It's more than a pants suit
Did you hear the one about the $65 million pair of pants?
It sounds like the start of a joke, but unfortunately it's not.
A Washington, D.C.-based lawyer has filed a $65 million lawsuit against a dry cleaner for a missing pair of pants. Despite the fact that the pants were found and the owners attempted to settle the case, the lawyer instead brought a suit claiming the shop was violating consumer protection laws.
This attorney is also an administrative judge, so you'd think he would understand how frequently the legal system is abused and be sympathetic to its victims. Instead, he's apparently chosen to join the ranks of plaintiffs who target small businesses.
He alleges the shop's “satisfaction guaranteed” and same-day service guarantee weren't met, and therefore, the dry cleaner is liable for $1,500 per day, per violation, per person. He is suing the shop owner, his wife and their son, adding in $500,000 for emotional damages, $542,500 in legal fees, even though he is representing himself, and other costs for a total of more than $65 million. As outrageous as this suit sounds, it's not surprising that the defendant is a small business.
Small businesses are the target of lawsuits because trial lawyers understand that they're more likely than a large corporation to settle a case rather than go to court. Small businesses don't have in-house lawyers to inform them of their rights, to write letters responding to allegations made against them or to provide legal advice. They don't have the resources to hire an attorney, nor the time to spend away from their business fighting these small-claim lawsuits. Often, they don't even have the power to decide whether or not to settle a case their insurance company makes that decision.
For the small business with five employees or less, the problem often isn't the million-dollar verdicts that make the news. It's the $5,000 and $10,000 paid to settle a suit. When you consider that many small businesses gross $350,000 or less a year in general, $5,000 to $10,000 can significantly impact a small-business owner's bottom line.
Needless to say, those costs mean the entrepreneur can't spend money on other needed expenses, such as providing health insurance. The Pacific Research Institute recently released a report called “Jackpot Justice,” which estimated the social and economic costs of our legal liability system. The institute estimates the annual price tag for a family of four is $9,827 in costs and lost benefits. The additional health care costs associated with legal liability, the institute estimates, added 3.4 million Americans to the list of those without health insurance.
There are literally hundreds of cases of small businesses that have been subjected to frivolous lawsuits. Our “sue first” culture is hurting small-business owners and slowing job creation across the country. The growing number and costs of lawsuits threaten to significantly stifle the growth of our nation's economy by hurting this important segment of that economy.
For that reason, we need to reform our nation's civil justice system. After all, a true system of justice shouldn't fly by the seat of anyone's pants.
Todd Stottlemyer is president and CEO of the National Federation of Independent Business in Washington, D.C.