Business owners regularly threaten litigation to protect their companies. In most cases, this threat does not create any potential liability to the party threatening litigation if a case is not ultimately filed. But this does not mean that the possibility exists. Likewise, business owners should be advised that they may potentially have a viable claim to play offense.
Any claim would need to meet the test for such a claim no differently than any other claim for tortious interference with prospective business relationships. The general rule requires proof (1) that either the interferer had no belief in the merit of the suit or (2) while having some belief in its merit, the interferer institutes or threatens to institute the litigation in bad faith, intending only to harass the third parties and not to bring the claim to definitive adjudication. Or to quote Detective Munch from Homicide, the courts are telling you: Don’t you ever lie to me like I’m Montel Williams
In a Delaware case, a plaintiff filed a lawsuit containing false statements that allegedly caused the prospective sale of an imaging center not to close. The plaintiff also allegedly threatened to sue the prospective buyer of a different imaging center by sending a letter with a draft complaint attached to it. The recipient of the letter, fearing litigation, allegedly backed out of the suit.
While the Court found that business concerns caused each of the buyers to terminate their contracts to purchase an imaging center—not the false and misleading actions of the plaintiff—the Court also found the plaintiff’s actions were committed in such bad faith sanctions were warranted. Therefore, the Court ordered the plaintiff to pay for the entirety of the defendant’s legal fees and costs up until plaintiff voluntarily dismissed its claims.
This case is a stark reminder that threats of litigation must actually have legitimate factual and legal bases. It is also a reminder to my fellow attorneys that talk is not cheap—if you threaten baseless litigation, then your bluff might result in you and your client being sued.
David Seidman is the principal and founder of Seidman Law Group, LLC. He serves as outside general counsel for companies, which requires him to consider a diverse range of corporate, dispute resolution and avoidance, contract drafting and negotiation, and other issues. In particular, he has a significant amount of experience in hospitality law by representing third party management companies, owners, and developers.
He can be reached at david@seidmanlawgroup.com or 312-399-7390.
This blog post is not legal advice. Please consult an experienced attorney to assist with your legal issues.
Image from: BAD IDEA by SpecJects on DeviantArt
