speaker, anyone who is worried about what frivolous lawsuits will do to them, their family, their friends, or their businesses ought to rush to oppose this Democratic substitute amendment. That is because it is an amendment that will do very little to prevent frivolous lawsuits.

The underlying bill makes several key changes that will deter lawyers from filing frivolous lawsuits. The substitute amendment before us strips all these away.

First, this legislation, the underlying legislation, allows the court to require an individual who files a frivolous lawsuit to pay attorneys' fees incurred as a result of the frivolous lawsuit. This provision obviously makes attorneys think twice before they file such a frivolous lawsuit. However, the Democratic substitute amendment does not include this key provision. In other words, there is no disincentive to file a frivolous lawsuit.

This also means that under the Democratic substitute, small business owners would still suffer from the cost of frivolous lawsuits. Individuals would still suffer because they would see their insurance premiums go up. They would see their health care costs rise. They would still see their reputations damaged, all because of wrongfully filed, frivolous lawsuits.

In other words, Mr. Speaker, this substitute amendment does not provide any relief to those who would get unfairly slapped with a frivolous lawsuit. Those victims would still have to pay their own legal fees.

Next, this substitute claims to have a ``three strikes and you are out'' provision. But if you look at it closely, as the chairman mentioned a while ago, there are no real consequences for the attorney who repeatedly files frivolous lawsuits.

Instead, the substitute merely requires a court to refer the offending attorney to his State bar association; and you can imagine that means that nothing is going to happen.

By contrast, the base bill requires that attorneys who fill frivolous claims face real consequence. Those attorneys can be barred from practicing in that Federal court for a year. That is a real disincentive to file frivolous lawsuits.

Also, the Democratic substitute we are considering now places heavy mandates on States. It requires a new regulatory scheme to deal with ``civil justice expense and delay'' issues. Mr. Speaker, I think that is a very nice but meaningless euphemism for frivolous lawsuits. The requirements would create a new bureaucratic nightmare instead of dealing with the real problem, which is of course frivolous lawsuits.

Finally, Mr. Speaker, the substitute amendment does nothing to address the problem of forum shopping and that is at least half the problem. We simply cannot continue to allow trial attorneys to flock to counties that will award unreasonably high verdicts to any plaintiff who walks in the door. This does too much damage to many Americans and it is, quite frankly, time to put a stop to this type of abuse.

Mr. Speaker, I urge my colleagues to oppose to substitute amendment and vote yes on the underlying bill which would deter lawsuit abuse.

I thank the distinguished gentleman for his leadership on this issue and a number of Members who have come to the floor to express their opposition to this legislation.

Mr. Speaker, the prime place for the answer to the question of frivolous lawsuits has to be in our judicial system. I am not sure why Congress considers it necessary to interfere on a regular basis with the normal process of the court system. They have done that throughout the years of the leadership of the Republican agenda, particularly as relates to closing the door to the injured, to plaintiffs, with the representation that there are too many frivolous lawsuits.

They did it in product liability, so a child injured on the Nation's playground, their parents could not find their way into the courthouses and have the judges or juries make the decisions that are necessary on the facts that are presented.

In the bankruptcy setting, they attempted to alter the bankruptcy code so that those in the middle class would never be able to go in and file Chapter 11 as our large corporations have been able to do over the years. Why do we feel the necessity to think that we are the arbiter on frivolous lawsuits when we do not have the facts before us?

The legislation we have would reverse the changes to rule 11 of the Federal Rules of Civil Procedure that were made by the Judicial Conference in 1993 such that, one, sanctions against an attorney whose litigation tactics are determined to harass or cause unnecessary delay or cost or who has been determined to have made frivolous legal arguments or unwarranted factual assertions would become mandatory rather than discretionary to the court; two, discovery-related activity would be included within the scope of the rule; and, three, the rule would be extended to State cases affecting interstate commerce so that if a State judge decides that a case affects interstate commerce, he or she must apply rule 11 if violations are found.

This legislation strips State and Federal judges of their discretion in the area of applying rule 11 sanctions. Furthermore, it infringes on States' rights by forcing State courts to apply the rule if interstate commerce is affected. Why is the discretion of the judge not sufficient in discerning whether rule 11 sanctions should be assessed rather than having a must-apply rule implemented on them by eliminating from them the ability to review the facts?

Part of the legal justice system is the eye on the facts, the presence in the courtroom, the lawyers, plaintiffs, defendants, prosecutors, defense lawyers, fact finders in the jury, the judge; not an oversight body way up here in Washington that has no knowledge of what is going on in individual courthouses.

If this legislation moves forward in this body, it will be important for us to find out its effect on indigent plaintiffs or those who must hire an attorney strictly on a contingent-fee basis. Because the application of rule 11 would be mandatory, attorneys will have to enhance their legal fees to account for the additional risk that they will have to incur in filing lawsuits and the fact that they will have no opportunity to withdraw the suit due to a mistake. Mistakes do happen.

Overall, this legislation will deter indigent plaintiffs from seeking counsel to file meritorious claims given the potential of high legal fees. This goes right in the face, if you will, of contingent fees that have been so important to those that have been injured on their job, injured in catastrophic disasters, such as issues dealing with mobility. All of those questions, individuals will now be deterred because lawyers will have this enhanced, if you will, burden that could have been handled in the courthouse.

I have not seen a dearth of judges who have had the ability and the responsibility to throw out frivolous lawsuits, fear doing so. Yet we want to sit on the high and look down the mountain and interject into the courts in Texas, Louisiana, New York, Wisconsin, Georgia and States all around the Nation and legislate what judges already do--create a fair justice system.

The ``Benedict Arnold corporation'' refers to a company that in bad faith takes advantage of loopholes in our Tax Code to establish bank accounts or to ship jobs abroad for the main purpose of tax avoidance, I will support this provision in the motion to recommit.

Let me simply say, in closing, Mr. Speaker, this is a bad legislative initiative. I would ask my colleagues to oppose it. Give all the decisions back to the courthouse and let us have a fair judicial system for all.

Mr. Speaker, I rise in opposition to the base bill before the Committee of the Whole, H.R. 4571, the Lawsuit Abuse Reduction Act of 2004 and state my support for the substitute as offered by the gentleman from Texas, Mr. Turner.

As I mentioned during the Committee on the Judiciary's oversight hearing on this legislation and reiterated in my statement for the markup, one of the main functions of that body's oversight is to analyze potentially negative impact against the benefits that a legal process or piece of legislation will have on those affected. The base bill before the House today does not represent the product of careful analysis.

In the case of H.R. 4571, the Lawsuit Abuse Reduction Act, this legislation requires an overhaul in order to make it less of a misnomer--to reduce abuse rather than encourage it.

The goal of the tort reform legislation is to allow businesses to externalize, or shift, some of the cost of the injuries they cause to others. Tort law always assigns liability to the party in the best position to prevent an injury in the most reasonable and fair manner. In looking at the disparate impact that the new tort reform laws will have on ethnic minority groups, it is unconscionable that the burden will be placed on these groups--that are in the worst position to bear the liability costs.

When Congress considers pre-empting state laws, it must strike the appropriate balance between two competing values--local control and national uniformity. Local control is extremely important because we all believe, as did the Founders two centuries ago, that state governments are closer to the people and better able to assess needs and desires. National uniformity is also an important consideration, in federalism--Congress' exclusive jurisdiction over interstate commerce has allowed our economy to grow dramatically over the past 200 years.

This legislation would reverse the changes to Rule 11 of the Federal Rules of Civil Procedure (FRCP) that were made by the Judicial Conference in 1993 such that (1) sanctions against an attorney whose litigation tactics are determined to harass or cause unnecessary delay or cost or who has been determined to have made frivolous legal arguments or unwarranted factual assertions would become mandatory rather than discretionary to the court, (2) discovery-related activity would be included within the scope of the Rule, and (3) the Rule would be extended to state cases affecting interstate commerce so that if a state judge decides that a case affects interstate commerce, he or she must apply Rule 11 if violations are found.

This legislation strips state and federal judges of their discretion in the area of applying Rule 11 sanctions. Furthermore, it infringes States' rights by forcing state courts to apply the rule if interstate commerce is affected. Why is the discretion of the judge not sufficient in discerning whether Rule 11 sanctions should be assessed?

If this legislation moves forward in this body, it will be important for us to fund out its effect on indigent plaintiffs or those who must hire an attorney strictly on a contingent-fee basis. Because the application of Rule 11 would be mandatory, attorneys will pad their legal fees to account for the additional risk that they will have to incur in filing lawsuits and the fact that they will have no opportunity to withdraw the suit due to a mistake. Overall, this legislation will deter indigent plaintiffs from seeking counsel to file meritorious claims given the extremely high legal fees.

Furthermore, H.R. 4571, as drafted, would allow corporations that perform sham and non-economic transactions in order to enjoy economic benefits in this country. Therefore, I planned to offer an amendment that would preclude these entities from so benefiting.

The text of the amendment defined the term ``Benedict Arnold Corporation'' and proposed to prevent such companies from benefiting from the legal remedies that H.R. 4571 purports to offer.

The ``Benedict Arnold Corporation'' refers to a company that, in bad faith, takes advantage loopholes in our tax code to establish bank accounts or to ship jobs abroad for the main purpose of tax avoidance. A tax-exempt group that monitors corporate influence called ``Citizen Works'' has compiled a list of 25 Fortune 500 Corporations that have the most offshore tax-haven subsidiaries. The percentage of increase in the number of tax havens held by these corporations since 1997 ranges between 85.7 percent and 9,650 percent.

This significant increase in the number of corporate tax havens is no coincidence when we look at the benefits that can be found in doing sham business transactions. Some of these corporations are ``Benedict Arnolds'' because they have given up their American citizenship; however, they still conduct a substantial amount of their business in the United States and enjoy tax deductions of domestic corporations.

Such an amendment would preclude these corporations from enjoying the benefit of mandatory attorney sanctions for a Rule 11 violation. By forcing these corporate entities to fully litigate matters brought helps to put their true corporate identity into light and discourages them from performing as many domestic transactions that may be actionable for a claimant.

In the context of the Judiciary's consideration of the Terrorist Penalties Enhancement Act, H.R. 2934, my colleagues accepted an amendment that I offered that ensured that corporate felons were included in the list of individuals eligible for prosecution for committing terrorist offenses. The amendment that I would have offered for this bill has the same intent--to increase corporate accountability and to encourage corporate activity with integrity.

I ask that my colleagues support the substitute offered by Mr. Turner and defeat the base bill. We must carefully consider the long-term implications that this bill, as drafted, will have on indigent claimants, the trial attorney community, and facilitation or corporate fraud.

Mr. Speaker, I offer an amendment in the nature of a substitute.

Mr. Speaker, I yield myself such time as I may consume.

I offered a substitute, which I believe is much stronger in preventing frivolous lawsuits than the bill offered to the House. In addition, it preserves the right that was mentioned earlier to sue a foreign corporation, which is jeopardized in the bill offered before us.

The Republican bill also weakens our civil rights laws by having a chilling effect upon suits relating to civil rights, and our substitute carves out an exception for civil rights litigation. But, most importantly, it does not eliminate the possibility that one may be unable to sue a foreign corporation in the United States.

First of all, our bill strengthens the provisions against frivolous lawsuits. Members on both sides of the aisle uniformly, unanimously agree that our laws and our rules of procedure must prohibit frivolous lawsuits. Our bill imposes a mandatory ``three strikes and you're out'' provision on frivolous pleadings and discovery violations. Thus, it is far more stringent than the Republican bill, which merely subjects these violations to mandatory payment of cost and fees. More importantly, our bill includes clear and specific civil rights carve outs so there will not be a chilling effect on these actions. We also amend the United States Code so that the change is not subject to future changes and modifications by the courts as the Republican bill would be.

Second, our bill limits the ability of corporate wrongdoers to conceal any conduct harmful to the public welfare by requiring that court records may not be sealed unless the court first enters a finding that such sealing is justified. This provision will help ensure that information on dangerous products and actions is made available to the public. A nearly identical provision passed by voice vote in the 107th Congress with the support of the gentleman from Wisconsin (Chairman Sensenbrenner). The Republican bill does not contain this very important protection.

Third, we provide that parties which destroy documents in connections with civil proceedings shall be punished with mandatory civil sanctions, held in contempt of court, and referred to the State bar for disciplinary proceedings. Again, this is far tougher than the Republican bill, which does not provide for contempt of court and disciplinary proceedings.

And, fourth, we specify that the Civil Justice Reform Act, which has been so successful in the Federal courts, be applied to all courts in order to speed up the pretrial process and to weed out junk lawsuits.

And, finally, unlike the Republican bill, our substitute does not have this new rule of jurisdiction that operates to make it impossible to sue a foreign corporation in this country and, further, by the absence of such provision, promotes corporations in our own country continuing this despicable process of relocating their headquarters overseas in order to avoid U.S. taxes, and now they will do so to avoid being sued. There is no reason to give these companies a windfall profit, windfall gain, at the expense of corporations who do the right thing and stay here at home.

This is a common sense substitute. It cracks down on frivolous lawsuits even more forcefully than the Republican bill. It preserves our antitrust laws and our ability to obtain justice against foreign corporations. It is a better bill, a stronger bill, and one that we would urge this House to substitute for the bill offered by our Republican colleagues.

Mr. Speaker, I reserve the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

I would remind the distinguished chairman that careful reading of our bill would reveal to him there is no safe harbor allowing any period of days, 21 or otherwise, to withdraw pleadings that may be frivolous. What we have done in our bill is we have amended the statute. We have provided a new statute against frivolous lawsuits; we do not disturb rule 11. We urge him to take a closer look at the bill and what we propose.

I would also suggest to the distinguished chairman that the provision in our bill to protect the public against automatic sealing of certain court records which may be important and contain important information that should be available to the public to protect the public against things like defective products and other things, the decision to seal is one that is in the hands of the court and the sealing must be justified clearly. In the cases of sexual abuse, that sealing is justified. I do not know any judge in the land that would not understand that. And, certainly, I do not see any judge taking the language that we have offered and overturning any State law or issuing any ruling contrary to State law that would not result in the sealing of sexual abuse cases.

The major principal defect in the Republican bill relates to the fact that you are unable to sue a foreign corporation because they attempt to change the law as it presently exists and to make the provision require that you file against a corporation where their principal place of business is. There are many foreign corporations that may be in the United States that do not have their principal place of business here; it is overseas. So the language that has been offered has the effect of denying a plaintiff with a genuine injury, not a frivolous lawsuit, but a genuine, valid lawsuit from being able to sue a foreign corporation.

That provision, perhaps the Republican drafters of their bill did not understand what they were doing with the language they offered, but that is the effect of it; and I think anyone who votes for the Republican bill and says that we are denying an American citizen the opportunity with a legitimate claim to file a suit in the United States against a foreign corporation is casting a vote they will regret.

I also think it is important to point out that the sanctions that are provided in the Democratic substitute are stronger than the provisions in the Republican bill. It is also, I think, important to point out that our sanctions apply to State courts where interstate commerce is involved. Your ``three strikes and you are out'' provision does not apply in State courts, perhaps, again, by drafting error; but it does not apply.

So we think it is very critical that this bill be the one the House adopts.

Mr. Speaker, I yield 5 minutes to the distinguished gentleman from New York (Mr. Weiner).

Mr. Speaker, I yield 2 minutes to the gentleman from Virginia (Mr. Scott).

Mr. Speaker, how much time remains on each side?

Mr. Speaker, I yield 3 minutes to the gentleman from Washington (Mr. Inslee).

(Mr. INSLEE asked and was given permission to revise and extend his remarks.)

Mr. Speaker, I yield 30 seconds to the gentleman from Washington (Mr. Inslee).

Mr. Speaker, do I close or does the chairman close?

Mr. Speaker, I yield myself such time as I may consume.

Mr. Speaker, let me say the language regarding the establishment of the forum is very clear in the Republican bill as the gentleman from Washington (Mr. Inslee) pointed out. It says the suit should be filed where the defendant has its principal place of business.

Now, the distinguished chairman says, well, the law has established that you can sue where somebody is registered to do business and all these foreign corporations have to register to do business.

That is not what the language offered in the Republican bill says. It does not say you can sue a foreign corporation in States where it is registered to do business. It says where its principal place of business is located, and many foreign corporations have no principal place.

I would suggest to the gentleman who offered up the quote of Senator Edwards, we agree with Senator Edwards. We should ban frivolous lawsuits, and the bill that we have offered does it more forcefully and effectively than the Republican bill does. At the end of the third strike under the Republican bill you can be barred in practicing law in that court. You are suspended. Under our bill, the third strike, you are referred to your State bar association for disciplinary proceedings, to include possible disbarment.

Now, under your bill a lawyer from New York can come down to east Texas and file a lawsuit and if it is frivolous then he gets barred from ever practicing law in the Eastern District of Texas again.

What good is that going to do for a New York lawyer who may never come back to east Texas anyway? What good will it do to say you cannot come to east Texas? Even if he has to come back he can send a law partner and let him file the frivolous lawsuit again.

If you want to get a lawyer's attention, you refer them to the State disciplinary board that governs their right to practice law in that State.

I practiced law for many years, and anytime a lawyer gets referred to the State bar association for disciplinary action, it is a serious thing. If a lawyer continues to file frivolous lawsuits, they should be disbarred; and then we would not have to worry about them running to another court to file another frivolous lawsuit where they had not already filed one before. They would not be practicing law.

So I would suggest, if my colleagues really want to get tough on frivolous lawsuits, they will support the Democratic substitute, and if they want to be sure that an American citizen who is injured in America has the right to sue a foreign corporation that was the perpetrator of a tortious act, they better vote against the Republican bill and vote for the substitute.

I know the gentleman from Wisconsin (Mr. Sensenbrenner) did not intend for that to be the effect, but that is the effect of the language that he has offered up today; and I would suggest that any Member on either side of the aisle would be well advised to vote against his bill to ensure that that does not occur to an American citizen who would be denied the right to file a lawsuit against a foreign corporation.

Mr. Speaker, I yield back the balance of my time.

Mr. Speaker, on that I demand the yeas and nays.