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How To Stop A Frivolous Lawsuit From Disrupting Your Business

by | Jan 4, 2024

If you own or manage a business, and you are suddenly slapped with a frivolous lawsuit, you may be tempted to feel slightly amused – people actually file such ridiculous claims and think they can get away with it? However, it won’t be a laughing matter for long. Frivolous lawsuits have the potential to be a serious interruption to your business operations (particularly if you are a small or family-owned company) and can cost you significant time and money to resolve. 

In this blog, we’ll explore what you need to know about this type of business litigation and what you can do to minimize the fallout. Knowing how to stop a frivolous lawsuit from continuing can make the difference between your business’s success and stagnancy, in the short and long-term! 

What Is A Frivolous Lawsuit?

A frivolous lawsuit is an essentially baseless claim – the party filing it knows that it doesn’t have merit, and isn’t likely to succeed if it makes it all the way to trial, but they may be filing it to annoy or harass your business, or to prevent you from taking another type of legal action while the lawsuit is pending. Maybe they have a personal grudge against you, or a perceived slight by your business against them; maybe they want to generate media attention for themselves or a cause they represent; whatever the case, it’s a lawsuit where the issue isn’t about the lawsuit at all. 

Small Businesses Are More At Risk – Here’s Why

According to the National Federation of Independent Businesses (NFIB)’s Research Foundation National Small Business Poll, 50% of small business owners in the U.S. are concerned about the possibility of being sued, and for good reason. 

In any given year, NFIB reveals, small business owners pay around $35.6 billion to settle civil suits; 95% (nearly all!) of small business owners choose to settle out of court. The ones who fought spent an estimated $105.4 billion in litigation costs. 

Large corporations usually have the resources necessary to handle these types of claims with ease and intimidate potential plaintiffs from starting a fight with them. They can stop a frivolous lawsuit in its tracks, in contrast with the average small business that can’t afford the high costs of going to court – case preparation fees, expert witness fees, deposition fees, filing fees, attorney fees, etc. (not to mention the cost of the time involved). 

Plaintiffs are well aware of this, so they often target small business owners knowing that they are likely to get a settlement they don’t deserve, because the small business owner doesn’t want to go to court. There’s little risk to them if the lawsuit doesn’t fail or does go to court, but they stand to gain significantly (even if there is no validity to their claim). 

Examples Of Frivolous Lawsuits Commonly Encountered By Small Businesses

Product Liability – 

If your business produces products for consumers, you may be hit with a suit accusing your product of being defective or dangerous, even if that is ludicrous. 

Doug Volpi’s four-employee shop, Frontier Paint, faced a multi-million dollar lawsuit from a plaintiff who claimed he’d been exposed to asbestos while using a paint product purchased from Volpi’s business. However, there was no asbestos in the paint, and the date that the plaintiff claimed to have been exposed was years earlier than Volpi had even bought the business. Even though the plaintiff eventually dropped the complaint, Volpi had to spend nearly $1,500 out of his own pocket and time away from running his business to address the frivolous lawsuit. 

Another example of this (although it didn’t involve a small business) is a famous case where a woman sued Google Maps for her pedestrian accident; she used walking directions along a highway without sidewalks and was hit by a car. However, the case was dismissed for many reasons (one of which was that users are expected to use common sense with any product). 

Personal Injury/Premises Liability – 

If someone claims to have been injured on your property because of your negligence, this could turn into a lawsuit, even if you weren’t negligent at all. 

For example, in 2014, a 75-year-old woman named Bettie Daniels fell in a dressing room in a Sears Roebuck. She injured her arm, shoulder, and hip. Later, Bettie attempted to sue for negligence because she claimed the “unusually shiny” floor caused her fall, even though she could produce no evidence. (Sears won.)

Employee Discrimination/Harassment –

If disgruntled employees or former employees or contractors claim that you harassed or discriminated against them – even if they don’t have a basis – these claims may be taken quite seriously, especially in the wake of the #MeToo movement. 

In 2014, the Equal Employment Opportunity Commission brought a frivolous class action against CRST Van Expedited Inc. in Iowa, claiming that female employee plaintiffs were subject to a sexually hostile working environment and to sexual harassment, and that CRST failed to prevent, correct, and protect. However, the EEOC didn’t present any expert evidence, statistics, or legal authority, and the argument was essentially just bald assertions. The company was awarded almost $4.6 million in attorney fees and other related expenses. 

False Advertising – 

These types of cases usually put large corporations in the headlines, like when a man sued Redbull for not “giving him wings”, as their slogan claims (and won a $13 million settlement), or when another man sued Anheuser-Busch for their beer failing to produce visions of beautiful women on a sandy beach, as a commercial suggested (that case was thrown out). 

Of course, note that not all product, premises, employee, or false advertising claims are frivolous; a claim is only considered such when there is no evidence or logic to the lawsuit. 

Prevent Frivolous Lawsuits From Arising In The First Place (As Much As Is Up To You) 

You can’t always anticipate the lengths some people will go to get money; and you can’t always foresee that people will act dishonestly and maliciously against you. Sometimes, a frivolous lawsuit is completely out of your control. However, there are many things you can do to reduce the likelihood of having to face this type of business litigation!

For one, you can build an ongoing relationship with a business attorney with the goal of evaluating (and limiting) areas of vulnerability and exposure. A business attorney can review your documents and contracts, your systems and processes, your structure, your goals, and more and examine them all to make sure that they are legally compliant and minimize risk. Some small business owners are hesitant to invest in a relationship with a law firm, but taking a proactive approach – working to stop a frivolous lawsuit from occurring in the first place- may end up saving you hundreds of thousands down the road. 

Another Way To Stop A Frivolous Lawsuit From Disrupting Your Business? Get Insured!

The other thing you can do is invest in liability and E&O insurance. General liability insurance protects businesses from the costs of alleged bodily injuries, advertising wrongs, property damage, and the like, while E&O protects against claims of alleged inadequate work or other negligent actions (important for service-based businesses). If you have this type of insurance, and a frivolous lawsuit arises, it may cover the costs of attorney fees, court costs, and settlements or judgements if the case succeeds. 

If You Can’t Stop A Frivolous Lawsuit, Handle It Calmly And Thoroughly; Don’t Panic Into Ignoring It Or Settling Right Away!

Encountering a frivolous lawsuit can be overwhelming. You can’t just ignore it, even if you know it’s groundless, as you are legally required to respond if served (and may be subject to a costly default if you don’t.) You may be tempted, if you have the means, to make a settlement offer and move on quickly. Settling may indeed make the plaintiff go away, but you shouldn’t give someone money who doesn’t deserve it, and it may encourage other frivolous lawsuits in the future. It’s not the best solution. Most likely, there are many other ways to approach the situation! It’s in your best interests, if you don’t have legal representation you trust, to enlist the assistance of an experienced business litigation firm immediately. 

An attorney who is well-versed in corporate lawsuits can evaluate the claim against you and advise you as to possible next steps. They may be able to file a motion to dismiss, file a counterclaim against the plaintiff (such as malicious prosecution), file an anti-SLAAP motion (regarding silencing the wrongful free speech of the plaintiff), or take some other course of action that results in you on top. They can collect evidence, retain expert witnesses, and handle all communications for you. 

In the end, if the lawsuit truly is frivolous, it will fail in court, and a judge may order the plaintiff to pay you damages related to the whole ordeal if you have the right representation on your side. 

Work With An Experienced Business Litigation Firm

In such a cutthroat business atmosphere as New York, if you’re sued – frivolously or not – you need an elite, skilled, highly knowledgeable legal team to have your back. You have enough on your plate without having to stop focusing on your goals to stop a frivolous lawsuit. Pitcoff Law Group can handle everything for you and represent you in court, if necessary! We make legal simple, for any size business. Our business litigation lawyers work one-on-one with you to achieve the best outcome. We’ll aggressively protect your business’s future! Call today to see if you qualify for a complimentary consultation.