Sept. 14 (Bloomberg) -- The U.S. House of Representatives passed a bill requiring judges to impose fines on attorneys who file lawsuits dismissed as frivolous.

The bill's author, Republican Representative Lamar Smith of Texas, said the legislation would reduce the number of unjustified cases. He said these lawsuits raise costs for businesses, forcing some companies to settle to avoid protracted litigation. Under current federal rules, judges have discretion to decide whether to require fines after dismissing a case for lack of merit. The bill passed 229-174.

``Gaming of the system by a few lawyers drives up the cost of doing business and drives down the integrity of the judicial system,'' Smith said.

House Republicans' decision to push the bill is linked to election-year politics, because U.S. Senator John Edwards of North Carolina, the Democratic nominee for vice president, was a lawyer before entering politics, said Larry Sabato, a professor of political science at the University of Virginia.

``Not incidentally, the Democratic vice presidential candidate is a prominent trial lawyer who made his fortune as a plaintiffs' lawyer,'' Sabato said.

House Republicans want to focus attention on their drive to curb liability costs for U.S. companies. In July, the Senate blocked a House-passed bill to shift all class-action lawsuits of more than $5 million from state to federal courts.

Matt Webb, vice president for legal reform at the U.S. Chamber of Commerce, which supports today's bill, said the legislation was unlikely to win passage in the Senate.

Sidestepping Sanctions

Backers of the legislation said the current rules allow a lawyer to file a lawsuit and sidestep penalties if a judge dismisses the case as frivolous. A 1993 change in the Federal Rules of Civil Procedure gave judges the ability to impose penalties such as requiring that plaintiffs pay the attorneys' fees of the defendants.

The change also gave plaintiffs' lawyers a 21-day ``safe harbor'' to withdraw lawsuits before sanctions are ordered.

The House-passed bill eliminates the safe harbor, and requires penalties for all federal cases.

The American Trial Lawyers Association, which represents plaintiffs' attorneys, is lobbying against the bill, arguing it ignores the past practice of allowing a panel of judges and lawyers to recommend changes in sanctions rules. The bill may make attorneys reluctant to file meritorious cases against companies, the group said.

``This is not about frivolous lawsuits,'' said Carlton Carl, a spokesman for the trial lawyers' group. ``It's about intimidating plaintiffs and advantaging corporations.''

Democratic Proposal

Democrats, including Representative Mel Watt of North Carolina, said the measure would keep some lawsuits on the docket longer. Plaintiffs' attorneys won't want to withdraw their cases to avoid the perception they are admitting their case is frivolous, Watt said.

Democrats offered an alternative bill that included sanctions directed at corporate defendants, including fines for destruction of documents and a provision making it tougher for a company to win a judge's approval to seal court records in civil cases. That was rejected, 226-177.

The Chamber of Commerce estimates corporations face annual tort costs of about $129 billion and said companies should be shielded from liability in cases that are dismissed. The chamber points to cases such as a lawsuit filed on behalf of obese children claiming McDonald's Corp. was legally responsible for their obesity.

A federal district judge in New York dismissed the case. The judge said allowing the case to proceed would ``spawn thousands of similar `McLawsuits' against restaurants.''

To contact the reporter on this story: Laura Litvan in Washington llitvan@bloomberg.net

Last Updated: September 14, 2004 15:45 EDT