Summary: H.R.10 — 104th Congress (1995-1996)All Information (Except Text)

Bill summaries are authored by CRS.

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Reported to House amended, Part I (02/24/1995)


Title I: Civil Justice Reform

Title II: Reform of Private Securities Litigation

Common Sense Legal Reforms Act of 1995 - Title I: Civil Justice Reform - Amends the Federal judicial code to provide for the award of attorney's fees to the prevailing party in Federal civil diversity litigation. Grants the district court discretion to reduce the amount of such award under special circumstances.

(Sec. 102) Amends Rule 702 of the Federal Rules of Evidence to make inadmissible: (l) testimony by a witness in the form of an opinion that is based on scientific knowledge unless the court determines that such opinion is based on scientifically valid reasoning and is sufficiently reliable so that its probative value outweighs specified dangers; and (2) testimony by a witness who is qualified if such witness is entitled to receive any compensation contingent on the legal disposition of any claim with respect to which such testimony is offered.

(Sec. 103) Sets forth rules governing any product liability action brought in State or Federal court against a manufacturer or seller of a product on any theory for harm caused by the product which shall supersede State law only to the extent that State law applies to an issue covered by this section. Specifies that any issue not covered by this section shall be governed by otherwise applicable State or Federal law.

Makes a product seller liable to a claimant for harm only if the claimant establishes that: (1) the product which allegedly caused the harm complained of was sold by the product seller, the product seller failed to exercise reasonable care with respect to the product, and such failure to exercise reasonable care was a proximate cause of the claimant's harm; (2) the seller made an express warranty applicable to the product which allegedly caused such harm, independent of any express warranty made by the manufacturer as to the same product, the product failed to conform to the warranty, and the failure of the product to conform caused the claimant's harm; or (3) the seller engaged in intentional wrongdoing as determined under applicable State law and such intentional wrongdoing was a proximate cause of the harm.

Makes an exception where: (1) the manufacturer is not subject to service of process under the laws of the State in which the claimant brings the action; or (2) the court determines that the claimant would be unable to enforce a judgment against the manufacturer.

Permits the award of punitive damages against a manufacturer or product seller, to the extent permitted by applicable State law, if the claimant establishes by clear and convincing evidence that the harm suffered was the result of conduct manifesting actual malice. Limits the amount of such damages to three times the amount awarded to the claimant for the economic injury on which such claim is based or $250,000, whichever is greater.

Specifies that the liability of each manufacturer or seller of the product involved in the action shall be several only and not joint for non-economic damages. Makes the manufacturer or seller liable only for the amount of non-economic damages allocated in direct proportion to such manufacturer's or seller's percentage of responsibility as determined by the trier of fact.

(Sec. 104) Expresses the sense of the Congress that each State should require each attorney admitted to practice law in such State to disclose in writing to any client with whom such attorney has entered into a contingency fee agreement: (1) the actual services performed for such client in connection with such agreement; and (2) the precise number of hours actually expended by such attorney in the performance of such services.

Amends Rule 11(c) of the Federal Rules of Civil Procedure to require (currently, allow) the court to impose an appropriate sanction upon an attorney, law firm, or party that has made specified representations to the court (e.g., a representation intended to harass, cause unnecessary delay, increase the cost of litigation, or present frivolous arguments) to compensate the parties injured by the conduct.

(Sec. 105) Amends the Federal judicial code to require a district court to dismiss a civil action, without prejudice, if: (1) not later than 60 days after such action is commenced, the defendant files a motion to dismiss on the basis that the plaintiff failed to transmit a written statement specifying the particular claims alleged and the amount of damages claimed to the defendant at least 30 days before commencing such action; and (2) the plaintiff fails to establish that before commencing such action the plaintiff complied with such requirement.

Sets forth provisions regarding: (1) exceptions (e.g., any civil action to seize or forfeit assets subject to forfeiture and actions where the defendant is likely to flee); and (2) the statute of limitations.

(Sec. 106) Revises rule XI of the Rules of the House of Representatives to require each committee report on a bill or joint resolution (bill) of a public character to include: (1) whether that bill preempts the law of any State; (2) the retroactive applicability, if any, of that bill; (3) whether that bill creates a private cause of action and, if so, a description of the relief and the terms and conditions for awarding any attorney fees; and (4) the applicability, if any, of that bill to the Federal Government or any of its agencies or instrumentalities.

(Sec. 107) Amends the Racketeer Influenced and Corrupt Organizations Act to prohibit any person from bringing an action under such Act for damages based on injury to that person's business or property if the racketeering activity involves conduct actionable as fraud in the purchase or sale of securities.

Title II: Reform of Private Securities Litigation - Securities Litigation Reform Act - Amends the Securities Exchange Act of 1934, with respect to class actions, to require a court-appointed class action steering committee, composed of class members, to direct counsel for the plaintiff class (plaintiff steering committee).

(Sec. 202) Prohibits the use of disgorgement funds resulting from actions brought by the Securities Exchange Commission (the Commission) to pay legal expenses incurred by private parties seeking distribution of such funds.

(Sec. 203) Declares that the portion of any final judgment or settlement awarded to class plaintiffs serving as the representative parties shall be equal (on a per share basis) to the portion of the final judgment awarded to all other members of the class.

Revises the guidelines for private class action suits to: (1) restrict to five the number of class actions filed by a named plaintiff during any three-year period; (2) subject a losing party litigant, if certain conditions apply, to liability for the prevailing party's legal fees; and (3) require the court to make a conflict of interest determination with respect to a plaintiff's counsel who directly owns or has a beneficial interest in the securities that are the subject of the litigation.

Requires a court to require just and equitable security for the payment of awardable fees and expenses from the attorney for the plaintiff class, the plaintiff class, or both.

Sets forth disclosure guidelines for any proposed settlement agreement that is disseminated to the plaintiff class, including: (1) a statement about agreement or disagreement on the amount of recoverable damages per share and the likelihood of the plaintiff's prevailing; (2) the amount of legal costs and fees sought as part of the settlement; and (3) the identification of lawyers' representatives who will be available to answer questions from class members.

Revises the guidelines for private class action suits to: (1) mandate discharge of a defendant who settles before verdict or judgment from all claims for contribution by nonsettling persons; (2) provide for recovery of contribution by a person who becomes liable for damages from certain non-parties who would have been liable for the same damages, if joined in the original suit; and (3) grant defendants the right to submit to the jury written interrogatories on the issue of each defendant's state of mind (scienter) at the time the alleged violation occurred.

Prohibits brokers or dealers from soliciting or accepting referral fees for assisting an attorney in obtaining the representation of a customer in any private action.

(Sec. 204) Delineates the requirements for securities fraud actions, including: (1) explicit pleading and proof of scienter; (2) plaintiff's reliance on a material misstatement or omission that proximately caused the plaintiff's loss; and (3) limitations on damages.

(Sec. 205) Defines the circumstances ("safe harbor") in which a person shall not be held liable for the publication of predictive statements in any action based on a fraudulent statement under this Act. Permits the defendant in such action to move for an automatic protective order to restrict all discovery to the specific issue of the applicability of the "safe harbor."

Directs the Commission to adopt a regulatory framework to implement the "safe harbor" requirements of this Act with respect to predictive statements concerning the future economic performance of an issuer of securities.