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Legislation Help for
Business
By Aleda Sebenick, Compliance Officer /
CUSTOM PROTECTIVE SERVICES
BIG WIN FOR BUSINESS
On April 14, President Barack H. Obama signed into law the Small Business Paperwork Mandate Elimination Act repealing the broadly expanded the 1099 filing requirements. A last hour insertion into the Health Care Bill would have required any individual or corporation from whom a business purchases a total of $600 or more in goods or services to file a 1099 form with the IRS. This is a big win for small business.
UPDATE ON LAWSUIT ABUSE
The committee on the judiciary opened hearings March 11 to hear testimony to amend Rule 11 of the Federal Rules of Civil Procedure. Since 1993, Rule 11 allows judges the
option to impose sanctions on attorneys who file meritless civil suits.
Lamar Smith (R-Texas) and Chuck Grassley (R-Iowa) introduced the Lawsuit Abuse Reduction Act of 2011 that would amend Rule 11 by
mandating sanctions. The offending parties will have to pay reasonable legal fees to the injured parties.
LARA would also eliminate the 21-day �safe harbor� rule that allows parties to withdraw frivolous lawsuits without sanctions.
Those that oppose this rule change, including the American Bar Association, argue that LARA would flood the courts with additional litigation resulting in further delays in the judicial process. Small business advocacy groups applaud LARA as an excellent start to holding unscrupulous attorneys accountable. The National Federation of Independent Business (NFIB), among others, argues that it is an incentive for attorneys to investigate the merits of the claim before filing civil suits or sending threatening letters to sue.
You may ask what this has to do with state judicial proceedings. History shows that state judicial rules, more often than not, eventually align their rules to the federal rules. Texas is ahead of the game. On March 10,
HB 274, authored by Brandon Creighton, was filed and is now in committee for review. This bill closely mirrors Governor Perry�s call for further civil suit reforms in his press release printed in the
Texas Tribune Sept. 16, 2010, as follows:
� LOSER PAYS FOR FRIVOLOUS LAWSUITS: If a court determines that a lawsuit is groundless or a jury determines a suit is frivolous, then the plaintiff should be required to pay the defendant�s attorney�s fees.
� EARLY DISMISSAL FOR FRIVOLOUS LAWSUITS: Forty-two states and the federal courts already have this mechanism in place for the early dismissal of clearly frivolous lawsuits. If a lawsuit is frivolous, Texas judges should be able to dismiss the case immediately before the legal bills pile up and the trial court should award attorney fees to the defendant.
� LEGISLATURE DETERMINES NEW CAUSES OF ACTION: Texas judges should not be permitted to create a cause of action from the bench. We should require the legislature to explicitly state when they are creating a new cause of action in statute, forcing courts to read statutes strictly, and providing only those rights and remedies the legislature intended.
� INCREASED ACCESS TO COURTS FOR LEGITIMATE CLAIMS: The court system should be more accessible to Texans with legitimate claims without the incurred costs associated with a drawn out trial. Lawsuits with claims between $10,000 and $100,000 should have expedited trial settings and limited discovery in order to get litigants in and out of the court quickly and allow swifter recovery for damages.
The preceding legislation is an excellent start to thwart legal extortion perpetrated on businesses. I hope that this reform will prompt a reduction in the low dollar unfounded threats that plague small business and insurance companies. Understandably, our insurers knowingly settle invalid claims to avoid costly litigation. While there is no definitive data on the cost of this legal chicanery, it most certainly leads to rising insurance premiums, hidden administrative costs, and higher cost of goods and services passed on to consumers. In addition, the time and expense that small businesses waste on addressing these unscrupulous claims impedes business growth, job creation, employee benefit offerings, and better compensation for existing employees.
If we truly mean to grow our economy by creating jobs and thus reducing our government deficits, then helping companies eliminate the wasteful expenditures caused by bad laws and abusive lawsuits is a good start. We need to continue working with our lawmakers to find fair solutions to stop the insidious attacks affecting American business owners, employees, and consumers.
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