LAWSUITS ARE GENERALLY SOME FORM OF SHAKEDOWNS

                                                       

There have been many cases where plaintiffs have sued defendants with frivolous claims in order to get money from the defendants by getting the defendants to settle out of court rather than suffer the full financial consequences of paying huge lawyer’s fees to fight the frivolous claims.    

Extortion, also called a shakedown, is a criminal offense of obtaining money, property, or services from an individual or institution, through coercion. Unfortunately, the plaintiffs who sue for frivolous reasons to force defendants to settle by paying a lessor amount of money to the plaintiff would not be charged with extortion since it would be impossible for the prosecutors to prove that a plaintiff in a civil case had the criminal intent to extort money from the defendant in a civil case. All the plaintiff would have to do if he was charged with that crime is to say he really believes in his lawsuit. If however he brought about a number of similar lawsuits, the prosecutor would have a good case of extortion to prosecute.

The owners of a small auto repair business in Arcadia, California, received a minor citation from the Bureau of Automotive Repairs for leaving the date off a particular invoice. The correction was made, and the business owners carried on with business as usual that is until a group of private attorneys threatened to sue them, unless the auto repair business paid them a $2,000 "settlement fee," claiming unfair business practices.

In Northridge, California, a woman decided to purchase a new blender from an appliance store and selected one at the bottom of a pile of five boxes rather than ask for help reaching the top blender. When the other four blenders fell on her, she sued the store for not warning customers about the danger and for stacking the boxes too high, claiming she now had carpal tunnel syndrome along with neck, shoulder and back pain. Would the stupid woman sued if there was a sign next to the stack of boxes that said, DO NOT TAKE BOXES FROM THE BOTTOM OF THE STACK OF BOXES work?

While playing basketball, a teenager in New Hampshire jumped upwards to dunk the ball into the basket net  and got two of his teeth caught in the basketball net. He sued the net manufacturer and ended up settling out of court for $50,000.

These are just a few examples in a growing wave of shakedown lawsuits hitting small businesses nationwide which are costing a cumulative $88 billion per year in settlements and attorney fees, according to Mark Cole, president of Citizens Against Lawsuit Abuse in Houston, Texas. In some cases, businesses have been forced to lay off employees and even close their doors as litigation continues to spiral out of control, rivaling baseball as America's favorite pastime.

"It's the worst part of our business," says Beth Thieme, vice president of Amigo Mobility International Inc., a family-owned Bridgeport, Michigan-based company that manufactures three-wheeled scooters used by elderly or disabled shoppers in grocery stores. It was Beth's husband, Al, who built the first Amigo power-operated vehicle in 1968 and started selling them to stores in 1970. In recent years, the increase of frivolous lawsuits have put a crimp in the company's profitability.

Beth said, "We've had our share of shakedown lawsuits where someone was just looking for settlement money," At 2.3 miles per hour, an individual weighing nearly 300 pounds will tell me they were catapulted out of the equipment. You know what? It didn't happen--it couldn't have happened."

Like most business owners, Beth understands legitimate injuries can and do occur. But she'd like to see the laws changed to cover only the true economic damages incurred. "I pick and choose which battles are worth fighting," Beth says, offering a recent claim by a woman who broke her wristwatch on one of the scooters as an example. "I was happy to send her the cost of the watch; even a little bit more. However, she was also asking for a two-year membership to a health club, which had nothing to do with breaking the watch on the scooter. This is what we have to deal with.

It was a landmark shakedown for Kathie Reece McNeil. The fraudulent shakedown lawsuit was the last thing on her mind when she fell in love with and purchased the Aztec Hotel in Monrovia, California, six years ago on what was once the original alignment of the famous Route 66. The hotel, which originally opened in 1925, was not only the most ornate hotel in the small city, but it would become a place where celebrities dropped by on their way to Palm Springs. Clark Gable, Tom Mix and Wyatt Earp, among others, stayed at the historic inn.    

"I [got hit by a lawsuit in 2003, claiming that on January 1, someone visited the hotel and was discriminated against because she was in a wheelchair and there was no access for her," McNeil explains. At the time, McNeil was busy working with both state and federal government agencies to preserve the wonderful old hotel treasure.

She said, "A structural report was going to be filed with the State Historic Office of Preservation regarding exactly what we needed to do to restore the hotel. Until it was completed, I couldn't make any changes to the structure," explains McNeil, who was leaning on the experience and guidance of state and national historic preservation offices as well as the Route 66 Preservation Foundation, which was administrating the grant to do the structure report.

Upon calling the attorney who was representing the plaintiff, she was shocked to learn that he wanted $18,000 to make the suit "go away." However, he couldn't promise they wouldn't sue her again, since she couldn't make the necessary changes immediately.

Instead of paying off the attorney, for months, rather than pouring her heart and soul into the hotel, McNeil spent hours researching the case, asking everyone who worked at the hotel if they'd ever even seen the woman on the premises. Not only had no one seen her, The claimed she'd been there at 10 a.m. to hear a band play.

"We didn't have a band playing on the morning of New Year's Day," notes McNeil, who smelled something fishy, especially when she heard the plaintiff's conflicting reasons for being at the hotel. "She claimed she was also meeting her son there and, at another time, that she was there to open Christmas presents."

McNeil would later see a deposition from the plaintiff's son, claiming she was there to meet him. Upon closer inspection of the deposition, she noticed the name was that of a homeless man whom McNeil had allowed to stay one night at the hotel as a courtesy. Now aware that something definitely seemed askew, McNeil searched files available at the local courthouse in Pomona, California, and found that the man had been arrested for felony charges, including some for drugs and fraud.

Eventually, McNeil won the case because neither the plaintiff nor her so-called son was found to be credible and it became obvious that the woman had never been at the hotel when she claimed to be. Yet McNeil couldn't afford to celebrate her victory, having run up $102,000 in legal fees to fend off the opposing counsel and handle the case. "I'm still paying it off," says McNeil, who only now is starting to finally enjoy the historic hotel she'd so desired.Unfortunately, she couldn’t collect her court ordered costs from the two fraudsters since they were both deadbeats.

But shakedown lawsuits aren't only served by unknown plaintiffs. Disgruntled employees are also very happy to jump on the shakedown bandwagon. Carole Ross, an attorney with the Del Mar Heights, California, office of the Sheppard, Mullin, Richter and Hampton law firm, points to many cases in which people take no personal responsibility for their actions and seek money due to a company's  so-called evil motives.

Carole Ross said, ”It amazes me when I see some of the lawsuits brought for  wrongful termination or for not even being hired, People will claim it's because 'I'm a woman, over 40, Jewish or some other religion' and list all these reasons on the complaint. It's like throwing darts at a dart board hoping one of them will stick." Ross has helped a number of small-business owners handle such cases.

Although dealing with a frivolous lawsuit can be pricey for entrepreneurs in terms of both time and money, the bigger problem that arises from the many shakedown lawsuits that have hit the courts in greater numbers recently is that these lawsuits affect all small-business owners in the form of higher insurance rates.

"Did you know the Girl Scouts of Metro Detroit have to sell 36,000 boxes of cookies simply to pay for the insurance coverage just in case they're sued?" says Bob Dorigo-Jones, president of Michigan Lawsuit Abuse Watch, a group trying to raise public awareness of the cost such litigation has on all citizens.

"Every person in the United States is paying close to $900 a year in the increased costs of goods and service because of these legal costs," says Dorigo-Jones, who's working in conjunction with Todd Young of the American Justice Partnership on what is called The Victims Project in hopes of gathering more and more examples of businesses that have endured such shakedown lawsuits.

We reached out to 200,000 businesses and have several thousand responses already," says Young of the new project which will compile a list of the victims of fraud and frivolous lawsuits and use these names in campaigns to the media and the governments to help curb lawsuit abuse. Ultimately the goal is to push for legal reforms that will prevent situations such as the man in Harrisburg, Pennsylvania, who slipped and fell on ice outside of a staple and supply company in a strip mall and sued everyone in sight. The man sustained just $3,000 in injuries but sued the staple and supply company, along with all the strip mall tenants, the landlord, and the developer for $1.7 million. Although the store was eventually released from the suit, the business still had to retain and pay for an attorney.

As if suing a small business for a frivolous claim isn't enough, Andy Kotner, president of San Diego's Citizens' Against Lawsuit Abuse, offers another, more outrageous example of a legal shakedown: A San Diego-based attorney sent out letters threatening to sue entire towns, including La Mesa and Ramona, California. In the letter, he demanded that each business pay $2,500 for not complying with ADA regulations.

"He sent these letters to all 67 businesses in the tiny tourist town of Julian," says an attorney who defended some of the town's small-business owners. "Some of the places he threatened to sue had gone out of business prior to receiving the letter, and in one case, the owner had died." The attorney went on to add that this wasn't about specific ADA requirements that weren't being met but was instead a sweeping lawsuit against every business name registered in the town.

"It's a form of legalized extortion," says Kotner, referring to the manner in which some attorneys are using the fine print in ADA requirements to send "demand" letters and threaten lawsuits.

"Under the California Unruh Act, if you're not Americans with Disabilities Act (ADA) compliant, you're committing a hate crime. So if you have a toilet paper dispenser that's a fraction of an inch off what's required or a doormat in front of your entrance, you're now committing a hate crime," explains Kotner, who stands firm that such unwieldy lawsuits must be stopped.

The good news is, in some cases, the shakedown experts have become overzealous, even greedy, and have been shut down. Earlier this year, California Attorney General Bill Lockyer actually filed a lawsuit against the Trevor Law Group. It seems that over the years, the Beverly Hills, California-based law firm had named more than 2,000 collision repair shop owners in lawsuits along with sending thousands of demand letters to small businesses offering not to sue them in exchange for settlements.

Following a state investigation, three principles of the firm were disbarred. In another instance, Lockyer filed charges against a second law firm, Brar & Gamulin, that had mass-mailed lawsuit threats to hundreds of ethnic grocery stores and nail salons. The firm was ordered to pay nearly $1.8 million for filing the fake lawsuits.

"It's a form of legalized extortion," says Kotner, referring to the manner in which some attorneys are using the fine print in ADA requirements to send "demand" letters and threaten lawsuits.

"Under the California Unruh Act, if you're not ADA compliant, you're committing a hate crime. So if you have a toilet paper dispenser that's a fraction of an inch off what's required or a doormat in front of your entrance, you're now committing a hate crime," explains Kotner, who stands firm that such unwieldy lawsuits must be stopped.

The good news is, in some cases, the shakedown experts have become overzealous, even greedy, and have been shut down. Earlier this year, California Attorney General Bill Lockyer actually filed a lawsuit against the Trevor Law Group. It seems that over the years, the Beverly Hills, California-based law practice had named more than 2,000 collision repair shop owners in lawsuits along with sending thousands of demand letters to small businesses offering not to sue them in exchange for settlements. Following a state investigation, three principles of the firm were disbarred. In another instance, Lockyer filed charges against a second law firm, Brar & Gamulin, that had mass-mailed lawsuit threats to hundreds of ethnic grocery stores and nail salons. The firm was ordered to pay nearly $1.8 million for filing the lawsuits.

As an increasing number of small businesses fall prey to such predatory law suits, an increasing number of them are getting wise and looking to partner with lawsuit abuse and reform organizations throughout the country. But what else can be done to help stop the problem before it affects your small business? Here are a few tips:

• Make sure you're adequately covered with the right type of and amount of insurance.
• Post any necessary warnings about safety issues.
• Stay on top of all necessary business codes and regulations is one preventative step
• Attorneys and group fighting such frivolous lawsuits suggest voting for politicians who advocate tort reform.
• If you are sued, don't panic or make any hasty decisions, since plaintiffs and their attorneys are often seeking a quick buck and may simply move on to someone else if you don't respond immediately.
• Research the law firm suing you to find out if they have a history of similar frivolous lawsuits. If you find similar lawsuits on the books, contact the office of the attorney general in your state
• Create, print and distribute an employee manual that includes all company rules, guidelines and regulations for your employees. Make sure you include sections on what constitutes grounds for dismissal as well as what's considered inappropriate behavior. Have each employee sign a form acknowledging that he or she has received it.

Do what you can to protect your business, but remember that someone who's determined to sue will do so simply because they can. As business owner Beth Thieme says, you can't fight every battle. You need to pick and choose. In time, as more business owners stand up against fraudulent claims, the shakedown specialists, like those mentioned above, will eventually recognize the increased public awareness of such suits and the repercussions of trying to manipulate and exploit the legal system.

I got much of the preceding information from an article written by Rich Mintzer who is a freelance journalist and the author of several business books.

In early February of this year, the fight to strengthen the landmark civil rights law Americans with Disabilities Act (ADA) passed a crucial first test when a bipartisan majority in the House of Representatives passed H.R. 620, the ADA Education and Reform Act with a vote of 225-192. The bill seeks to provide a “notice and cure” period where alleged ADA violations are brought to the attention of the business owner, and they have up to 120 days to address or make substantial progress towards addressing issues of physical access.

Improving and expanding physical access is the original intent and spirit of the ADA, but the recourse for addressing violations under Title III of the law created the unintentional consequence of unleashing a torrent of frivolous lawsuits that put profit ahead of people. Lawyers are recruiting plaintiffs to file what came to be known as “ADA drive-by lawsuits,” in which plaintiffs often use deliberately vague language to allege businesses to be out of compliance with provisions of the ADA. Demand letters suggest a settlement that is relatively less than the cost of hiring a lawyer and litigating the matter, and the owner often settles to avoid drawing their business and employees into a protracted legal battle.

The practice is so rampant and profitable that individual lawyers (Shysters whose firms are scum ponds) file hundreds of these lawsuits, often with the same plaintiffs alleging the same ADA violations. Only the defendant’s name changes in the court documents, but the sheer volume of these cases filed sometimes proves to be too much for some attorneys to even get this part correct. Often, hoteliers discover that the plaintiff never actually was a guest at or even visited their property. The Asian American Hotel Owners Association ( AAHOA)  members also report receiving lawsuits that had their property name on one page and another business’ name on subsequent pages. The brazen ways that some attorneys abuse the ADA to line their pockets is intolerable and increasingly unaffordable for hoteliers and other small business owners.

AAHOA’s advocacy efforts helped advance the bill through the House. Members affected by these lawsuits shared their compelling stories through congressional testimony, letter writing, phone calls, and, the most effective means of advocacy, face-to-face meetings with their legislators. While these efforts encouraged legislators to cross the partisan divide and build a coalition to pass this legislation in the House, the bill awaits a forward-thinking sponsor in the Senate. Rep. Ted Poe (R-TX), the bill’s sponsor, called for Senate action saying, “I urge the Senate to quickly take up this legislation and put an end to unscrupulous attorney’s abuse of the ADA.”

While awaiting federal action, Minnesota, Arizona, New Mexico, Texas and Florida passed legislation to curb drive-by lawsuits. Although this provides some relief for hoteliers and small business owners in these states, unscrupulous attorneys are merely setting up shop in a neighboring state and beginning their predatory practices anew. Others lacking that pioneer spirit simply move up to the next level and are filing their claims in federal court. A fix at the federal level, while not eliminating this type of lawsuit abuse entirely, refocuses efforts on addressing accessibility issues before resorting to litigation.

The concept of class actions was an excellent idea.  Because solo actions are impractical, especially when the recovery to each victim is small, people cannot get the compensation they deserved, and companies that cause widespread harm escape liability. Class actions solve this problem. Now, if banks like Wells Fargo or automakers like VW cheat their customers, they can expect a class action tsunami that will punish them stiffly and make their victims whole again.

But the reality of class actions turned out far less rosy. One problem is frivolous settlements: many lawsuits usually end with settlements that give high bounties to the attorneys but nothing of value to the class members. These sweet fees explain why class actions “exploded in the U.S. beyond the realm of reason,” as a leading court concluded. Judge Richard Posner called this a “racket” and told fellow judges “no class action settlement that yields zero benefits for the class should be approved, and a class action that seeks only worthless benefits for the class should dismissed out of hand.” Data confirms Posner’s skepticism: only negligible few of the class members—often no more than 1%—redeem coupons that they receive in the settlements.

Happily, law reform instructing judges to disapprove of such settlements succeeded in reducing frivolous litigation. But it did not solve the other major problem – of “shakedown”lawsuits. These are class actions that go after companies for violating minor, technical, and often obscure regulations. The alleged violations cause no harm or injury, and go wholly unnoticed by anyone other than law firms specializing in digging them up. There is law prohibiting stores from printing more than five digits of your credit card on a receipt.  Law firms make a living tracking “so called offenders”—stores that print a couple extra digits—and sue them even when none of the consumers were harmed or ever complained.

Courts in the US finally have the tool to fight back against these “no injury” lawsuits, thanks to a recent decision by the Supreme Court. In a case decided a few months ago, Spokeo v. Robins, the Supreme Court held that class actions must allege a “concrete” harm, or else trial courts should throw them out. In that case, a website that collected and disclosed information about people was sued by a plaintiff who claimed that the information about him was incorrect and that his privacy rights were violated. The irony was that the website’s errors made the plaintiff’s profile look better than he really was.  The website said that he had a job, a graduate degree, and was relatively affluent—all incorrect. Of course, such false praise did not cause the plaintiff any harm. But it was nevertheless a technical violation of a federal statute. The entry could actually harm the plaintiff because if his real background was less favourable, anyone knowing that would think of him as a liar. 

Only a few months passed since the Spokeo ruling, but it now seems that it is having a game-changing effect on class action litigation. Relying on the requirement of “concrete” injury, judges have been emboldened to throw out many no-injury class actions that in the past survived. Here is a lively example. In many cases, employees are suing employers who, as part of the hiring process, run credit checks, but fail to give proper disclosure. In all these cases, the employers are actually disclosing and getting consent to these credit checks, but the lawsuits complain that the disclosures are not given on a “stand alone” form, as required by law, and instead are printed on documents that contain additional information. There is no shred of real injury, not least because we know that no one reads these disclosures anyway, but also because in many cases the employees were hired after all. Still, they file class actions and allege a so-called “informational injury.” To their chagrin, courts no longer think that their injury is concrete, and citing the Spokeo ruling they are turning these plaintiffs away.

Likewise, in the too-many-digits lawsuits (against stores that forget to redact the right number credit card digits on the printed receipts), plaintiffs are claiming that they are suffering privacy injury and risk of identity theft, but without real harm courts are no longer swayed with that argument.

Take care that you don’t sue someone for frivolous reasons just to get a hopeful settlement. The defendant may go ahead with the trial and if you lose, you could be faced with the defendant’s lawyer’s enormous fees.