How to defend yourself against frivolous litigation.
Frivolous litigation is on the rise. Here's how to defend yourself against it
Frivolous litigation is a growing problem in the United States. From 1938 to 1976 there were only 19 reported instances of lawsuits challenged as frivolous under a federal regulation that permitted such challenges. In the three years from 1983 to 1986 the number was more than 300. Frivolous litigation can delay the resolution of even simple matters for years and can be very costly in both time and money. While there may be little you can do to avoid such litigation being brought against your company, the tide is turning in favor of victims. Both judges and legislators are sending a strong message that we can no longer tie up the courts with such cases.
For litigation to be considered frivolous, it must be without merit or pursued in bad faith. Some claims or defenses are frivolous because they have no factual basis. For instance, one company sued a customer for not buying more than $23,000 worth of video and electronic equipment, as the contract between them required. The customer said it simply wasn't obligated to buy the equipment, even though it acknowledged a valid contract. Its attempted defense was frivolous, because it had no basis in fact.
Other claims and defenses have no basis in law. This is common in employment discrimination cases. Employment relations is a continuously changing, and emotional, area of the law, so plaintiffs may push beyond what is reasonable. For instance, someone who claimed that it's illegal to discriminate against people with blue eyes would be pursuing a claim that has no basis in our law.
Other lawsuits are frivolous because the claims they raise have already been resolved. One man filed lawsuits concerning the same claim for veterans' benefits in different courts for more than 30 years before a judge finally forbade him to litigate that same issue again. Even if a claim or defense is legitimate, an adversary may use unwarranted tactics, which a court can penalize (see "Delaying Tactics," page 2).
Two procedural aspects of our legal system have contributed to the cost of frivolous litigation that victims must bear. First, win or lose, people generally have had to pay their own legal fees, which effectively shifts at least half the cost from the perpetrator to the victim. Second, our legal system makes it easy to file a claim first and get the facts later. Through a process called discovery ("fishing expedition," in the vernacular), those who file a lawsuit can demand access to their adversaries' most confidential records to see if they've done anything blameworthy. Not only can this jeopardize confidential business information, it can be a major expense, sometimes even causing the victim to hire additional staff. Claude Clement Mimun, for example, a New York City garment manufacturer, was hit with a lawsuit in 1982 claiming he'd infringed on a competitor's trademark. It turned out that the plaintiff hadn't even investigated his claim. His only apparent purpose was to harass Mimun and maybe make a quick buck in a settlement. Yet Mimun had to spend thousands of dollars defending himself.
Fortunately, there are changes under way intended to deter this abuse. Most important, it's becoming easier for victims to recover the amounts they spend responding to frivolous tactics. In recent years they've been awarded amounts ranging from a few hundred dollars to almost $2 million.
In the federal courts, Rule 11 of the Federal Rules of Civil Procedure may now be the most broadly used antidote. It requires courts to penalize lawyers, persons representing themselves, and in some instances clients, who file claims or other court papers that don't have a reasonable factual, legal, or good-faith basis. Those who run afoul of Rule 11 can be ordered to pay their adversary's legal fees and other defense costs. In addition, certain federal statutes, such as the Civil Rights Act of 1964, allow someone who wins a lawsuit -- whether they are plaintiff or defendant -- to recover attorney's fees and court costs from the other side.
Many state statutes also allow litigants to recover their attorney's fees and court costs from an adversary when they prevail in frivolous litigation or when a legal tactic is undertaken in bad faith or without objective reasons. Indiana is a good example. As in most states, Indiana courts have traditionally required each side to pay its own attorney's fees, but in recent years there have been changes. Today at least nine different statutes dealing with indebtedness, consumer sales, lawsuits against the government, and other specific areas of the law allow successful litigants to recover their attorney's fees. Another general statute in Indiana allows successful litigants to recover attorney's fees and costs if they can prove that a claim or defense is frivolous, unreasonable, or groundless; that someone continued to litigate after discovering that their claim or defense was groundless; or that an action was taken in bad faith.
Several other states, including Arizona, California, Colorado, Florida, Idaho, Massachusetts, Minnesota, North Dakota, South Dakota, Utah, Washington, and Wisconsin, have similar statutes. In some states, you can get the same results by using court rules of procedure that govern the conduct of lawyers. New York judges, for instance, have used these rules to penalize frivolous litigation.
In addition, the courts have always had, but have infrequently used, broad discretionary powers to shift the burden of costs and legal fees to a litigant who is abusing the court system. Often, to take advantage of this power of the courts, you must prove that your adversary acted with actual bad faith -- egregious misconduct or intent to hurt you rather than just further its own cause. Since this depends on subjective considerations, it's often hard to prove, so you're almost always better off looking for statutes that specify objective standards of what's frivolous.
