H.R. 988, the "Attorney Accountability Act of 1995," contains three substantive provisions:
1) The "Unreasonable Party Pays" Rule;
2) Honesty in Evidence;
3) Rule 11 Sanctions
1. The "Unreasonable Party Pays" Rule
The general rule in federal and state courts is that each party pays its own attorney's fees. This is known as the "American Rule." The American Rule lies in contrast to the "Loser Pays" or "English Rule," which provides that the losing party in a lawsuit generally pays the prevailing party's attorney's fees. The American Rule already has many exceptions. Approximately two hundred federal statutes provide for "fee- shifting," which means that they authorize courts to order the losing party in suits brought under such statutes to pay the attorney's fees of the prevailing party.
The "Attorney Accountability Act of 1995" (hereinafter "the Act") would Amend 28 U.S.C. 1332, applying a form of the Loser Pays Rule reflecting American traditions of negotiation (the "Unreasonable Party Pays Rule") in all federal district court (trial level) cases that arise under state law. Accordingly, the Act would not have an effect on existing fee-shifting statutes. A suit arising under state law may currently be brought in federal court pursuant to 28 U.S.C. 1332 if there is complete diversity of state citizenship between the plaintiff and the defendant, and the amount in controversy exceeds $50,000. Traditionally, such cases involve tort and contract suits. In all diversity cases, under the Act's proposed language, fee- shifting would be mandatory, and would be imposed equally on plaintiffs and defendants.
Under H.R. 988, a party who obtains a verdict, judgment or order which is less favorable than a rejected written offer of settlement made within 10 days of trial must pay the offeror's reasonable attorney's fees from the date of the last offer made by either party. This Rule should discourage frivolous suits, encourage parties to make pretrial offers of settlement, and reduce the number of trials in federal court.
H.R. 988 defines "reasonable attorney's fee" to be one that is "calculated on the basis of an hourly rate which may not exceed that which the court considers acceptable in the community in which the attorney practices law, taking into account the attorney's qualifications and experience and the complexity of the case."
The Act would not necessarily require a party to pay the entire amount of another party's attorney's fees. Rather, it would limit the paying party's liability to an amount not exceeding the amount it paid its own attorney. If the paying party hired its attorney on a contingency basis (an agreement in which a plaintiff does not pay unless it prevails,) and, because it lost, paid its attorney nothing, then it would be liable for the opposing party's attorney's fees up to the amount "that would have been incurred by the nonprevailing party for an attorney's noncontingent fee . . . ."
The Rule should effectively deter plaintiffs from filing in federal court meritless or weak cases; or cases which possess legal merit but which are initiated for revenge, to intimidate or to cause financial harm to a defendant. The Rule could save taxpayers thousands of dollars in federal taxes per case in administrative costs. The Rule will also discourage a preference for filing in federal courts by plaintiffs who wish to avoid undesirable state court procedures.
Virtually every Western legal system, except for the United States, has adopted a version of this Rule. This Rule puts a prospective party on notice before filing suit that it may have to incur the costs the opposing party would otherwise incur as a result of that suit if reasonable offers are not accepted.
2. Honesty in Evidence
This section would amend Rule 702 of the Federal Rules of Evidence, which allows expert witnesses to testify as to their expert opinions with respect to "scientific, technical, or other specialized knowledge." Such evidence may have an enormous impact on a jury's decision because of its nature. Accordingly, assuring that such evidence is valid and reliable is of utmost importance. With that in mind, the amendment would make a scientific opinion inadmissible unless it is:
(1) scientifically valid and reliable;
(2) has a valid scientific connection to the fact it is offered to prove; and
(3) sufficiently reliable so that the probative value of such evidence outweighs the dangers specified in [Federal] rule [of Evidence] 403.
The "dangers" specified in Rule 403 are "unfair prejudice, confusion of the issues, or misleading the jury."
The Act would further make expert testimony inadmissible if the "witness is entitled to receive any compensation contingent on the legal disposition of any claim with respect to which such testimony is offered."
The standard for admissibility of scientific expert testimony was most recently addressed by the Supreme Court in Daubert v. Merrell Dow Pharmaceuticals, Inc., 113 S.Ct. 2786 (1993), on remand, No. 90-55397 (9th Cir., Jan. 4, 1995, Kozinski, J.). In that case, the Supreme Court held that Rule 702 does not require that scientific evidence have "general acceptance" in the relevant scientific community to be admissible. Rather, the Court held that the Rule requires that expert testimony rest on a "reliable foundation" (i.e., the methodology from which the evidence is derived must be based on "scientific knowledge") and be "relevant to the task at hand" (i.e., it must assist the trier of fact and have a logical scientific nexus to the subject matter of the suit or other admitted evidence.) This test has been read to be less stringent than the test originally set forth, before the Federal Rules of Evidence were adopted, in Frye v. United States, 293 F. 1013 (D.C. Cir. 1923), although not always applied as such. Under Frye, scientific evidence was not admissible unless it had been generally accepted in the particular scientific community to which it belonged.
The Act creates a presumption of inadmissibility, rather than admissibility of scientific evidence, which can be rebutted if items (1)-(3) are met. This standard will thus shift the current standard and force attorneys to prove to the court the validity of scientific evidence under standards established by the Supreme Court before it can be admitted.
Items (1) and (2) would serve to codify and are meant to complement the standards established in Daubert by the Supreme Court and by the Ninth Circuit on remand. H.R. 988 uses the words "scientifically valid and reliable" as simple definitions which will be interpreted in conjunction with, and not as superseding the Daubert case. H.R. 988 should effectively require that the methodology from which scientific evidence is derived be based on scientific knowledge and that it have a logical, scientific nexus to the subject matter of the suit or other admitted evidence. These goals of Daubert would thus be enforced by requiring a showing of their presence before admissibility is allowed.
Item (3) would effectively amend Rule 403 of the Federal Rules of Evidence as it applies to scientific evidence by making evidence inadmissible if its prejudicial value outweighs (rather than substantially outweighs as currently provided in Rule 403) its probative value. Reading this literally, if the dangers of unfair prejudice, confusion of the issues, or misleading the jury even insubstantially outweigh the probative value of the scientific evidence, the evidence is inadmissible. Thus, the standard for judging prejudice versus probative value existing in Rule 403 is lowered for cases involving scientific evidence. This change favors the inadmissability of scientific evidence that is not valid and reliable, since such evidence is more likely to be unfair, confusing or misleading.
The Act would also make expert testimony inadmissible if the "witness is entitled to receive any compensation contingent on the legal disposition of any claim with respect to which such testimony is offered." The reason for this provision presumably is that an expert witness who receives a contingency fee is less likely to furnish reliable testimony than one who receives a flat or hourly fee since he or she has a vested interest in the outcome of the litigation. The provision would exclude evidence if the witness receives any contingency fee, even if such fee is not a percentage of the judgment or settlement, but rather is a flat fee or hourly fee the payment of which is contingent upon the legal disposition of the claim.
H.R. 988 is intended to prevent trial lawyers from taking advantage of the court system. If there is a consensus in the scientific community that a hazard or risk (usually of a product) is real or substantial, the trial lawyers will implore that consensus to support complaints for compensatory and punitive damages. If the consensus in the scientific community is that a hazard or risk is trivial or imaginary, however, the same lawyers should not be able to brush that fact aside and find "fringe" experts to testify otherwise. Even in cases where real hazards exist, trial lawyers will attempt to stretch claims beyond validity in order to collect punitive damages. By creating a presumption of inadmissability, rebutted by the standards created in Daubert by the Supreme Court, along with a lower standard of prejudice, an amended Rule 702 will be effective in weeding out "junk science" as evidence in our federal courtrooms.
These amendments to Rule 702 would apply only to civil and not criminal cases. They would most frequently be used in products liability cases. This will prevent frustration in the important use of scientific evidence such as blood-type analysis and DNA testing in criminal proceedings.
3. Rule 11 Sanctions
A. Overview of the Rules Process
The Judicial Conference of the United States has the responsibility to "carry on a continuous study of the operation and effect of the general rules of practice and procedure". It also recommends changes in the Federal Rules to promote a "simplicity in procedure, fairness in administration, and just determination of litigation and the elimination of unjustifiable expense and delay." 28 U.S.C. 331. All of this activity is coordinated by its Committee on Rules of Practice. The Standing Committee reviews and coordinates the recommendations of five advisory committees.
The Rules Enabling Act process, for the most part, is a proper and effective procedure by which the Judiciary governs its business. In fact the Congress has only blocked the court approved rules on two occasions, once in the early 1970's when new Federal Rules of Evidence were proposed and in the early 1980's when a far-reaching change to Rule 4 was proposed. The Congress did add a requirement of more openness in the rule making process during the consideration of the 1988 amendments to the Rules Enabling Act.
The Supreme Court is authorized to "prescribe" the general rules of practice and procedures. In fact it has been the general practice of the Supreme Court to merely act as a conduit for the rule changes and rely on the Judicial Conference to make the basic decisions in this area. Justice White believed that, as a matter of practice, the role of the Supreme Court is to "...transmit the Judicial Conference recommendations without change and without careful study as long as there is no suggestion that the committee system has not operated with integrity". Indeed Chief Justice Rehnquist's April 22, 1993 letter conveying the rules to the Speaker states: "While the Court is satisfied that the required procedures have been observed, this transmittal does not necessarily indicate that the Court itself would have proposed these amendments in the form submitted."
However, three of the Supreme Court Justices do not appear to accept this passive role, or at least in this instance they felt so strongly that they dissented in part to the proposed rules. Their observations are outlined in Justice Scalia's dissent in which he objected to changes in Rule 11 joined by Justice Thomas.
B. Rule 11 Sanctions
Justice Scalia in his dissent identifies three reasons why the proposed Rule 11 changes will make the Rule "toothless". The first is the so-called "safe harbor" provision which is a 21-day grace period within which a party accused of a frivolous filing may withdraw the filing and escape any sanctions. The practical consequence of this "safe harbor" provision, Justice Scalia asserts, will be to encourage some litigants to abuse the litigation process with impunity and force their opponents to incur substantial transaction costs. The Judicial Conference responded to this argument in the following manner: "The basic requirement for pre-filing investigation is retained in the text of the rule, and, as the Committee Notes make clear, pleading on information must be preceded by an inquiry reasonable under the circumstances. The revision is not a license to join parties, make claims, or present defenses without any factual basis or justification. However, it must be acknowledged that, with these changes, some litigants may be tempted to conduct less of a pre- filing investigation than under the current rule. The Advisory Committee believes that this risk is justified, on balance, by the benefits from the changes." H.R. 10 did not change this provision. H.R. 988 abolishes the "safe harbor" provision and returns to the old Rule 11 (pre Jan. 1994.)
The second problem Justice Scalia discusses is the changes in Rule 11 from mandatory sanctions to discretionary sanctions for frivolous or abusive tactics. This change was made by the Rules Committee after its submission by the Advisory Committee on Civil Rules, and there was no specific rationale proffered by the Committee on Rules and Practice. H.R. 988 retains these provisions.
The third aspect of the proposed rules that Justice Scalia objected to was "disfavoring compensation for litigation expenses". This results from the new language which provides that monetary sanctions "ordinarily" should be payable to the court. According to Justice Scalia, "The net effect (of this change) is to decrease the incentive on the part of the person best situated to alert the court to perversions of our civil justice system." H.R. 988 retains these provisions.
The last change made to Rule 11 by the 1994 amendments would make the rule inapplicable to Discovery. H.R. 988 goes back to the old Rule 11 (pre Jan. 1994) and makes Rule 11 applicable to discovery.