the votes of the Judicial Conference of the United States reflecting the views of the entire Federal judiciary should be the most eloquent proof that this is a major problem. The Judicial Conference does not often address to Congress a request that it deal with the need to enact reform legislation. There has been some concern about the data. An argument is made that when one looks at the number of cases classified as RICO cases under some recent reporting provisions of the Administrative Office of the U.S. Courts, one gets the impression that RICO cases are a tiny fraction of the Federal caseload and, therefore, not worth dealing with. As I understand, however, the Administrative Office has advised the subcommittee, as we all know, that numbers undercount the number of RICO cases, because the statistical method for compiling the data simply asks the plaintiff's lawyer to select from about 40 different categories one classification of that case. And in light of the fact that Federal judges are generally looking askance on the attempt to overuse RICO, it is not surprising that if lawyers have an alternative, and they always do, they tend to check a box other than civil RICO. I think the Administrative Office of the U.S. Courts recognizes that. But the more important point in dissipating the argument based on statistics is that as the Federal courts recognize just as litigants, litigating lawyers, and parties recognize, that Federal cases are not fungible. There may be 100,000 filings a year. Some cases are easy to dispose of; others are not. The complex elements of the RICO statute and the tendency to use these claims in complex commercial disputes means that the ability to turn a dispute into a RICO case is a disproportionate preoccupation of the resources of a Federal court-more so, for example, than a prisoner's repeat habeas corpus petition, which is classified as a civil case, or a social security appeal-which may be important to the petitioner, but is hardly of the complexity that a RICO case would generate. Next, Mr. Chairman, I would note that this is a compromise bill-as you recognized in your opening statement. No one who is supporting it, if he were to sit down to write his own view of a perfect reform to this legislation, would come out with precisely this version. This is, however, the result of 4 years of very arduous discussion involving many Members of the Congress, on both sides of the Hill, and many of the people in the organizations on both sides of this dispute; and we believe it represents a fair balanced approach to a real problem. Finally, we address in our statement some controversy that has arisen about the effective date provision. This bill has as one of its basic approaches to resolving the problem of the misuse of civil RICO the detrebling of a category of case, probably the largest category of case, I think it's fair to note, and that is why we believe this would be a significant step forward. It is generally called the business-to-business case, but it would also involve organized labor, for example. And in those cases, the recovery that would be permitted would be confined to single compensatory damages without the current trebling and without the current provision for attorneys' fees and costs, these are the fea tures that now lure plaintiffs into bringing local disputes into the Federal courts or to converting other Federal disputes into RICO cases. Since this is reform legislation, we think it is quite appropriate for Congress to make this change applicable to those cases that are pending but have not yet reached settlement or judgment. That is not at all inconsistent with general principles of American law. In fact, as we explain in our statement, the general rule is that, when Congress acts, the new law that it establishes applies to pending cases. The Supreme Court has dealt with that issue over and over again, and said that in the absence of a congressional direction to the contrary, the new legislation will govern pending cases unless it would be, and this is the Supreme Court standard, "manifestly unjust" to apply the new law to pending cases. As we explain at some length in the statement, the provision in this bill is even more generous to pending case plaintiffs than the general rule of law would be. It applies a somewhat easier standard to satisfy "clearly unjust" rather than "manifestly unjust." It also completely excludes cases that have been settled or reached a jury verdict, and it only applies to the category of case I have described: those cover the detrebling provision. Even in that instance, that is, when the court is satisfied that it would not be clearly unjust to apply the new detrebling, the prevailing plaintiff would get the benefit of an award of attorneys' fees and other litigation costs thus, to the extent that anyone could even purport to make an argument that there had been some reliance on the lure of treble damages for investing in a civil RICO case and, therefore, that it would be unfair to detreble this windfall recovery that is being sought, this bill protects any such reliance interest. It does so by assuring the plaintiff that in addition to full compensation, the plaintiff may get attorneys' fees and additional litigation costs in this narrow category of pending case that would be affected by the detrebling. So under all the circumstances, Mr. Chairman, we think this is a fair, balanced bill that the subcommittee should endorse. Thank you, sir. Mr. HUGHES. Thank you very much, Mr. Lacovara. [The prepared statement of Mr. Lacovara follows:] - 2 The RICO Reform Coalition is hopeful that this Subcommittee will be able to move forward quickly in reporting this legislation to the full Judiciary Committee. This legislation is a better bill than H.R.5445, the RICO reform legislation that was passed by an overwhelming margin of the full House of Representatives in the 99th Congress. The primary purpose of H.R.1046 is to limit the use of civil RICO by plaintiffs in civil litigation that has historically been tried in state courts or should be litigated under directly applicable existing federal statutes. Four years ago, the U.S. Supreme Court recognized that civil RICO had gone far afield from the original intent of its authors, and said that its remedy lay in the Congress, not in the courts: "It is true that private civil actions under the statute - More recently, Chief Justice Rehnquist reiterated the need for reform of the civil RICO statute. He stated: "Virtually everyone who has addressed the question agrees PREPARED STATEMENT OF PHILIP A. LACOVara, Vice President and SENIOR COUNSEL FOR LITIGATION AND LEGAL POLICY, GENERAL ELECTRIC CO., FAIRFIELD, CT, AND CHAIRMAN, Business/Labor Coalition for CIVIL RICO REFORM Mr. Chairman and Members of the Subcommittee, my name is Philip A. Lacovara. I am presently the Vice President and Senior Counsel for Litigation and Legal Policy for the General Electric Company in Fairfield, Connecticut. I am also currently serving as the chairman of the Business/Labor Coalition for Civil RICO Reform. This coalition, composed of a large cross-section of business and labor groups, has been seeking reform of the private lawsuit provisions of the civil RICO statute for nearly four years. here today to pledge the Coalition's full support for H.R. 1046, the Civil RICO Reform Act of 1989, which Mr. Boucher, Mr. Gekas, Mr. Feighan, Mr. Smith of Florida, and Mr. Smith of Mississippi introduced in February of this year, and is currently co-sponsored by an additional fifty-eight Representatives. I am The Coalition that I represent here today would much rather prefer a simpler piece of legislation that would go further in addressing the inappropriate uses to which plaintiffs have put civil RICO. We supported such a proposal in 1985. However, this proposed legislation represents a compromise among many factions, compromises necessary in order to achieve civil RICO reform. This legislation, arrived at after several years of negotiation with various Congressional offices and competing legislative interests, is designed to correct some of the widely recognized flaws in the civil provisions of the current RICO statute. Although H.R.1046 does not remedy all of the civil RICO litigation abuses, it is the collective opinion of the members of the reform Coalition that this compromise legislation stands the best chance of passing both Houses of Congress in the 101st Congress. Moreover, the effort to reform civil RICO is supported by an extraordinarily broad-based coalition. The following groups have all been active in petitioning Congress to amend civil RICO substantially: American Bar Association National Association of Manufacturers American Civil Liberties Union U.S. Chamber of Commerce AFL-CIO American Institute of Certified Public Accountants American Bankers Association Independent Bankers Association of America Future Industries Association American Council of Life Insurance Credit Union National Association Grocery Manufacturers of America National Automobile Dealers Association State Farm Insurance Companies American Financial Services Association The breadth of this Coalition demonstrates the broad recognition that civil RICO has gone awry, and needs the remedy H.R.1046 would provide. As might be expected, the opponents of RICO reform claim it is special interest legislation. I find it difficult to believe that a coalition composed of the American Bar Association, and business, labor, and civil liberties groups can be characterized as special interest. Quite the contrary, I submit that it is the effort to scuttle RICO reform to protect the particular interests of a few lobbying groups, and private attorneys that have developed a lucrative practice bringing civil RICO lawsuits that smacks more |