Standing Strong Against Business Shakedowns
The owners of a small auto repair business in Arcadia, California, received a minor citation from the Bureau of Automotive Repairs for leaving the date off an invoice. The correction was made, and the business owners carried on with business as usual--until a group of private attorneys threatened to sue them, unless the auto repair business paid them a $2,000 “settlement fee,” claiming unfair business practices.
In Northridge,California, a woman decided to purchase a new blender from an appliance store and selected one at the bottom of a pile of five boxes rather than ask for help reaching the top blender. When the other four blenders fell on her, she sued the store for not warning customers about the danger and for stacking the boxes too high, claiming she now had carpal tunnel syndrome along with neck, shoulder and back pain.
While playing basketball, a teenager in New Hampshire went up to dunk the ball and got two of his teeth caught in the basketball net. He sued the net manufacturer and ended up settling out of court for $50,000.
These are just a few examples in a growing wave of shakedown lawsuits hitting small businesses nationwide which are costing a cumulative $88 billion per year in settlements and attorney fees, according to Mark Cole, president of Citizens Against Lawsuit Abuse in Houston, Texas. In some cases, businesses have been forced to lay off employees and even close their doors as litigation continues to spiral out of control, rivaling baseball as America’s favorite pastime.
“It’s the worst part of our business,” says Beth Thieme, vice president of Amigo Mobility International Inc., a family-owned Bridgeport, Michigan-based company that manufactures three-wheeled scooters used by elderly or disabled shoppers in grocery stores. It was Beth’s husband, Al, who built the first Amigo power-operated vehicle in 1968 and started selling them to stores in 1970. In recent years, the increase of frivolous lawsuits have put a crimp in the company’s profitability.
“We’ve had our share of shakedown lawsuits where someone was just looking for settlement money,” says Beth, who otherwise enjoys their rewarding business. “At 2.3 miles per hour, an individual weighing nearly 300 pounds will tell me they were catapulted out of the equipment. You know what? It didn’t happen--it couldn’t have happened.”
Like most business owners, Beth understands legitimate injuries can and do occur. But she’d like to see the laws changed to cover only the true economic damages incurred. “I pick and choose which battles are worth fighting,” Beth says, offering a recent claim by a woman who broke her wristwatch on one of the scooters as an example. “I was happy to send her the cost of the watch--even a little bit more. However, she was also asking for a two-year membership to a health club, which had nothing to do with breaking the watch on the scooter. This is what we have to deal with.”
For Kathie Reece McNeil, a fraudulent shakedown lawsuit was the last thing on her mind when she fell in love with--and purchased--the Aztec Hotel in Monrovia,California, six years ago on what was once the original alignment of the famous Route 66. The hotel, which originally opened in 1925, was not only the most ornate hotel in the small city, but it would become a place where celebrities dropped by on their way to Palm Springs. Clark Gable, Tom Mix and Wyatt Earp, among others, stayed at the historic inn.
“I [got hit by] a lawsuit in 2003, claiming that on January 1, someone visited the hotel and was discriminated against because she was in a wheelchair and there was no access for her,” McNeil explains. At the time, McNeil was busy working with both state and federal government agencies to preserve the wonderful old treasure.
“A structural report was going to be filed [with the State Historic Office of Preservation] regarding exactly what we needed to do to restore the hotel. Until it was completed, I couldn’t make any changes to the structure,” explains McNeil, who was leaning on the experience and guidance of state and national historic preservation offices as well as the Route 66 Preservation Foundation, which was administrating the grant to do the structure report.
Upon calling the attorney who was representing the plaintiff, she was shocked to learn that he wanted $18,000 to make the suit “go away.” However, he couldn’t promise they wouldn’t sue her again, since she couldn’t make the necessary changes immediately.
Instead of paying off the attorney, for months, rather than pouring her heart and soul into the hotel, McNeil spent hours researching the case, asking everyone who worked at the hotel if they’d ever even seen the woman on the premises. Not only had no one seen her, but she claimed she’d been there at 10 a.m. to hear a band play.
“We didn’t have a band playing on the morning of New Year’s Day,” notes McNeil, who smelled something fishy, especially when she heard the plaintiff’s conflicting reasons for being at the hotel. “She claimed she was also meeting her son there and, at another time, that she was there to open Christmas presents.”
McNeil would later see a deposition from the plaintiff’s son, claiming she was there to meet him. Upon closer inspection of the deposition, she noticed the name was that of a homeless man whom McNeil had allowed to stay one night at the hotel as a courtesy. Now aware that something definitely seemed askew, McNeil searched files available at the local courthouse in Pomona, California, and found that the man had been arrested for felony charges, including some for drugs and fraud.
Eventually, McNeil won the case because neither the plaintiff nor her son was found to be credible and it became obvious that the woman had never been at the hotel when she claimed to be. Yet McNeil couldn’t afford to celebrate her victory, having run up $102,000 in legal fees to fend off the opposing counsel and handle the case. “I’m still paying it off,” says McNeil, who only now is starting to finally enjoy the historic hotel she’d so desired.
But shakedown lawsuits aren’t only served by unknown plaintiffs. Disgruntled employees are also very happy to jump on the shakedown bandwagon. Carole Ross, an attorney with the Del Mar Heights, California, office of the Sheppard, Mullin, Richter and Hampton law firm, points to many cases in which people take no personal responsibility for their actions and seek money due to a company’s “evil motives.”
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