ISSUE BRIEF: Liability Reform
Rental businesses pay the costs of excessive litigation. Rental businesses are directly impacted by product liability suits against products they rent or sell but do not manufacture. Litigation from class action suits and medical malpractice suits affects our costs indirectly. In our current system, the threat of costly legal action will move defendants to settle cases rather than be exposed to open-ended financial liability.
It costs little more than a small filing fee and often takes little more time than generating a form complaint to begin a lawsuit. It costs much more for a small business to defend against it.
The defense against frivolous lawsuits was considerably weakened when Federal Rule of Civil Procedure 11, was changed in 1993. Until that change, Rule 11 provided for sanctions on those who file claims for an improper purpose, to harass or cause unnecessary delay or needless increase in the cost of litigation, or include claims that are not warranted by existing law or lack a factual or evidentiary basis. When Rule 11 was modified in 1993, it triggered an automatic, similar change in state rules in a number of jurisdictions.
The 1993 changes weakened Rule 11 by:
The changes allowed plaintiffs' lawyers to force those targeted to settle cases for amounts just under the expected cost of defending against the claim. Insurers settled, and small business paid more for insurance.
The Lawsuit Abuse Reduction Act ('LARA'), H.R. 420, addresses frivolous lawsuits against small business, school boards and many others.
LARA will reduce the filings of frivolous lawsuits by:
LARA provides reasonable remedies to end forum shopping. LARA allows a plaintiff to file a personal injury case:
LARA precludes plaintiffs' lawyers from filing cases where their clients have no meaningful connection.
We support comprehensive litigation reform, and especially liability reform for small businesses. H.R. 420 was adopted by the U.S. House of Representatives and ARA supports passage of a similar bill in the U.S. Senate.