"Enough is enough." That is the new message from corporate America. After suffering through the deluge of class action attacks against corporations that sell products ranging from hamburgers to medical equipment to automobiles, corporate boardrooms are taking the offensive against the increasing number of vexatious litigants. In a role reversal, corporations are moving up the pleading cover sheet to become plaintiffs, rather than defendants, in litigation related to frivolous lawsuits. And with an added twist, corporations are suing the lawyers who at one time represented the plaintiffs who filed suit in the first place.
Last week, DaimlerChrysler Corporation was joined by North Star Dodge Sales as plaintiffs in a lawsuit against three Texas lawyers who purportedly used falsified evidence in a 1998 lawsuit blaming the automaker and dealership for a crash that killed four children. In the earlier product liability suit, state District Judge David Peeples threw out the case and fined the three lawyers almost $900,000 after learning that the claimed defective steering column was intact. Shockingly, this information came from a report made by the plaintiff lawyers' own investigator.
In dismissing the original product case, Judge Peeples called the firm's conduct "an egregious example of the worst kind of abuse of the judicial system." Evidence presented by the automaker in the new lawsuit accuses the lawyers of conspiring to commit several forms of fraud, from tampering with evidence to attempted bribery of witnesses. In addition to filing the lawsuit to discourage frivolous and fraudulent court claims, the automaker is reported to be preparing a complaint to the state bar association.
Inasmuch as a corporation's decision to file a separate lawsuit seeking punitive damages against the plaintiffs' lawyers may be an emerging tactic, court rules have long existed providing for sanctions and punishment against lawyers found guilty of wrongdoing. For example, Federal Rule 46(b)(1)(B) states that a lawyer who "is guilty of conduct unbecoming a member of the court's bar" may be disciplined or disbarred.
Perhaps the most common form of sanctions imposed against opposing counsel occurs under Rule 11, a federal rule that enables judges to penalize lawyers who violate the provisions contained therein. For example, Rule 11 requires the attorney signing pleadings to certify that the signer's knowledge, information, and belief were "formed after reasonable inquiry," that the pleading or motion is "well grounded in fact and is warranted by existing law or a good faith argument for the extension, modification or reversal of existing law, and that it is not interposed for any improper purpose." Thus, under Rule 11 an attorney is required to engage in additional investigation before signing the pleading. And Rule 11 sanctions are not the most potent arrow in corporate defense counsel's quiver. While those sanctions may deter the filing of claims and result in a dismissal, they do not represent adjudication on the merits when granted.
Sanctions are also appropriately imposed against lawyers under federal law -- title, 28, section 1927 -- for conduct that, viewed objectively, manifests either intentional or reckless disregard of the attorney's duties as officers of the court. In such situations, the court often examines whether plaintiffs' counsel's conduct, when viewed objectively, imposed unreasonable and unwarranted burdens on the court and opposing parties, and whether plaintiffs' counsel acted recklessly or with indifference to the law.
Several years ago, section 1927 sanctions were entered against a plaintiff's attorney in a products liability suit against Upjohn Company. In that case, a three-judge panel of the United States Court of Appeals for the Seventh Circuit affirmed the decision of the lower court judge ordering the plaintiff's attorney to pay costs and legal fees of the defendant because the attorney "multiplied the litigation unreasonably and vexatiously." With an additional slap on the attorney's hand, the court noted that "[c]ounsel is obliged to research the law before filing suits." More recently, the same panel of the Seventh Circuit removed the attorney from the roll of attorneys authorized to practice because she failed to pay the sanctions entered under section 1927.
Earlier this year, in class action product liability litigation involving the diet drug "fen-phen," the manufacturer filed a motion for an injunction and for civil contempt and sanctions against a lawyer representing one of the plaintiff class members. Described in the ruling as "a sad day for the court to hold a member of the bar in civil contempt," the court noted it had no other choice following the attorney's "patter of evasion and lack of candor with this court."
In another products liability action, this one involving Uniroyal Chemical Company, a trial court sanctioned a party for discovery violations. Invoking Federal Rule 26(a), the case was dismissed for failure to provide the required expert witness reports. In upholding the district court's judgment, the Sixth Circuit Court of Appeals stated that "any sanction short of dismissal would permit the repeatedly recalcitrant appellant to benefit from his tactical obstruction ... [and] in the analogous context of excusable neglect, appellant has not necessarily forfeited his 'day in court' solely by reason of his lawyer's misconduct, when [appellant] has a legal basis to initiate an action for professional malpractice against his willfully dilatory counsel."
In addition to some judges reestablishing control of their courtrooms by punishing lawyers who file lawsuits deemed frivolous, at least one state attorney general is cracking down on lawyers for filing lawsuits to extort money from small businesses. This month, California State Attorney General Bill Lockyer sued a Long Beach attorney and his law firm for filing what Lockyer referred to as "sham lawsuits" brought to line the pockets of the lawyer with easy money. The suit seeks civil penalties of at least $1 million and the return of money paid by hundreds of nail salon owners and other small retailers, many of them immigrants, to settle lawsuits the lawyer brought or threatened to bring. This is the second case filed by the state attorney general's office against lawyers accused of abusing a decades-old consumer protection law that lets plaintiffs file lawsuits even if they haven't been directly harmed. The first case resulted in three lawyers resigning from the state bar earlier this month rather than face disbarment over alleged ethics violations for sending settlement offers shortly after filing the lawsuits, demanding from $6,000 to $26,000. (To read more about this case, see Three Down, Many More to Go.) One settlement offer is reported as reading: "Either pay even more money to fight in court or settle out of court and get on with business."
With class action lawyers under attack by defendants, judges and attorney generals, some lawyers have jumped on the bandwagon and are chasing other lawyers. Dubbed as "professional" or "serial" objectors, some lawyers are making their money by threatening to hold up class-action settlements by raising objections in what some describe as extortion-like threats. In some instances, the objector may actually improve the terms of the settlement. In most instances, however, the objector uses his status to shake down the class counsel for a fee to flee and stop clogging up the settlement. One frequent objector, Attorney Lawrence Schonbrun, summed it up when he said: "It's the pot calling the kettle black. I can't listen to class-action lawyers saying objectors are doing it for the money when they are the epitome of lawyers who do things for huge sums of money."
Will these fresh offensive measures stop the marauding band of tort lawyers who are parading through this country filing frivolous tort lawsuits? Doubt it. As Chief Justice Warren Burger stated nearly twenty years ago, "mass neurosis ... leads people to think courts were created to solve all the problems of society."
Perhaps the best we can hope for is that some lawyers, at least those with some scruples, will slow down long enough to recognize that excessive and frivolous litigation overwhelms the judicial system's capacity to administer speedy and efficient justice, leads to higher costs for litigants and society at-large, and even hinders America's competitive position in the global economy.
Certainly, public opinion is starting to take note of the horrifyingly out-of-control nature of worthless lawsuits, the latest of which involve ridiculous obesity claims. In a recent national survey, 92% of respondents agreed with the statement: "There are far too many frivolous lawsuits today."
It remains to be seen whether public disgust with meritless lawsuits will motivate legislators on Capitol Hill to address liability reform. Two bills currently before the House of Representatives seek to directly prevent or limit frivolous lawsuits. The Personal Responsibility in Food Consumption Act (H.R. 339) seeks to prevent frivolous litigation by limiting civil liability of manufacturers, distributors or sellers of food or non-alcoholic beverage products in instances where the plaintiff is unable to prove that the product was not in compliance with applicable statutory and regulatory requirements. The Medical Malpractice Insurance and Litigation Reform Act (H.R. 1116) seeks to limit frivolous medical malpractice lawsuits by requiring that no medical malpractice liability action may be brought unless it is accompanied by an affidavit of a qualified specialist that includes the specialist's statement of belief that there is a reasonable and meritorious cause for the filing of the action against the defendant. The Senate's companion bill, the Better Health Act of 2003 (S.B. 1374), introduced last week, includes a provision requiring a specialist affidavit, too. And this is just to name a few of the many federal and state legislative proposals that are designed to clean up the dockets of our run-away liability system.
In the absence of Congressional action, consensus is that frivolous lawsuits and attorney sanctions will be a hot election issue. President Bush already stated his position on the issue in his State of the Union speech, "No one has ever been healed by a frivolous lawsuit." The Democratic candidate, whoever it may be, will likely espouse a much different perspective, considering the fact that it has been reported that 74 percent of the $24.4 million contributed by lawyers and law firms went to Democrats in the last federal election cycle.
With presidential candidates drawing their lines and Congress, as well as some state legislatures -- battling out tort reform in numerous bills, defendants are left for the time being with the courts to make their cases against the lawyers. And it does appear that in the lawsuit tsunami, the tides might be changing.July 18, 2003
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