WHITE PAPER WHAT IS VEXATIOUS LITIGATION? What is Vexatious Litigation? PAGE1

Transcription

1 WHITE PAPER WHAT IS VEXATIOUS LITIGATION? What is Vexatious Litigation? PAGE1

2 Table of Contents CONTENTS WHAT IS VEXATIOUS LITIGATION?...4 VEXATIOUS LITIGATION BURDEN...5 TABLE OF INDIVIDUAL CLAIMS...5 BUSINESS CLAIMS...7 PSYCHOLOGICAL BEHAVIOUR OF A VEXATIOUS LITIGANT...8 OPTIONS FOR THE COURTS AGAINST VEXATIOUS LITIGANTS...9 CONTENTS What is Vexatious Litigation? PAGE3

3 INTRODUCTION TO THE TEXAS VEXATIOUS LITIGANT STATUTE VEXATIOUS LITIGATION BURDEN 01 INTRODUCTION What is Vexatious Litigation? When determining whether proceedings are vexatious, the court should review the history of all proceedings and not whether the cause of the original action had merit. In British Columbia (Public Guardian and Trustee) v. Brown, 2002 BCSC 1152, Mr. Justice Halfyard set forth two distinct elements for distinguishing vexatious intent with the aforementioned criteria. Vexatious litigation, or serial litigation, can be defined as any legal action not likely to lead to any practical result and brought only to harass or subdue the defendant. Though it can take the form of a single, frivolous lawsuit, litigation is usually only classified as vexatious when an attorney or pro se litigant (an unrepresented litigant) repeatedly files groundless or frivolous lawsuits and loses. This pattern of unwarranted and meritless filings is usually needed in order for litigation to be classified as vexatious. In a nutshell, vexatious litigation refers to a misuse of the legal system for the litigant s personal gain. The filings are often numerous The claims are often frivolous or without merit They impose enormous burdens on both the courts and the defendants The vexatious litigant persistently engages in legal proceedings, often against a large number of people, and often knowing that no legal basis for their claims exist. They usually pursue litigation in only in order to annoy, harass or financially punish people, though in some cases, the litigant is merely aggrieved at being unsuccessful and hopelessly continues to pursue legal action because they refuse to accept defeat. The bringing of multiple actions to determine an issue that has already been ruled by a court of competent jurisdiction The action cannot succeed, would lead to no good, or if no sensible person could reasonably expect relief Grounds and issues raised tend to be rolled forward into subsequent actions, with additional actions filed and supplemented, often with actions filed against the lawyers who acted either for or against the litigant Failure of the litigant to pay the costs of unsuccessful proceedings 1. The proceedings themselves should be vexatious - distressing or harassing - and must be taken without merit 2. There must be intent - judged objectively and requiring proof of knowing and deliberate continuation of the vexatious conduct - though it is not necessary to prove that the litigant knew their conduct was vexatious. Rather, it only matters that a reasonable person in the same circumstance would believe the circumstance to be vexatious. One notorious example of vexatious litigation in Massachusetts involved one plaintiff that filed at least 150 separate lawsuits, with more than 90 appeals, against a former girlfriend. Vexatious Litigation Burden Being on the receiving end of vexatious litigation can be extremely taxing, both in terms of reputation and financials. Companies are unable to ignore any claims or actions, and are left with no other choice but to expend the funds necessary to defend their position. The motivation behind vexatious litigation is difficult to pin down as some parties will use these multiple lawsuits to harass or control their intended target, try to litigate claims that have no legal basis, or just try to manipulate the system for their own personal gain. Despite this, some common threads exist: Re. Lang Michener v. Fabian (1987) 59 O.R. (2d) 353, (H. C. J.) is the most cited case when determining whether legal proceedings are vexatious and the court set forth the following criteria. Individual Claims One well-known source of serial litigation is the ADA, Americans with Disabilities Act, the goal of which is to prevent discrimination against persons with disabilities and provide full and equal access to the services offered by prespondentsublic accommodations such as banks, retail stores, restaurants, hotels, museums, golf courses, and amusement parks Title III of this act prescribes the removal of both structural and programmatic barriers in existing public accommodations where such removal is readily achievable, and in newly altered or constructed buildings. According to the ADA, readily achievable is defined as being easily accomplishable and able to be carried out without much difficulty or expense. What is Vexatious Litigation? PAGE5

4 INDIVIDUAL CLAIMS With a private right of action for both individuals and advocacy groups, as well as a public right of action by the Attorney General, violations of the ADA carry fines of $55,000 for the first occurrence and $110, 000 for each subsequent violation. This, of course, creates a huge incentive for abuse of the law. Plaintiffs and attorneys file dozens of cases for frivolous reasons such as door handles being misaligned by 3/8th of an inch or a disabled parking sign not properly noting the exact cost of the fine for a potential parking violation 3. Business Claims BUSINESS CLAIMS Though vexatious litigation can usually be seen as being motivated by the desire for personal gain, whether by earning revenue through attorney s fees, or some desire for vindication, in the case of business, it can be used to hinder competition. For these small violations, businesses pay an average of $16,000 in what is essentially a forced settlement. The cost of fighting the allegation can typically be four to five times the average $75,000 in annual income generated by the business 4. Moore Law Firm, operating out of California, is the embodiment of this type of lawsuit abuse. In just a few years, the number of lawsuits they have filed alleging ADA violations already numbers over 700. Most of these suits are quickly settled and, in some cases, the business has also gone bankrupt. Frivolous litigation has effects which extend beyond that of the plaintiff and defendant. It can harm other non-litigating market participants, such as suppliers, distributors, purchasers, and even consumers. Baseless (sham) litigation brought forth for the sole intent of impeding competition may violate the antitrust laws, which focus on competition. Though antitrust is not the only means by which the law may attempt to curb vexatious litigation, it is necessary when other methods of deterrent are insufficient - such as when litigation is likely to hamper competition, or the potential gain outweighs any penalty imposed. California leads the nation in attacks on small businesses, with over 40% of ADA access lawsuits being filed there. Indeed, it is small businesses paying the highest cost, with litigants taking advantage of the ambiguity in readily achievable and the other complexities of compliance. In Molski v. Mandarin Touch Restaurant, the court sums up the modus operandi of common litigants in these ADA suits as sue, settle, and move on to the next suit, with defense attorney, Mike Mollenhour complaining that from a small-business person s point of view, this falls into the category of litigational terrorism 5. Another steady source of serial litigation is the Fair Credit Reporting Act (FCRA) 6 which defines the legal aspects for credit inquiries, which employers often contravene when running background checks on potential employees. Again, this creates huge incentives for abuse, with notable examples including Swift Transportation which paid out $4.4 million, Home Depot which paid $3 million, and Domino s which settled for $2.5 million 7. Such large settlements usually occur when individual FCRA lawsuits turn into class actions, which, given the fact that most companies receive thousands of applications a year, is notoriously easy. Annually, FCRA lawsuits number up to The ADA Lawsuit Contagion Sweeping U.S. States The ADA Opening Doors for the Plaintiff s Bar: How Ambiguities in Title III Inhibit Access, Increase Litigation, and Hurt Business Serial Plaintiff Uses FCRA To Threaten Employers 8 settlements #ldy0ppbisodidvqb.99, Based on 2015 data: 9 Is Section 285 s exceptional case requirement too exceptionally hard to satisfy? Patent law is another means by which the courts may attempt to deter frivolous litigation, granting them the authority to award fees incurred in defending such actions. Section 285 of the Patent Act states that the court may award reasonable fees in exceptional cases, such as those involving bad faith, frivolous or vexatious litigation and other types of misconduct perpetrated during either litigation or securing a patent, though it is fairly well-known that the court rarely awards fees under this section of the Act. Only patent litigation that is deemed to be objectively baseless, and to have been taken in bad faith, may be deemed exceptional and subject to an award of fees. In a recent Petition for Writ of Certiorari, Octane Fitness LLC asked the U.S. Supreme Court to overturn the precedent to make it easier for the prevailing defendant in a patent infringement case to recover attorney s fees from the plaintiff 9. Other remedies for antitrust violations such as treble-damages, a statute which permits the court to triple the amount of the actual/compensatory damages to be awarded to a prevailing plaintiff, may be far more likely to deter such conduct due to their substantial nature. In markets such as pharmaceuticals, where impeding competition may greatly profit the monopolists, antitrust law can go a long way in preventing vexatious litigation. What is Vexatious Litigation? PAGE7

5 CRITERIA FOR VEXATIOUS LITIGANTS OPTIONS FOR THE COURTS AGAINST VEXATIOUS LITIGANTS Psychological Behaviour of a Vexatious Litigant As previously mentioned, the motivations behind vexatious litigation can be difficult to pin down, and it is only recently that psychiatrists have begun to examine the possible psychopathology behind serial litigants. These individuals can usually be broadly categorised into two groups 10 : Those with mental health issues who launch multiple legal actions against numerous and diverse targets Those who are unsuccessful in a previous lawsuit and refuse to accept the defeat, hopelessly persisting in attempting to re-litigate their case In addition, there are a few behavioural characteristics frequently displayed by vexatious litigants 11 : 1. A history of changing legal counsel and at least one episode of representing themselves propria persona (acting as their own attorney) a. Unsurprisingly, competent and ethical counsel will generally find a way to ethically remove themselves from the case after the vexatious or frivolous nature of the claim becomes apparent, or after a period of poor client control. Vexatious litigants may, after a period of representing themselves propria persona, find legal counsel who identify with them and their cause. 2. Evidence of narcissistic or paranoid personality traits, obtained from psychiatric examination and psychological testing a. These traits can manifest in an attitude, expressed either verbally or behaviorally that the litigant believes themselves to be an exception - that the normal rules don t apply to them, especially with regards to conduct within a judicial process. Often they will believe that these rules do not apply to them, and that they deserve special accommodations, because they have suffered some form of abuse, humiliation and/or victimization at the hands of alleged perpetrators - which may include court staff and judges. 3. Refusal to settle disputes through the customary channels of negotiation and traditional litigation a. These litigants will characteristically refuse to accept negative judicial decisions, and even occasionally decisions in their own favour if they believe that the positive judgment will end the litigation and their chance to receive the vindication they believe they deserve. Often, the reason for their continued litigation is a desire to have their alleged suffering, humiliation and perceived victimization recognized, and their belief is that the court will sympathise and offer them some sort of vindication and redemption. Though overturning a positive judicial outcome may seem, superficially, to contradict their perceived agenda, it is in fact a direct product of their main motivation to litigate in the first place - a desire to have their victimization recognized, not to resolve the conflict. Options for the Courts Against Vexatious Litigants Vexatious litigation has increasingly been recognized as a difficult problem to manage. The the fact that so many vexatious litigants represent themselves in propria persona, in at least some of their actions, only makes it more difficult. Though the court has a responsibility to be more accommodating to litigants without formal counsel, and such litigants are often given a fair amount of leeway, the courts can deal with vexatious litigants by way of civil restraint orders designed to be issued against parties who have made claims that abuse the legal process. The All Writs Act authorizes the United States federal courts to issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law. This empowers them to regulate the activities of abusive litigants through the imposition of tailored pre-filing restrictions where required 12. California, Hawaii, Texas, Florida, Ohio, and Connecticut have all introduced legislation designed to curb the problem of vexatious litigation. These statutes range from a bond required to pay off the defendant s cost, to pre-filing orders as previously mentioned. The main challenge in drafting such legislation is the method for determining what exactly constitutes a vexatious litigant. In California, a litigant is deemed vexatious if he or she meets one of any number of criteria, which include repeatedly relitigating a claim after a final, adverse judgment, repeatedly filing unwarranted motions, or filing at least five suits (other than small claims suits) in the prior seven years that have been resolved against him or permitted to remain pending at least two years without justification. Conversely, in Ohio, a litigant is vexatious if her or she persistently engages in vexatious conduct in a civil action, regardless of whether or not they initiated the suit Vexatious Litigants Litigants Who Won t Accept No (or Yes ) for an Answer, What is Vexatious Litigation? PAGE9

6 OPTIONS FOR THE COURTS AGAINST VEXATIOUS LITIGANTS When dealing with real-world litigants, any attempt to create a fixed statutory definition for what makes litigation vexatious is bound to be under or over-inclusive. Instead, each case should be determined on it s own merits by an appropriate judicial official, according to a set of flexible and pre-determined statutes 13. As already discussed, vexatious litigation has proved itself to be a large problem in the United States. Not only is it taxing on individuals and businesses, it often imposes massive burdens on court personnel and can divert time and resources from other, legitimate, disputes. Such frivolous misuse of the judicial system subverts the basic purpose and function of it 14. Vexatious litigants also often turn their fire on judges, court personnel and opposing counsel, creating huge strain. One such litigant laid 300 complaints against courts, judges and public officials, across several states, all due to events arising from a series of traffic violations. See Azubuko v. McCabe, No. 1:108-CV- 226, 2008 U.S. Dist. LEXIS 91798, at *1 (D. Mass. Oct. 27, 2008). Though the courts have a responsibility to the public to allow them to seek redress for their disputes, they also have a duty to prevent frivolous and vexatious litigants from straining court resources. More work must be done in defining what makes a vexatious litigant and determining how to to prevent abuse of the judicial system What is Vexatious Litigation? PAGE11

7 ABOUT SNAP DILIGENCE Headquartered in Houston, Texas, Snap Diligence is a data intelligence platform that helps users quickly discover the civil litigation, business history and networks of individuals and companies. How it works With only a first and last name, users can access millions of Texas civil court and business records. Snap Diligence s powerful algorithms connect relationships between people and their businesses and shows adversarial connections within lawsuit parties. Snap Diligence users can even privately upload their own contacts into the system to so they can see where their own business network intersects with their research results. This gives Snap Diligence users the ability to find out who they know and who might be able to give them an introduction or the inside story on what happened in a lawsuit or a business deal. CONTACT SNAP DILIGENCE SALES@SNAPDILIGENCE.COM Learn more at SnapDiligence.com