Are frivolous and unfair lawsuits a fact of business life?

A Harris Interactive poll conducted for the U.S. Chamber Institute for Legal Reform a few years ago has some interesting statistics for how the threat of lawsuits impacts the operations of small businesses in the United States. 

More than a third of those surveyed had been sued within the prior ten year period and more than 70% said their businesses suffered as a result of the suit because litigation was very time consuming.  Over 60% said their businesses suffered because of litigation costs.  Another study conducted by the Institute for Legal Reform, for example, places the cost to small businesses of tort liability alone at $98 million.

Time and money were the two biggest factors cited.  It’s something we’re all in short supply of and for entrepreneurs and small business owners whose pockets aren’t as deep as their publicly traded brethren, it means a lawsuit can leave a large scar. 

What struck me about the Harris poll results was that almost all small business owners, a whopping 96%, believed that frivolous and unfair lawsuits were a major problem.  It was particularly disappointing that the pollsters used frivolous and unfair interchangeably because they are not the same thing.

We tend to treat things that are trivial as frivolous.  As a result, it’s easy to characterize lawsuits over what is perceived to be a minor grievance as frivolous because from “our” perspective it’s nothing more than a pimple on an elephant’s buttock.  Being called to task for something that is so minor feels unfair.

In a court of law, however, frivolous has a much more focused definition.  A lawsuit is characterized as frivolous only if there is no chance of winning.  In other words, Ms. Plaintiff, even if everything you say is true you have no case.  Very few cases of the more than 16 million civil suits that get filed each year meet that criterion.  That means the vast majority of cases do present a legitimate controversy and perceptions of “fairness” depend on whether you’re the plaintiff or the defendant. 

Nobody likes being sued.  It feels unfair even when the claim is legitimate.

Now a legitimate controversy doesn’t mean every plaintiff wins.  It only means that the case presents a plausible claim.  Both parties have genuine competing interests.  They’ll still have to meet the burden of proof.  The judicial process merely provides a mechanism that allows the facts to be sorted out impartially and then applies the law applied to the facts to reach a resolution.

There is a huge disconnect when you compare the overwhelming fear of injustice so many small business owners experience with existing court house dockets because if the majority of cases filed were truly frivolous many more would be dismissed than actually are. 

As much as we all hate lawsuits we need to recognize that even with heavy lobbying in Washington, D.C. the foul lines of the legal environment of business won’t move too much.  What that means for business owners, both large and small, is that you need to know the legal rules of the business game so you don’t inadvertently step on the foul lines.  Being responsible means knowing the rules.

Once you identify where those foul lines and the plausible claims for your industry and your particular business are, you can take the steps necessary to protect yourself and avoid lawsuits.  You can adapt and overcome. 

Even if you feel that frivolous suits are a fact of life, your business doesn’t need to fall victim to one.