Note to Small Business: There is no Lawsuit Plague

by Fred Abramson on September 27, 2010 · 3 comments

Mark Henkins, writing in puts forth a persuasive rebuttal to the argument that our current “litigious” climate has produced an avalanche of frivolous lawsuits that have hurt small businesses.

According to Mr. Henkins, the rhetoric espoused by this view goes like this: “Lawsuit abuse that clogs our courts and raises the costs of goods and services,”  as warned by the National Federation of Independent Business, which calls itself ”The Voice of Small Business.” What’s more, “many small businesses become innocent victims of this sue-thy-neighbor mentality.”

Similarly, groups like the American Tort Reform Association argue that excessive litigation has caused pain for small businesses. The ATRA state that “these lawsuits compromise access to affordable health care, punish consumers by raising the cost of goods and services, chill innovation, and undermine the notion of personal responsibility.”

However, the facts demonstrate that the risk to small businesses from being destroyed by a frivolous lawsuit is remote.

  • According to The National Federation for Independent Business when it asked 3,500 small business owners to rank the problems they faced. “Costs and Frequency of Law Suits/Threatened Suits” came in 65th of 75, barely beating out “Solid and Hazardous Waste Disposal.”
  • The number of civil tort cases shrank by more than 31 percent from 1996 to 2005, according to a U.S. Department of Justice examination of state courts in the nation’s 75 most populous counties.

Small businesses should not discount the risk of lawsuits. If you enter into a business dealings without a written contract, you are placing your business at risk.  However, a lawsuit without merit can often be defeated by making an early motion to dismiss the claim, with minimal legal costs.  Simply put, the argument that there is an increase of law suit plague is not supported by the facts.

What do you think? Has your business been subject to lawsuit that was without merit? What do you think the legal system could do to better address this issue?

The Law Office of Frederic R. Abramson represents small businesses in New York State. If you have any questions regarding litigation, call me at 212-233-0666.

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{ 3 comments… read them below or add one }

Gsarton September 27, 2010 at 4:18 pm

1. Asking a group for a subjective view on problems they face is not the same as analyzing actual probabilities that a group may face damage vis-a-vis litigation.
2. The reduction in cases in limited geographical areas does not imply a drop in frivolous suits which damage small business owners.

Simply put, your facts do not support your argument either.

Growden92646 September 28, 2010 at 6:36 pm

I would like to see some of the study parameters changed; has a decrease in lawsuits matched a decrease in manufacturers? While being a distributor or retailer opens up all of the drive-by ADA claims that seem to be the rage in So. California, those groups are not subject to the insurance lawsuits of product liablity claims. Many of these claims are nothing more than insurance companies recouping claim payments that frankly the adjuster should not have granted. Getting a motion to dismiss in these instances proved impossible, the judge or arbitrator wanted to at least let discovery take place. Opposing council would then politely inform that they would insure that discovery cost X amount of dollars but we could settle for an amount very close to that. It’s just a business decision. I don’t believe that any manufacturing will return to the U.S. until some of these abuses are rectified.

Growden92646 September 28, 2010 at 6:38 pm

*opposing council would ENSURE, not insure*

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