Lawsuit Abuse Prevention Act (LARA) Aims to Kill Frivolous Lawsuits

The House of Representatives will consider legislation this week that could make it cheaper to produce everything from hot dogs to television programming to online trading services.

Congress will vote on the Lawsuit Abuse Prevention Act (LARA), a bill supporters hope will stop millions of dollars worth of frivolous lawsuits against companies, but also doctors, schools and even the Girl Scouts.

House Republicans have already passed numerous bills meant to end needless government regulation. With LARA, the GOP hopes to unburden companies and organizations from time-wasting, expensive legal actions that are often silly, and just as often make the newspapers.

In a report on the bill, the House Judiciary Committee noted several examples of what it said were trivial legal pursuits.

One was a lawsuit filed in New Jersey against Kraft Foods that claimed the company's hot dogs caused cancer. The plaintiffs sought to recoup the money they spent on hot dogs, but also wanted a warning label on all hot dog packages saying that "consuming hot dogs and other processed meats increases the risk of cancer."

According to the committee, the suit was accompanied by a billboard advertising campaign, and it took six months to dismiss it once it was moved to a federal court. No sanctions were imposed against the plaintiffs.

Another involved a suit against NBC in 2004, in which the plaintiff said an episode of Fear Factor made him sick. He wanted $2.5 million after watching contestants on the show eat blended rats.

The suit was dismissed as frivolous, but the court didn't award NBC any of its defense costs.

But one man's frivolous lawsuit is another man's college tuition for his kids. How can you tell if a suit is silly enough to be called "frivolous?"

One good way, Republicans argue, is to change federal law to require judges to impose monetary sanctions against plaintiffs who bring these cases. LARA, offered by Judiciary Committee Chairman Lamar Smith (R-Texas), would make that change.

Another way is to eliminate the current rule that allows plaintiffs with frivolous suits to withdraw them within 21 days with no penalty. Smith's bill does just that, which he says would deter unserious complaints from ever reaching the court.

"If it costs $10,000 to defend yourself in court against frivolous charges, it makes financial sense to settle the case for $9,000, even
if you weren't at fault in any way," Smith's committee concluded in its report. That report says the current incentive structure creates a "perverse dynamic" that amounts to "legalized extortion."

Supporters of the bill hope that changes at the federal level would trickle down to state courts, which often mimic federal standards. That might have stopped Lindsay Lohan from suing E*Trade a few years back, over a commercial that had a baby girl in it named "Lindsay" who was a "milkaholic."

Lohan said the spot was a clear reference to her, and demanded $100 million. E*Trade ultimately reached an undisclosed settlement, and cited Smith's logic in doing so — the need to get rid of the problem.

"It was a simple business decision," an E*Trade spokeswoman said. "We always have to consider the cost and time involved in litigation, and we are pleased to have the matter behind us."

Aside from saving the business world from time-sapping, resourcing-sucking suits, Smith hopes his bill can stop other legal silliness, much of which is listed in the committee report. Like the father who sued a youth hockey league for more than $200,000 when his son wasn't named MVP of his team.

Silly product warnings might also not be needed, like the sticker on the hairdryer that warns people to "never use while sleeping," or the label on the bag of hazelnuts that warns the bag "contains nuts."

So what's in the way of passing the bill? Plaintiffs groups, for one thing, plus the lawyers who work for them, or who might soon work for them.

And if Democrats in the House are any indication, Senate Democrats are unlikely to consider the bill at all once the House passes it. House Democrats in the Judiciary Committee said the bill would raise the cost of civil litigation and make civil rights claims harder to prosecute.

That opposition makes Smith's bill the seed of an idea — one that he'll plant this week, but one that can only grow if Republicans find some way to take back the Senate.

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Pete Kasperowicz is a staff writer for The Hill newspaper and website, and has no positions in any of the companies listed. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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