NFIB LAUNCHES 'SMALL BUSINESSES FOR SENSIBLE REGULATIONS'



As the nation's legal system continues to spiral out of control and billion dollar lawsuits become the norm, NFIB is working hard for legal reform in all 50 states. Along with pushing for legislation that abolishes joint-and-several liability capping excessive punitive damages, NFIB will fight for legal services that level the courtroom playing field for small business. After all, just one frivolous lawsuit can force a small business to close its doors forever.

Small Businesses for Sensible Regulations is a national NFIB effort focused on protecting small businesses and American jobs from the impacts of regulations recently proposed by the Obama administration.

Today, hundreds of new, costly federal regulations – environmental, labor and others – are in the pipeline in Washington, D.C., and if implemented they will collectively touch nearly every aspect of the American economy.

Regulations can be expensive and overwhelming for small businesses. Washington's complex regulatory maze results in a per-employee regulatory cost to a small firm nearly 36 percent more than the cost to large firms. In addition, businesses currently waste precious hours completing page after page of federal forms, some of which are duplicative and burdensome. See: Small Business Administration's Office of Advocacy, The Impact of Regulatory Costs on Small Firms, Sept. 2010.

Over the past five years, the number of major regulations proposed, having an impact of $100 million or more on the economy, has increased by more than 60 percent. See: Federal Regulation: A Review of Legislative Proposals, Part I, Senator Rob Portman, June 23, 2011, page 2.

The U.S. Environmental Protection Agency (EPA), for example, has more than 330 regulations under consideration today impacting everything from farm and construction dust to CO2 emissions from schools and hospitals. See: Current Unified Agenda of Regulatory and Deregulatory Actions, Office of Management and Budget, Reginfo.gov.

According to the Small Business Administration, the annual cost to the economy of complying with federal regulations is already as high as $1.75 trillion or approximately $10,585 per employee and on the rise. These new regulations will make it challenging for small businesses to create or maintain jobs as they grapple with significant compliance costs and a maze of stringent and often unattainable requirements.

It is essential that we restore balance to the federal regulatory process. With thousands of regulations already on the books, government officials should focus on enforcing current regulations instead of writing thousands of pages of new rules.

The White House has pledged to review the impact and burden of proposed and existing regulations. Through the work of Small Businesses for Sensible Regulations, NFIB will work to ensure that administration officials meet this commitment and regularly hear from voters and small businesses around the country. With unemployment hovering at 9% and troubling economic forecasts of slow growth, the American people can ill afford a slew of new regulations that drive up prices, send American jobs overseas, and hamper our long term recovery.

FRIVOLOUS LAWSUITS

Background

Frivolous lawsuits create a climate of fear for America's small businesses. While some claims are legitimate, a large percentage are completely without merit. However, individuals and entities that are sued still have to defend themselves, and this defense is often costly to both business and consumers. Individuals and attorneys who file baseless claims and victimize innocent people should be held accountable for their actions.

Since 1993, Rule 11 of the Federal Rules of Civil Procedure, which helped to prevent frivolous filings, has been hamstrung by changes that loosened its effectiveness. Because of the changes, parties and their counsel are allowed to avoid sanctions simply by withdrawing their frivolous claims within 21 days. This change has removed real incentives for attorneys to avoid frivolous filings.

Main Points of Concern

NFIB supports mandatory sanctions for lawyers who bring frivolous lawsuits.

The costs of tort litigation are staggering, especially for small businesses. The tort liability price tag for small businesses in 2008 was $105.4 billion dollars [1]. While some claims are legitimate, a large percentage are completely without merit. Small businesses that are sued still have to defend themselves, and this defense is often costly to both businesses and consumers.

Small businesses are the target of many frivolous lawsuits because trial lawyers understand that a small business owner is more likely than a large corporation to settle a case rather than litigate. Often small business settlements are less than $5,000, but even $1,000 settlements are significant for businesses. Settling cases results in higher business insurance premiums for small business owners. Small businesses annually pay $35.6 billion out of pocket to settle these claims [2]. Individuals and attorneys who file baseless claims and victimize innocent people should be held accountable for their actions.

The Lawsuit Abuse Reduction Act (H.R. 966) will discourage frivolous lawsuits by reinstating several important provisions to Rule 11 of the Federal Rules of Civil Procedures that were changed in 1993.

In 1993, the Civil Rules Advisory Committee, despite overwhelming support for Rule 11 from federal judges, decided to weaken the rule by allowing parties and their counsel to avoid sanctions simply by withdrawing their frivolous claims within 21 days of the motion for sanction being filed.

The Lawsuit Abuse Reduction Act makes Rule 11 sanctions against attorneys or parties who file frivolous lawsuits mandatory rather than discretionary.

It removes Rule 11's "safe harbor" provision that currently allows parties and their attorneys to avoid sanctions for making frivolous claims by withdrawing them within 21 days after a motion for sanctions has been filed.

This legislation allows for Rule 11 sanctions for frivolous or harassing conduct during discovery and allows monetary sanctions, including attorneys' fees and compensatory costs, against a represented party.

[1] "Tort Liability Costs for Small Businesses," U.S. Chamber Institute for Legal Reform, 2010, at 11.
[2] Id.

SMALL BUSINESS LIABILITY REFORM

Liability Reform Would Return Common Sense to the Court System

The frequency and high cost of litigation in our country's current civil justice system is a matter of growing concern to small businesses. Liability reform would inject a measure of fairness into a legal system that currently preys on business, often without regard to legal merit. Liability reform also would help reduce the number of frivolous lawsuits and the exorbitant costs that can drive businesses to financial ruin.

Civil litigation was once a last resort remedy to settle limited disputes and quarrels, but recent years have brought a litigation explosion. The number of civil lawsuits has tripled since the 1960s. Litigation has become a big business, and it is putting small companies out of business. When the typical cost of a lawsuit that goes to trial is at least $100,000, the economic pressures to settle are enormous. NFIB members say that being sued is one of the most threatening experiences for a small business owner. It is even more frightening for the smallest of the small which can be put out of business by one lawsuit.