Lawsuit Abuse a Growing, Costly Problem

Collette McLafferty holding a copy of the New York Post newspaper at the Yellow Brick Collective in New York on Aug. 25, 2014. Courtesy of Collette McLafferty

NEW YORK—Collette McLafferty was rehearsing at a studio in Long Island one night in 2014. A P!nk cover band had hired her to sing lead for a one-night gig at a pub.

A man walked into the studio holding a stack of papers. He approached the bassist, Richard Nevine, and took some papers from the stack to hand to him. The man was a process server there to tell Nevine he was being sued by a former bandmate for allegedly stealing his idea to start Long Island’s first P!nk cover band.

There was a pause. Then Nevine’s laugh rang out heartily. He was clearly unperturbed by the lawsuit and saw it as a great joke. The rest of the band erupted into laughter too, and even the process server chuckled.

The server took another part of the stack and served the guitarist as the laughter continued. Then he served McLafferty.

In her surprise, her laughter faded. She had never met this former bandmate. How was it he was suing her? And for $10 million at that? She was a hired singer for a single gig worth $75.

Her brow furrowed as she flipped through the pages filled with accusations in courier font. The 112-page complaint was a patch of quicksand that sucked her in. No matter how hard she tried to escape, she would be stuck in it for the next two years, and it almost took her life.

Whether Innocent or Guilty, You Pay

The judge eventually dismissed it as a frivolous claim. But the very act of suing did its damage.

McLafferty paid about $15,000 in legal fees. For two years, she navigated the legal system and the lawsuit consumed her mentally and emotionally. She spent a lot of time researching similar lawsuits.

Perhaps the most damaging result was that the press picked up on part of the complaint in which the plaintiff, Charles Bonfante, said she was “a lousy singer” and “too unattractive,” to be in the band.

That wasn’t the main thrust of the lawsuit, but it was the main thrust of the headlines.

The merits of her 20-year career became buried under words like “ugly” and “bad singer” in search engine results. She was so depressed, she would sometimes break down and cry in public, and she had suicidal thoughts.

“I entered this very dark, dark world, just learning about what was going on,” McLafferty said. “I couldn’t believe the level of corruption in our legal system that would allow this.”

Collette McLafferty (singer), Dan Purdom (guitar), and Andrew Potenza (percussion) at the book release party for "Confessions of a Bad, Ugly Singer" at the Parkside Lounge in New York on Oct. 17, 2018. Courtesy of Collette McLafferty

Rise in Lawsuit Abuse

The problem of lawsuit abuse has increased over the past 15 years in the United States, according to Tiger Joyce, president of the American Tort Reform Association (ATRA).

While some suits are between individuals—like the case of McLafferty and Bonfante—Joyce said “class actions are an issue that’s far, far greater than it’s ever been.”

He said a prime example of frivolous class-action suits, in his opinion, is the rising phenomenon of climate-change suits. People are suing fuel-related companies, demanding payment for predicted future damages due to climate change. For example, Judge William Alsup of Federal District Court in San Francisco threw out a case last year brought by the city of Oakland against oil companies, including BP and Chevron.

In December, Justice Barry Ostrager ruled in favor of Exxon Mobil Corp. in a similar case brought against it by the state of New York.

In recent years, there has also been a rise in the number of lawsuits filed under the Americans with Disabilities Act (ADA). “Often these so-called ‘violations’ are as minor as a mirror that is an inch too high or a sidewalk or parking lot that is angled one degree too much,” according to an ATRA Judicial Hellholes report.

Congressman Mike Conaway (R-TX) sponsored a bill in 2017 to amend the Disabilities Act and prevent these kinds of lawsuits. The bill, H.R. 620, passed the House in 2018 and is currently in the Senate.

Conaway said in a 2017 press release, “Cash-hungry attorneys are taking advantage of the ADA by filing frivolous lawsuits against small businesses—many of which aren’t even aware of the very minor, technical offense they are being sued for.”

On the other hand, the American Civil Liberties Association has said H.R. 620 could hurt people with disabilities. “[The bill will prevent] people with disabilities from immediately going to court to enforce their rights,” the association said in a report.

That’s the crux of many objections to lawsuit reform that would prevent abuse: it could also discourage or create obstacles for some people with legitimate cases from exercising their legal rights.

Another kind of lawsuit abuse that’s on the rise affects the investment world. The Institute for Legal Reform (ILR) reports that investors are suing companies because they object to merger or acquisition deals.

Investors are also suing companies whose share prices have dropped, alleging that the companies concealed prior knowledge of some factor that could possibly cause a drop in prices. Since 2012, there has been a 225 percent increase in this kind of lawsuit.

In the 1990s, similar suits were common—called “stock-drop” suits—in which lawyers would find investors to act as plaintiffs and sue companies for “an unexpected drop in company stock,” according to ILR.

Congress put a stop to “stock-drop” suits with the Private Securities Litigation Reform Act of 1995. But these new securities class suits are not targeting the stock price directly and thus sidestepping the 1995 legislation.

Businesses bear a large part of the burden of lawsuit abuse, and it affects mom-and-pop shops as well as large corporations.

Small Businesses Pay

It takes more than eight months on average to fight a suit, putting an extended strain on the time and energy small business owners have to dedicate to their daily operations. An estimated 30,000 small businesses (with less than 50 employees) are involved each year in litigation, according to a report commissioned by the United States Small Business Administration in 2005.

Small businesses can spend more than $100 billion dollars combined in one year on these lawsuits, according to an estimate by the National Federation of Independent Business (NFIB).

NFIB’s senior executive counsel, Elizabeth Milito, testified before the House of Representatives in 2013 concerning the impact of lawsuit abuse on small businesses. She said, “In California, attorneys have been known to rake in several million dollars a year fleecing small business owners.”

She gave the example of a particular attorney, Harpreet Brar, who received hundreds of settlements of $1,000 or more from “mom and pop” stores after suing them for minor violations of the state business code. He sued many of them, for example, for not having signs up saying they were collecting point-of-sale device fees.

‘An 18-Month Period of Stress’

Alexander Nicholas is a small business owner who was the victim of an abusive lawsuit.

Nicholas took over the family business, Keats Bar in Manhattan, in 2007. One of the bar’s employees, we’ll call her Sarah (Nicholas preferred not to name her), had been there for 10 years. One day in 2013, Sarah was out riding a bike with Nicholas’s father when she was hit by a car.

Keats Bar in Manhattan. Courtesy of Alexander Nicholas

While she was recovering from her injury, Nicholas repeatedly reached out to her to see how she was doing, he said. He held her job for her and tried repeatedly to touch base with her over the course of nine months. But he received no response.

So he finally hired a new employee to fill her role at the bar. Sarah sued him for wrongful dismissal, alleging he discriminated against her because she was disabled.

“It was an 18-month period of stress, heartache, uncertainty,” he said. “My legal costs came out to about [$10,000] to $15,000. For a small business, it’s rough. So when you have to fight a case like that you have to utilize your resources, your sanity, and time.”

“We had to be careful on new hires because we weren’t sure if we'd have the money to fill positions,” Nicholas said. “And it became extremely stressful on day-to-day with cash flow.”

Due to lack of evidence, Honorable Erika Edwards of the New York County Supreme Court dismissed the case on summary judgment.

Consequences

Current U.S. law states that judges may fine plaintiffs and lawyers or place other sanctions on them for filing frivolous lawsuits. But the judges are not required to do so. And if lawyers withdraw the suit within 21 days of filing, they cannot be sanctioned.

The Lawsuit Abuse Reduction Act of 2017, which is currently in the U.S. Senate, would require judges to place sanctions, and it would eliminate the 21-day grace period that lawyers have to correct their claim before they can be sanctioned.

This act is similar to “Collette’s Law,” or the Lawsuit Abuse Reduction Act introduced to the New York State Assembly in 2016. It was inspired by McLafferty’s story, and it would have imposed fines of up to $15,000 on plaintiffs who file suits deemed frivolous. But the act didn’t pass.

Collette McLafferty at the annual meeting of the Lawsuit Reform Alliance of New York in Albany, NY on Nov. 19, 2014. Courtesy of Collette McLafferty

Trial lawyers associations blocked “Collette’s Law” repeatedly in New York.

One reason the law met with opposition, is that it may inhibit people from filing legitimate suits. Lawyers may be more wary of taking on cases, or potential plaintiffs may be more wary of filing lawsuits in general. The fear would be that a judge could find the case frivolous and impose sanctions even though the plaintiff and lawyer genuinely thought it had merit.

McLafferty thinks the trial lawyers blocked it for other reasons. “It’s because the legal system is a business and ... taking away the ability to use the legal system as a harassment tool is also going to take money away from the [lawyers],” she said.

The National Trial Lawyers Association (now called the American Association for Justice) and The New York State Trial Lawyers Association both declined to comment for this article.

Honorable Arthur Pitts, a Supreme Court Justice for the state of New York, presided over McLafferty’s case. After the judge threw out the case, Bonfante agreed to pay all of McLafferty’s legal fees in a settlement. But by that point, she’d already made major life changes to be able to afford them—like moving out of Manhattan and giving up the apartment she’d had there for a decade.

The judge also made Bonfante apologize. In his apology, Bonfante said, “I look at my actions and it made me look like a bully and chest-thumping air bag.”

He was not only a drummer, but also a personal injury lawyer who represented himself in the case against McLafferty. He said, “I’ve never been as ashamed of anything I’ve done in my professional life as I am now.”