Seth M. Rosenstein

Fighting Back Against Frivolous Lawsuits and Meritless Claims

By Seth M. Rosenstein

Businesses and individuals facing the prospect of litigation often ask legal counsel whether they can sue or be sued over a particular set of facts and circumstances, and the proper response is generally that “Anybody can file a lawsuit against anyone about anything.”  That is not to say that every claim or suit has merit or should be pursued; far from it.  But the reality is that the courthouse doors swing wide open for even the most absurd litigants asserting baseless and frivolous claims.

Want to sue your dentist for supposedly putting listening devices in your fillings? No one will stop you. Want to fight a lawsuit by alleging that the plaintiff’s true identity as an alien from a galaxy far, far away bars their claims?  The court clerk will accept your filing with no questions.  In both state and federal courts, the bar for filing a lawsuit or pleading is essentially non-existent.

However, once a frivolous lawsuit or claim is filed, those who must waste their time, money, and effort fighting back have powerful ways to hold such parties – and their attorneys – accountable for abusing the judicial process and help them recoup the fees and costs attendant to defending claims that lack any factual or legal merit.  Court rules at the state and federal levels include provisions specifically designed to deter and address frivolous claims and provide remedies to the parties on the receiving end.

Aggressively Fighting Back Against Frivolous Claims 

Our litigation practice group aggressively avails itself of those rules when a client is served with a meritless complaint, whether in New Jersey and New York state courts or in federal court. If we believe a suit was filed in bad faith, in violation of an attorney’s ethical obligations, or for improper purposes, we take all steps required to ensure that sanctions against the offending litigant and their attorneys can be sought to make our client whole.  We have a solid track record of success fighting back against frivolous litigation, which, as noted, is all too easy to pursue, at least initially.

There is an important distinction, however, between a frivolous claim and a weak one. In every lawsuit that goes to trial, one party will prevail, and one party will lose. Just as the two contestants who lose on each episode of “Jeopardy!” can hardly be called dumb, a claim or defense will not automatically be deemed meritless simply because it was unsuccessful. To be considered frivolous, it must meet the definition of that term in the applicable court rule.

New Jersey’s Frivolous Litigation Act

New Jersey’s Frivolous Litigation Act (FCA) and Rule 1:4-8 of the state’s Rules of Court are prime tools that empower legal counsel and the courts to address meritless lawsuits and claims.

The FCA provides that a party who prevails in a civil action, either as plaintiff or defendant, may be awarded all of its reasonable litigation costs and attorney fees if the judge finds that a complaint, counterclaim, cross-claim, or defense of the non-prevailing person was frivolous.

For a claim or defense to be considered “frivolous” such that the filing party can be held liable for the other party’s attorneys’ fees and costs, the judge must find that:

• The complaint, counterclaim, cross-claim, or defense was commenced, used, or continued in bad faith, solely for the purpose of harassment, delay, or malicious injury; or
• The non-prevailing party knew or should have known that the complaint, counterclaim, cross-claim, or defense was without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification, or reversal of existing law.

Holding Attorneys Accountable

As “officers of the court,” attorneys have legal and ethical obligations to the judicial process.  The rules that codify these obligations and the potential penalties for violating them are designed to ensure attorneys have “skin in the game” when they file a lawsuit.

Under Rule 1:4-8 of New Jersey’s Rules of Court, an attorney must ensure, based on their reasonable investigation, that any papers they sign and submit to the court have a plausible basis in fact and law and are not being presented for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of litigation.

When an attorney violates this obligation, a court can hold them accountable by imposing monetary penalties and other professional sanctions directly on them and their law firm.

New York Remedies For Meritless Lawsuits

New Jersey’s definition of frivolous litigation and the penalties a court can impose on parties and attorneys are similar to those detailed in Section 130-1.1 of New York’s court rules.

As is the case in New Jersey, a New York judge can make an award of costs or impose financial sanctions against an attorney and/or a party upon the motion of one of the parties, but can also decide to impose sanctions on its own without any such request. A judge in New York, at their discretion, can sanction an attorney or party for conduct that:

• is completely without merit in law and cannot be supported by a reasonable argument for an extension, modification or reversal of existing law;
• is undertaken primarily to delay or prolong the resolution of the litigation, or to harass or maliciously injure another; or
• asserts material factual statements that are false.

Federal Rule 11

Rule 11 of the Federal Rules of Civil Procedure provides the mechanism through which litigants in federal court, as well as the court itself, can hold parties and their lawyers accountable for abuses of court processes and the judicial system. If the judge does not entertain the possibility of sanctions on their own, an aggrieved litigant may file a motion for the entry of appropriate sanctions pursuant to Rule 11(c)(2) that describes the specific conduct that allegedly warrants such penalties.

As with its corresponding state court rules, Rule 11 is designed not only to address the misconduct at issue but also to put future litigants on notice that they face the same possible fate for filing frivolous matters. Specifically, the rule provides that sanction imposed “must be limited to what suffices to deter repetition of the conduct or comparable conduct by others similarly situated.” If imposed upon the motion of an aggrieved litigant and warranted for effective deterrence, sanctions can include directing payment to the movant of part or all of their reasonable attorney’s fees and other expenses directly resulting from the violation.

No matter the forum, a frivolous claim or lawsuit is a scourge upon the civil justice system that has real, tangible, and harmful impacts on the parties that must respond to such filings.  Accordingly, we do not hesitate to put opposing parties on notice of frivolous claims and pursue all available remedies on behalf of clients needlessly drawn into a bogus lawsuit.

If you believe you or your business are the target of a frivolous lawsuit, please contact Ansell.Law Litigation Partner Seth M. Rosenstein. 

The Cost of Victory: What Business Owners Should Consider Before Filing a Lawsuit in a Commercial Dispute

By Seth M. Rosenstein

A wise person once said, “Litigation is the basic legal right which guarantees every corporation its decade in court.”  While likely said facetiously, the fact is that business litigation often comes at great expense to the company and individuals involved.

The costs of vindicating and protecting a company’s rights – in time, money, disruption, reputation, and commercial relationships – along with the inherent risk and uncertainty involved in all litigation, can lead even a victorious plaintiff to ask whether their victory was worth the destruction it wrought. 

Undoubtedly, there are situations where litigation is a company’s best or only path forward in a commercial dispute, whether it is with a customer, competitor, or business partner. Sometimes, a lawsuit is the last resort after other attempts to reach a resolution have failed or the only way to bring the other side to the negotiating table. Other times, quick intervention by a judge is necessary to prevent irreparable harm to the business. In those situations, your company will want and need an experienced and strategic litigator who stands ready to vigorously pursue your claims.

But even after the dogs of litigation have been unleashed, most commercial lawsuits settle or are otherwise resolved before trial for many of the same reasons cited above – the expense, disruption, and risk involved in entrusting the outcome to a judge or jury. 

That is why, regardless of the perceived strength and merit of their claims, business owners should think carefully and consider the possible negative implications of litigation before telling their attorney to run to the courthouse and file a lawsuit. Here are three things to factor into your decision-making before pursuing business litigation: 

Even the Most Straightforward Lawsuit Can Take Your Business Down a Long and Winding (and Expensive) Road

Lawyers are sometimes accused of making simple matters needlessly complicated. But for attorneys representing defendants in business litigation, making things complicated is often a feature, not a bug. Part of the defense’s strategy, especially when faced with a strong or straightforward claim, can include using any means to make litigation as drawn-out, convoluted, costly, and painful as possible for the plaintiffs.

Unfortunately, the wheels of justice are extremely amenable to a commercial defendant who wants to slow a plaintiff’s roll. The system isn’t designed for speed to begin with, and even if your attorney does everything in their power to speed your case along, there are plenty of ways a defendant can stretch your simple case out for years.  

They may file multiple motions regarding various issues, most of which will require the submission of briefs and the time needed to prepare them. A lengthy briefing schedule could be followed by a hearing or ruling even further into the future, all delaying the suit’s progress until the motions are resolved. 

Discovery, the process of requesting and exchanging documents, gathering evidence, and taking witness depositions, also offers ample opportunity for delay and added costs. It can take a while and cost lots of money to produce a voluminous amount of material in response to a party’s request. Depositions may be held in distant locations and involve significant travel costs (including fees for the attorney’s travel time) and complicated scheduling conflicts. You may also need to retain paid experts to testify or prepare reports. 

But it is more than fees, expenses, and delays that can make discovery costly for a business plaintiff. Owners, executives, and employees who would otherwise be doing their jobs may need to divert their time, effort, and productivity toward handling document requests or preparing and sitting for their depositions. These disruptions should be factored into your litigation calculations as well. 

Of course, the end of your case may not be the end of your case if one side appeals the judgment, which can keep the attorney’s fees meter and litigation clock running and even lead to another trial.

There Are No “Slam Dunks” in Business Litigation

Just as there is no crying in baseball, there are no slam dunks in business litigation. When you put your fate in the hands of a judge or 12 random people sitting on a jury, there is no guarantee they will see your case the way you and your lawyer do. There is always – always – a risk of an adverse ruling, no matter how strong your case appears to be.

Not only may your company lose on its claims (while still being on the hook for attorney’s fees and costs), but it may be exposed to liability and a judgment if the defendant files and prevails on a counterclaim. And if a contract or statute provides that the losing side in litigation must pay the winning side’s attorney’s fees and costs, the monetary hole can be even deeper.

A Judgment Is Not a Check

For all the risk of losing that is inherent in litigation, there is an equally inherent likelihood your company will prevail on its claims and obtain a substantial monetary judgment against the defendant. But no matter how many zeros that judgment contains, it could ultimately be worth far less – or nothing at all. 

First, subtract all the amounts your business paid its lawyers from your judgment. That could shave tens or hundreds of thousands of dollars off that top-line figure. And those fees may keep coming if your attorneys have to spend time and effort trying to collect the amounts due from the defendant. Judgment debtors can engage in plenty of moves and tricks to hide assets and make collection efforts as difficult as possible. 

Of course, nothing makes collecting on a judgment more challenging than an insolvent judgment debtor. If the defendant is actually broke, even the most talented litigator cannot get blood from a stone. 

Again, as noted, sometimes litigation is the right or only way to resolve a business dispute despite the risks and costs it may involve. But before shooting first, you should ask your lawyer questions about the best path forward for your company, which may include pre-litigation demands, negotiations and non-binding mediation.

If you are involved in or anticipate a business dispute, please contact Ansell Grimm & Aaron Litigation Partner Seth M. Rosenstein. 

Default Judgments: What Happens When You Fail to Respond to a Lawsuit

By Seth M. Rosenstein

One of the brightest minds of our time once said, “Half the battle is just showing up.” While “showing up” and responding promptly to a lawsuit filed against you doesn’t necessarily give you an edge in winning the case, failing to respond gives you close to a 100% chance of losing and having a default judgment entered against you.

Whether in state court, federal court or arbitration forums, a defendant in a civil action who does not file a response to the complaint against them within the time set forth by law effectively forfeits their right to defend the action. The court will accept the allegations in the complaint as true, enter a default judgment against the wayward defendant, and allow the plaintiff to take all steps needed to collect on their judgment.

That is why you should never ignore a complaint served upon you or your business and contact legal counsel as soon as possible. We cannot wish a lawsuit away, and nothing is accomplished by putting a complaint in your junk drawer like some people crumble up parking tickets and shove them in their glove compartment. When that first wage garnishment hits, a lien is put on your home, or your assets are seized, it will likely be too late for a do-over. 

Here is what you need to know about default judgments and their consequences.

What Is a Default Judgment?

To understand a default judgment, you need to understand the basics of how lawsuits work. They start with a plaintiff filing a complaint with the court that describes their claims against the defendant and the relief or amount of damages they want a judge to award. The complaint is then served on the defendant.

Once a defendant is properly served, the clock starts ticking on their time to respond. In New Jersey, that time is 35 days. It is either 20 or 30 days in New York, depending on how the complaint was served. In federal cases, defendants have 21 days to respond. Typically, that response will either be an answer to the complaint, a motion to dismiss the complaint, or a request for more time to respond. As long as the defendant “shows up” with a timely response and continues to participate in the case, the matter will proceed, and the defendant will be able to fight the allegations if they so choose.

When a defendant doesn’t respond promptly, the plaintiff can ask the court to enter a default judgment against the defendant. Unless the defendant has a legal basis for vacating that judgment, and seeks to vacate that judgment with the time set by court rules, the judgment will effectively close the door on any efforts to dispute the truth or accuracy of the complaint’s allegations. 

How Does a Plaintiff Obtain a Default Judgment?

The procedures for requesting and requirements for obtaining a default judgment are slightly different in New York and New Jersey (and in federal court). In some New York cases, a plaintiff can receive a judgment for all the damages they requested in the complaint without proving they actually incurred those damages. In other cases, the plaintiff must present evidence regarding their damages before a judge will enter a final judgment in the requested amount.

In New Jersey, the first step after a defendant fails to respond to a complaint is to ask the court for an entry of default. The plaintiff must then provide the defendant with notice of the entry and again when they subsequently file a motion for judgment by default. In this motion, the plaintiff must show the defendant was properly served notice of the proceedings, the defendant failed to answer, and the defendant is not an active member of the military. If they do so, the court may enter a final judgment by default, which definitively establishes the defendant’s liability.

In some cases, the court will hold a “proof” hearing at which the plaintiff will present evidence supporting the amount of damages they seek. The defendant must be given notice of this hearing as well. If the defendant shows up, they can dispute the damages amount. At the end of the hearing, the judge may enter a final judgment for a set amount, and the plaintiff is free to begin efforts to collect on the judgment.

What Can a Defendant Do After Entry of a Default Judgment?

As much as courts – and the law – do not favor defendants who ignore properly served complaints, they also loathe default judgments. They prefer resolving lawsuits on the merits of the claims and defenses, as opposed to disposition on procedural bases.

That is why the court rules provide a way for a defendant to ask a court for relief from a default judgment. But that relief is far from automatic. There are specific and limited bases for having a default judgment vacated, most of which involve flaws with the judgment itself. But short of a problem with the judgment (other than the substance of the claims), a defendant in New Jersey can get relief from a judgment if they show their failure to respond was due to “mistake, inadvertence, surprise, or excusable neglect” and that they have a meritorious defense to the allegations in the complaint. Similarly, in New York, a defendant must show they had a “reasonable excuse” for their failure to appear and also show they have a meritorious defense.

What qualifies as “excusable neglect’ and a “reasonable excuse” is largely up to the judge’s discretion, but simply forgetting or ignoring a complaint will unlikely be sufficient to support an application to vacate a default judgment. Rather than digging yourself into a hole that may be impossible to escape, the best course of action after being served with a complaint is to take the matter seriously and meet with experienced counsel who can preserve your right to mount a defense.

If you have questions about a pending default judgment against you or your business, please contact Seth Rosenstein at Ansell.Law.

Protecting Small Businesses and Property Owners From Serial Plaintiffs and Self-Appointed “Testers” Who File Nuisance Suits Under the Americans With Disabilities Act

By Seth M. Rosenstein

Twenty-five years after its passage, the Americans With Disabilities Act (ADA) has quite literally reshaped the landscape for disabled individuals, allowing them to participate more fully in society and avail themselves of the same facilities, services, and opportunities as everyone else. However, the ADA’s impact on the lives of millions of Americans has been matched by its impact on countless public-facing business and property owners who have had to modify their physical and online presence, practices, and properties to comply with the act’s accessibility requirements.

Title III of the ADA prohibits discrimination against people with disabilities by businesses open to the public. The ADA requires that businesses open to the public provide full and equal enjoyment of their goods, services, facilities, and websites and has provided detailed requirements for how companies must do so. However, satisfying those requirements can be tricky, even for the most well-intentioned and diligent businesses. If a person with disabilities wants to enter a store, visit a website, or obtain services but cannot do so because the business has not complied with the ADA, that person can file a lawsuit for such shortcomings, leading to costly and disruptive litigation that can cause both financial and reputational harm.

Self-Appointed “Testers” File Thousands of Shakedown ADA Suits Each Year

But the risk of ADA-related litigation doesn’t just come from individuals who were actually prejudiced or denied access or services. For all its benefits, the ADA has also become a tool for serial plaintiffs and legal counsel, many of whom have never attempted and never intended to patronize a business, to file questionable, if not frivolous, lawsuits designed solely to shake down the business for a quick payout. 

These nuisance ADA suits have cost American businesses millions of dollars. According to one analysis, ADA lawsuits have increased by 320% since 2013. Many plaintiff’s law firms file hundreds of cookie-cutter ADA lawsuits each year, often utilizing the same serial plaintiffs for each action. One person can visit multiple businesses or websites in a single day solely to identify even the slightest accessibility transgressions in order to generate claims. 

Small businesses bear the brunt of this abusive litigation, as serial plaintiffs – often labeling themselves as self-appointed ADA compliance “testers” – specifically target small businesses because they typically have limited means to defend themselves. Given the potential damages, including the payment of exorbitant attorneys’ fees, settlement is not just the path of least resistance; it may be the only path for a small business that wants to avoid a potentially devastating judgment.

So, what can small business owners do to reduce the risk of finding themselves in the crosshairs of a serial ADA plaintiff?

Hire a Certified Accessibility Specialist To Conduct a Compliance Assessment

You can’t fix a problem you don’t know you have. Perhaps the single most important thing you can do to limit exposure from accessibility lawsuits is to conduct a complete accessibility assessment and review of your facilities and online presence. A Certified Accessibility Specialist (CASp) can evaluate your property or internet presence, identify specific accessibility issues, and then supply you with the compliance requirements specific to your facility and website. Similarly, if you are planning new construction or alterations, a CASp can review your building plans and specifications to ensure the resulting construction will be ADA-compliant.

Once you have a complete picture of all accessibility issues with your facility or website, the next step is working to remove barriers and impediments to access. “Barrier removal” is one of the key elements of the ADA, and whether you need to make modifications or alterations to remove any identified barriers depends on whether such changes are “readily achievable,” which is defined “as easily accomplishable and able to be carried out without much difficulty or expense.” This is a very fact-specific analysis that depends on the complexity and costs involved in removing the barrier as well as the size and financial condition of the business. A CASp can assist in identifying barriers and also advise as to whether removal is “readily achievable” under the ADA.

Keep Your Eye on the Supreme Court

In its new term starting this month, the U.S. Supreme Court will decide whether self-appointed “testers” who do not suffer actual harm because of an alleged ADA violation have standing to sue under the act. The Court’s decision in Acheson Hotels, LLC v. Laufer will resolve a split between federal appellate courts on the issue and could have a seismic impact on the viability of ADA nuisance suits against small businesses if it rules that such individuals do not, in fact, have standing to sue. The importance of the case can be seen in the fact that 47 organizations have filed amicus briefs with the Court, advocating both for and against tester standing. 

Hire Experienced ADA Defense Counsel

Before reflexively giving in to an ADA plaintiff and settling a claim, small business owners should consult with experienced counsel who can evaluate the complaint and determine the best path forward. As noted, many complaints filed by “testers” are cookie-cutter and may contain boilerplate allegations of deficiencies that do not actually exist. It is often the case that an aggressive defense of the claims – particularly when the claims are frivolous – benefits both the business or property owner defending the action, as well as the greater community by deterring vexatious litigation primarily focused on lining counsel’s pockets.

If you have questions about your ADA obligations and protecting against accessibility lawsuits, please contact Seth Rosenstein at Ansell.Law.