From the March 2005 issue of Entrepreneur

Business owners afraid of losing big in a lawsuit should feel safer: A bill passed by the U.S. House of Representatives in September takes aim at nuisance lawsuits and class-action suits. At press time, the Lawsuit Abuse Reduction Act of 2004 (LARA), H.R. 4571, was awaiting action by the Senate Judiciary Committee.

Lawsuits in the United States are subject to the Federal Rules of Civil Procedure, which dictate who is responsible for what, how a lawsuit is to proceed, and what lawyers may do. LARA gives teeth to Rule 11, designed to stave off frivolous lawsuits. Under LARA, a lawyer who files a groundless lawsuit or presents a pleading or motion with the intent of harassing or causing unnecessary delay faces sanctions.

"Reinstating Rule 11 will hold personal-injury lawyers accountable to basic, fair standards," says Sherman Joyce, president of the American Tort Reform Association. The rule will also apply to any state case that affects interstate commerce, such as by threatening jobs and economic losses in other states.

The act would also rein in forum shopping--a practice in which lawyers file personal-injury lawsuits wherever they think they can win. Under LARA, plaintiffs may only sue where they live, where they were injured or in the defendant's principal place of business.


Jane Easter Bahls is a writer in Rock Island, Illinois, specializing in business and legal topics.