Frivolous lawsuits big problem for small business

Tony Gagliardi
Tony Gagliardi

Whatever the presidential candidates might point to, those on the losing end of a frivolous lawsuit know firsthand what ails our nation most: the judicial system and lawyers who game it.

It would be wrong to blame all of them. But there can be no ignoring some of the highly destructive damage lawyers do from having too big an influence in the Colorado Legislature and Congress. House Bill 13-1136, a state law that took effect this year, and House Resolution 758, which recently passed the U.S. House of Representatives, constitute exhibits A and B.

In spite of a Colorado Civil Rights Division statistic for one year showing 313 out of 339 employment discrimination complaints dismissed for lack of merit, State Sen. Morgan Caroll, State Rep. Joe Salazar and former State Rep. Claire Levy saw a civil rights issue where none had existed before. They teamed to ram HB 13-1136 through the Legislature, which does nothing but make it easier to sue small business owners under expanded classes of economic and noneconomic damages, including such amorphous concepts as inconvenience, mental anguish and — sad to say, not a joke — loss of enjoyment of life.

There was no civil rights issue needing redress. This law, stripped of its political coating, is a way to gin up the lawsuit business for the boys and girls at the state bar. Oh, by the way, Caroll, Salazar and Levy are all lawyers. See how it works?

Working in a different way — but just as revealing for what lawyers are up to — is H.R. 758, the Lawsuit Abuse Reduction Act of 2015 the U.S. House passed on a vote of 241 to 185 in September. The measure, refreshingly, would let judges decide whether lawsuits are based on existing legal principles and, if not, hold plaintiffs responsible for defendants’ legal expenses.

U.S. Reps. Ken Buck, Mike Coffman, Doug Lamborn and Scott Tipton from Colorado are to be commended for voting to pass H.R. 758. Not surprisingly, U.S. Reps. Diane DeGette and Ed Perlmutter, both practicing attorneys, voted against the bill. See how it works?

DeGette and Perlmutter need to be held accountable for their votes by the small business owners in their districts, but not more so than U.S. Rep. Jared Polis, who, as an entrepreneur himself, should have known better and not voted with DeGette and Perlmutter.

“Few things are more worrisome to American small business owners than the possibility of being dragged into court as the target of a frivolous lawsuit,” said Beth Milito, senior legal counsel for the National Federation of Independent Business, America’s voice of small business. “Under the current system there is nearly zero financial risk for trial attorneys and their clients who bring cases that should otherwise be laughed right out of court. You have to hire a lawyer no matter how weak the case against you appears. If you lose, you have to pay. If you settle before trial, you have to pay. And even if you win the case, you still have to pay your legal bills.” See how it works?

The most common type of lawsuits filed against small business owners are for product or professional liability and for personal injury, such as premise liability. In the last survey on liability that NFIB took of its small business owning members, by a 9-to-1 margin most cases were settled before trial. But about half of small business owners believed they were pushed into settling by their insurer when they would have preferred to fight.

In addition to allowing judges to toss frivolous lawsuits, H.R. 758 would close the escape hatch that lets attorneys withdraw outlandish claims in time to avoid penalties. The bill is now in the U.S. Senate, where it should be embraced and championed by Sens. Michael Bennet and Cory Gardner of Colorado.

If not, the Main Street mom-and-pop business owners who employ the majority of Coloradans and generate almost every new job should look them in the eye and ask why they didn’t.