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.

As for taking action to protect yourself against frivolous legal tactics, deadlines may vary from one jurisdiction to another. In some situations you have to bring your claim that a charge is frivolous as a counterclaim to the original lawsuit -- judges want to handle everything related to the same issue at once. Often, too, judges look favorably on litigants who let their adversaries know early on that they think a claim is frivolous and ought to be settled. You're safest to take appropriate action as soon as you have grounds for believing that an adversary is using unwarranted tactics.

Just as the specific statute or other legal authority you'll use to protect yourself against unwarranted legal maneuvers varies from case to case, so may the kind of costs you're permitted to recover. Many statutes permit you to recover court costs -- fees for the clerk, marshal, and court reporter, fees for printing documents and witnesses' per diems, fees for photocopies, expert witnesses, and interpreters. More recently, attorney's fees have been added to the costs you may recover under a variety of statutes. You'd probably like to be able to recover other costs, too: your salary for the time you spent handling the case, travel and other out-of-pocket costs, and pain and suffering. It would be rare to recover these, but under some statutes, judges have broad discretion to award "appropriate damages." Federal appellate courts can in some instances award damages for the delay you suffer because of a frivolous appeal, and they can, if they wish, award you double the amount of your actual costs.

As a rule, it will be up to the judge who decides your case to determine just how much you're entitled to. And, as the Wall Street brokerage firm Smith Barney Harris & Upham learned, just because you spend money doesn't mean you'll recover it. The firm took action against a former employee, Anthony Tedeschi, for alleged negligence that resulted in substantial losses to the firm. Tedeschi struck back with a barrage of legal claims, every one of which eventually was thrown out of court. The court lambasted Tedeschi for bringing claims "patently without substance," "egregious," and "vicious." But the company was awarded only $10,000 of the almost $50,000 it claimed to have spent defending itself.

When determining how much to award someone who wins a claim for court costs and attorney's fees, courts consider the time, labor, and skill needed to provide proper legal service; how difficult the issues are; the fee usually charged in the area for similar services; the amount of money at stake in the litigation; and whether time limits imposed by the circumstances demand unusual effort. Such time limits might take the form of court-imposed deadlines, a statute of limitations, or a situation in which safety or market conditions require you to move quickly. The best advice here is to act judiciously. The opportunity to recover costs you incur because of an opponent's frivolous legal tactics isn't a blank check to spend your adversary's money.

And a word to the wise. If you want to recover costs, be sure to ask for them. Some litigants, for instance, have recovered their attorney's fees, but not court costs, which can also be substantial. Courts may have the discretion to award a cost you don't ask for, but there's no guarantee they will give it of their own accord.


Claims against you may be legitimate; the tactics may not

If your adversaries engage in any of the following practices, don't assume they're part of the process:

* Ask for information they can easily get elsewhere

* Name as an expert witness someone who isn't qualified

* Refuse to prepare papers requested by the court

* Miss scheduled court appearances

* Show up late for court

* Ask for court hearing dates to be rescheduled time and again

* Make redundant requests that cause you additional work without legitimate reason

* Stonewall when asked to answer questions or provide documentation

* File papers that cause you unnecessary work or delay court procedures

* Appeal a trial court's decision when there's no good reason to do so.


A case in which the employer recovered full costs

The Anheuser-Busch Inc. plant in Missouri had employed Morris Obin for 10 years. During this period, it had warned him at least 20 times about misconduct, which included leaving work early, absenteeism, and assault.

On April 28, 1975, someone observed Obin drinking on the job -- for the third time in 30 days. Obin's supervisor called him in to tell him he might be formally disciplined. On the way out, Obin cursed the informer and sprayed him with beer. At last, Obin was fired. He sued Anheuser-Busch, claiming that the company violated his civil rights by discriminating against him on the basis of his religion. The litigation dragged on for two and a half years. Anheuser-Busch repeatedly tried to settle with Obin, telling him there was little chance he'd win, but he insisted on pursuing the litigation.

The judge who heard this case in 1980 decided that Obin's claim was frivolous because there weren't any facts to support it. Anheuser-Busch was entitled to recoup all the money it spent defending itself, $25,000.