Are you a small business owner?
Along with marketing, staffing, payroll, stocking the shelves or supply room, and what seems like a thousand other worries and headaches, you may also find that your business can be severely damaged or even shut down by frivolous lawsuits.
How can you minimize your risk of being hit by frivolous lawsuits and what can you do when one is filed against you? Below, we will discuss some of the more common types of frivolous lawsuits against small businesses in SC and how you can protect yourself against them.
Whether you are preparing to open your small business, are thinking of ways to protect your small business, or have just received a summons and complaint for a frivolous lawsuit against your business, your Myrtle Beach small business attorney on the Axelrod team can help.
What are Common Types of Frivolous Lawsuits Against Small Businesses?
A frivolous lawsuit is when a plaintiff sues you or your business even though they do not have a valid claim, they cannot prove their claim, or they know that they cannot win the case if it is pursued in court.
In many cases, the lawsuit is filed by a “pro-se” plaintiff who does not have an attorney representing them – possibly because the attorneys they consulted with refused to accept their case…
What are some common types of frivolous lawsuits against small businesses?
The angry plaintiff: Some plaintiffs who file frivolous lawsuits may have a valid complaint or they may feel that they were treated poorly. They are mad, they want satisfaction, and they may be right, but they don’t have a valid cause of action that can be proven in court.
Product liability: When a defective product injures a person who was using it as intended, they may have a valid lawsuit against the manufacturer, distributor, or seller of the product. On the other hand, if someone was injured by a product due to their own negligence, they do not have a claim.
In other cases, plaintiffs may file suit against the wrong person or business or file suit against every business who may have had contact with the product, without regard to each business’ liability or the plaintiff’s ability to prove a claim against them, because they aren’t sure which defendant is the right one to sue…
Professional liability: When someone engages a professional like an attorney, doctor, or accountant, and they are not satisfied with their outcome, they may feel like they have the right to sue the professional.
Fortunately for professionals everywhere, liability is not based on that person’s outcome – if the plaintiff cannot prove that the professional was negligent, which often requires expert testimony as to why the professional was negligent, they do not have a case and should not have filed the lawsuit.
Personal injury: If someone is injured on your property, you may be liable for damages if you were negligent in causing the danger, failing to correct the danger after notice, or failing to warn about the danger.
But sometimes people will sue for injuries that are not your fault – it could be a hazard for which they waived liability because of the nature of the business, a hazard that they created themselves or that you were unaware of, or it’s possible that they were not truly injured in the first place.
Fraudulent claims: Although many pro-se plaintiffs, and, although less common, plaintiff’s attorneys, will file a baseless lawsuit because they mistakenly believed there was liability, other plaintiffs may be just trying to “game the system” and take advantage of your business by faking an injury or lying about the conditions that led to the injury.
Is the plaintiff truly injured and they can prove how their injury happened, or are they a con artist who is looking for a quick settlement from your business?
Why are Frivolous Lawsuits Filed Against Small Businesses in SC?
Frivolous lawsuits may be filed by pro-se plaintiffs, or even plaintiffs’ attorneys, when they are honestly mistaken about the facts of the case or what the law says about liability for their injuries.
Less often, frivolous lawsuits may be filed by individuals who are fraudulently seeking to use the courts to put money in their pockets even though they know that the law is not on their side.
The Frivolous Demand Letter
Any time you receive a demand letter from an attorney (or a pro-se litigant), you must take it seriously. At a minimum, you should retain counsel to review the letter and the circumstances that gave rise to the claim and advise you as to whether there is a valid claim that could become a lawsuit and whether you should settle before a lawsuit is filed.
Having your attorney review a demand letter and research the claims against you costs money. Defending a lawsuit that has been filed against you costs even more money. Some plaintiffs and even some plaintiffs’ attorneys know this and will send a demand letter for frivolous claims, hoping to get a quick settlement and “nuisance money.”
Should you pay them to go away? What if it costs less to pay them to go away than it would cost to defend a lawsuit?
You should always consult your local small business attorney before making this kind of decision – be aware that if you pay one potential litigant “nuisance money,” you are setting a precedent and you may see more demand letters from other potential plaintiffs who also are looking for a quick buck…
No attorney should send a demand letter to a business if they do not intend to follow through with a lawsuit that they can prove.
Depending on the content of the letter and the nature of the claims, an attorney could be subject to professional discipline for sending a frivolous demand – talk to your small business attorney before making any decisions or responding to any demand letters that you receive.
How Can Small Businesses Protect Themselves Against Frivolous Lawsuits?
There is no way to completely insulate yourself from frivolous lawsuits, but you can take steps to minimize the chance of claims being made against your business whether they are valid or frivolous.
Consult with a Small Business Attorney
Your attorney on the Axelrod team can help you to:
- Choose the appropriate business entity for your new business;
- Structure your business so that your personal liability or the liability of partners is limited;
- Negotiate and draft contracts for real estate, goods, or services that make the terms clear, provide liquidated damage penalties for default, or limit remedies to arbitration;
- Advise you as to when and how to respond to demand letters;
- Consult with you on policies that can minimize the potential for lawsuits;
- Negotiate with potential litigants to minimize liability and avoid lawsuits; and
- Defend against frivolous lawsuits after they have been filed against your business.
Should I Purchase Insurance for My Small Business?
If you can, purchase insurance for your business. Property and liability insurance can provide some peace of mind against frivolous lawsuits, and your insurance company will provide an insurance defense attorney for your business if a lawsuit is filed.
Even when your insurance company provides defense counsel, however, you may need your own attorney who is looking out for your interests as opposed to the insurance company’s interests.
The most complete protection against frivolous lawsuits includes 1) a small business attorney who can work with your company to ensure you are doing everything possible to avoid lawsuits; and 2) an insurance policy that will cover your defense and losses if a lawsuit is filed.
Your small business attorney at Axelrod and Associates can help you to set up your business, work with you to ensure you are taking all possible precautions to prevent frivolous lawsuits, and defend your business in court when necessary.