Is a civil lawsuit a form of extortion?

“This is extortion!” the manager snapped when he read the lawsuit the landed on his desk.  The company had just been served.     

“They have no legitimate claim.”

“They just want us to settle.”  With each statement his face got redder and the vein in the middle of his forehead bulged more and more.

Lawsuits certainly have a way of getting everyone’s attention, especially in the United States.  Indeed, getting sued here is feared worldwide.

Getting sued is no fun.  But to determine whether it rises to the level of extortion requires a closer look at what extortion really is. 

Legally, extortion happens when someone unlawfully gets something (money, goods, or services) through coercion.  So we have two key drivers of this definition: unlawfulness and coercion.

While we may not like lawsuits, it’s not necessarily unlawful to file a suit.  The only way a suit is “unlawful” is if it’s “frivolous.”  Now what’s frivolous to you may not necessarily be frivolous to the court, and certainly not to the plaintiff who has filed suit. 

The law imposes a high standard before a claim or a case is deemed frivolous and thrown out.  A case is frivolous if you assume everything they claim is true and there is still no chance the plaintiff can win.  Few cases meet that test because there is usually a question of fact and some theory of law on which they can hang their hat. 

What that means for you is that as long as there’s a snowball’s chance in you know where, a plaintiff will be entitled to the due process necessary to protect their rights.  They will be allowed to have a jury decide questions of fact (i.e. who they want to believe) and apply the law to the facts.  It’s all part of the litigation process.

Misunderstandings and misinformation about what the facts are and how the law applies are at the heart of all lawsuits.  It’s that misunderstand that leads people to conclude that there is no claim, even when maybe there is. 

Now, the coercion part of the extortion definition requires the unreasonable exertion of force, or a threat.  It amounts to the lack of choice.  If the economics of litigation persuade you that it is cheaper to settle than to fight the battle in court that is a choice, not the unreasonable exertion of force.  If you believe a suit is without merit you have the right to defend yourself.  That is a choice too and part of the cost of doing business. 

Of course, one way to reduce the cost of doing business associated with legal liability and lawsuits is to get a better understanding of how your communication style and the content of what you say can be misunderstood.  It also pays to invest in learning more about the laws that apply to your business and how your business decisions affect your company’s legal risk profile. 

Taking control of the situation puts lawsuits into perspective and keeps them from feeling like extortion.

Hanna Hasl-Kelchner is a business attorney, author and speaker who provides clear legal insight to enhance business performance.  She wrote The Business Guide to Legal Literacy: What Every Manager Should Know About the Law and forthcoming How to Turn Your Business into a Litigator’s Chew Toy: Taking the Bite Out of Legal Liability.  Follow Hanna on Twitter @nononsenselawyr.