Fighting Back is the Best Defense Against a Frivolous Lawsuit



Posted: Friday, December 04, 2009

by Nina Kaufman
Ask The Business Lawyer

"Heather" was at her desk, reviewing accounts receivable reports. She grimaced as she saw the unpaid invoices from HiSpeed Technologies, Inc. She had done great work for them, and they continually praised her efforts - but what started out as a rough cash flow patch for them was turning into one excuse after another. Just as she wondered how she would ever collect the debt, there was a knock at the door. It was a process server, handing her some official-looking court documents. Her heart dropped into her stomach as she saw the names on the papers. Hi-Speed was suing her! Frantic, she wondered, "How can I make this frivolous lawsuit go away quickly"? Unfortunately for Heather, there is no "magic pill" to prevent people from suing for seemingly baseless reasons. However, you can hit back hard - hard enough that your litigious opponent thinks twice about proceeding further.

The first step is to understand how these kinds of claims can arise. They are often the knee-jerk response to avoid your claim for nonpayment. Deadbeat defendants frequently play several cards in their deck. They'll claim they were dissatisfied with your services or products. Plus, they may claim that the damages they suffered for your unsatisfactory work far outweighed whatever "paltry" sum you may be trying to collect. In addition, deadbeat defendants will delay - delay paying you, delay prosecuting the lawsuit -- as much as possible. Their strategy is often a war of attrition: can they drag out the lawsuit long enough to make the matter financially painful? Would paying them something - anything - even if undeserved, get rid of the dispute and thus be a more attractive option? That's what they bank on.

Understand at this stage, your best strategy is a strong offense. These are the steps to take: -

- Answer their complaint immediately with possible counterclaims and likely defenses. Consult with your attorney on whether you can demand penalties against them and their attorney.

- Keep up the momentum. Check into the possibility of a "summary or court proceedings" to be quickly finished with such forms of small business disputes. Avoid waiting for a trial date. Parties in a frivolous litigation often balk in the face of an aggressive defense and will either call the whole thing off or agree to a "nuisance value settlement".

An intelligent way to handle the situation is to make it painful for the other side to sue you for trumped-up claims. The most important step you can take is to have written contracts with all new clients. Here are a few terms that you'll want to include:

- A clear plan of accountability. This includes detail about the services provided and tracks the services to expectations of payment. No payment, no services.

- "Boilerplate" concerning legal fees and costs. Legal fees are almost never awarded in contract disputes . . . unless your agreement provides for them. Provisions like those go a long way to encourage an amicable resolution of disputes without the need for litigation. It most almost certainly will dissuade someone with a knowingly frivolous claim.

- Arbitration provisions. Arbitration can be faster and less expensive than litigation. In most cases, you can set an arbitration date months, even years, before you might get a trial date in court. Because arbitrator's awards generally cannot be appealed or set aside, there's no "prolonging the agony" through an appeals process. Speedy resolution at lower cost, in front of an arbitrator who should be able to sniff out frivolousness quickly - all of these are the bane of those whose game is delay.

Protect yourself from being vulnerable to frivolous lawsuit with a written agreement. When you are the subject of a nuisance claim, act as quickly as possible to consult with and get the aid of an experienced attorney who will carry out a proactive strategy for speedy resolution of your problem!

Copyright (c) 2009 Ask The Business Lawyer

--------

Fed up with the crazy legal issues your small business faces? Check out the user-friendly business law resources from Nina Kaufman, Esq., at http://www.GreatBusinessLawResources.com . She cuts through the legal gibberish to save you time, money, and aggravation. She also writes and blogs for Entrepreneur Magazine online. Get a free copy of her Contracts & Collections Info Kit at http://bit.ly/freecontractlaw

This Article has been viewed 1,765 times. (Not updated in real-time.)
Top-level comments on this article: (2 total)
» left by Richard Vail
 2 years 172 days ago.
60 fans.
great article, and in our litigious society, timely as well, thanks for taking the time to post this.
» left by Nina Kaufman 2 years 44 days ago.
2 fans.
Thanks, Richard. Given the current economy, I'll be curious to see how many people try to use this tactic to get out of paying large bills.
» left by Nina Kaufman 2 years 169 days ago.
2 fans.
Thanks, JP.  We'd like to think that everyone will act honorably in business (after all, isn't that something we strive for?), but that's not always the case. I wanted people to know that they have a way to fight back and not have to "roll over and play dead" -- but that they need to put their own house in order, too.
We want your comments! If you can read this, you don't have javascript enabled, so you can't use this comment system. Please enable javascript.