The Frivolous Lawsuit Trap

“You’ve just been sued,” is not something you want to hear as a stranger shoves a wad of papers into your hands.

If your shock gets replaced with a belief the lawsuit must be frivolous you've already made your first mistake in handling the matter.

Understanding the difference between a frivolous and non-frivolous suit can save you time and money because it's the difference between recognizing the merits of the case and a quick settlement, or protracted litigation. Confuse the two and you have a litigation nightmare.

It’s worth knowing the difference.

What is a frivolous lawsuit?

The legal definition of a frivolous suit is a suit for which there is “no colorable claim.” Unfortunately, many people believe that a frivolous case is any suit the other side won’t win. If you’re the defendant it’s only natural to be defensive and believe the other side is being silly; but, that doesn’t mean the case is frivolous in the eyes of The Law.

    What does “no colorable claim” mean?

No colorable claim is a fancy legal term that means the claim is not supported by facts and/or the claim is not recognized by law. In other words, there is no legal basis for the suit in law or in fact. Those are two separate things. Please allow me to explain.

Let's say a twenty year old employee sues for age discrimination because they feel they’re not getting challenging projects at work because of their youth. The fact that they are only twenty would not support the age claim because the law only protects those over forty from discrimination based on age. As a result, they would fall within the first part of the definition of “no colorable claim” because even if you looked at the facts in the most favorable light to the plaintiff, there is no way a twenty year old is going qualify for the protections you need to be forty in order to get.

Similarly, if the same employee sued because the assignments were unfair, it would still be frivolous suit because not everything that is unfair is recognized by law as actionable. So unless they could connect the dots to a legally enforceable contract claim that was breached by the alleged unfair assignments, or another legally recognized claim, such as discrimination based on a protected class (race, religion, national origin, etc.) that particular claim would meet the second part of the definition of frivolous.

    Why is the “no colorable claim” issue important?

If there is “no colorable claim” there is no legal basis for the complaint in law or fact. Its pie in the sky. The court can dismiss the case. Case closed.

Why is calling a lawsuit frivolous a trap?

In practice, meeting the requirements of “no colorable claim” is very difficult because it’s a very narrow definition. Very few cases are actually dismissed on that basis. Drafting a complaint based on a legally recognized claim and involving questions of fact is Law School 101. A lawyer can get in trouble for filing a frivolous suit and wasting the court's time.

That’s why calling every case you disagree with or don’t like “frivolous” is a huge trap. The vast majority of cases are very real. They turn on questions of fact and interpretations of the law. It’s often more than 50 shades of gray and that’s why lawsuits should never be taken lightly.

Trivializing them only sets you up for a lengthy battle and lots of cha-ching.

    What if the plaintiff loses, doesn’t that make the case frivolous?

No. Frivolity in the lay sense shouldn’t be confused with frivolity in the legal sense. Whether a case is frivolous is determined by the initial claim, not the final result.

Even when you win, the cost of vindicating your business can be high. Out of pocket costs can pale in comparison to the amount of stress associated with litigation drama and an uncertain outcome, plus the amount of time it chews up distracting you from your core business. That’s why it pays to keep your business out of court in the first place and why I've created a top-level, virtual program with the essentials to help you do that.

Why does it matter if non-lawyers call a case frivolous?

If you’re the defendant in the case, characterizing the suit as frivolous only serves to keep the emotional stakes high and when you do that you create an expensive blind spot because the suit does not get taken seriously until a substantial amount of time and money has been spent. Its resources that could be invested elsewhere if only you hadn’t been blinded by the myth of the frivolous lawsuit.

One of the most famous “frivolous” suits is the McDonald’s restaurant hot coffee case. A woman won $2.9 million in damages after she scalded herself when a cup of coffee purchased at the drive-through window spilled in her lap. The case made headlines at the time because the court of public opinion claimed “everyone knows coffee is hot.”

What most people don’t know is that 93% of that award ($2.7 million) represented punitive damages because McDonald’s files showed that they knew for years that their coffee was significantly hotter than its competitors’. Those few extra degrees made the difference between third-degree and second-degree burns that could occur in the time it would take to wipe up a spill from your lap. Those extra degrees are what caused the plaintiff’s burn injuries.

As a result, the punitive damages were in response to what the court perceived was a callous company attitude because they “knew” someone could get badly burned based on prior complaint and their own research, but they did nothing. McDonald's behavior constituted negligence. It was a valid cause of action.

And the damages? Certainly they were super-sized? Right?

Well, the original damage award represented two days of coffee revenue. It was later reduced on appeal to six figures and the case ultimately settled.

Next time you get a cup of coffee at McDonald's take a look at the cup. Thanks to this case it features a warning label reminding you that coffee is HOT. That warning now serves to transfer the responsibility for risk of injury to you, the consumer, and is one way to keep your business out of court.

CONCLUSION

Lawsuits are serious business. It pays to look at all sides of the case before declaring it “frivolous.” If you’re the defendant, the faster you can get to merits, the cheaper it is to resolve. 

Clients that are rich, angry, and wrong are a law firm's best friend. It gives them beaucoup opportunity to run the meter and that makes preconceived notions about what’s frivolous an expensive proposition that hurts your bottom line.

Don't get mad, get smart.

Other Resources:

Download 2 complimentary chapters of The Business Guide to Legal Literacy: What Every Manager Should Know About the Law

When to Settle a Lawsuit

How Fears Create Blind Spots that Undercut Effective Risk Management

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Hanna Hasl-Kelchner, Esq. helps responsible business leaders learn how to get more control over legal risk in their business so they can stay out of court and build more shareholder value by empowering them with the legal literacy advantage.

She is an award winning consultant, author and speaker. Her ground-breaking book, "The Business Guide to Legal Literacy," shows organizations how to extract the highest value of both disciplines to ignite better decision making and achieve more business success. Download two chapters here.

Discover how to make her strategies your own through her on-line learning programs, through private consultations, inviting her to speak at your business function, and listening to her podcast Business Confidential Now. Available through your favorite podcast app or here.

Contact Hanna and discover a new way to think about controlling risk and legal expenses in your business.