October 18, 2012

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There are many faces of lawsuit abuse, a rising majority of them being small business owners.

Roberto Guerrero , Owner of San Francisco-based Cumaica Coffee shop is one of them. “It began when Roberto received a letter from a customer who claimed that certain features in Roberto’s store violated the Americans with Disabilities Act (ADA).”

“All were minor violations such as a recycling bin placed too close to a door and a pastry case located too close to a counter. Roberto did not realize his store was in violation of the ADA but quickly made the requested changes and notified the customer. The customer acknowledged that Roberto made the requested changes yet sued anyway and sought nearly $90,000 in damages,” according to the U.S. Chamber Institute for Legal Reform.

After a year of litigation, Guerrero wound up settling the case for $20,000. However, Roberto wasn’t the only small business owner targeted. At least 16 neighboring businesses were also sued by the same plaintiff. Two of them were forced to close.

Most small business owners, like Guerrero are unaware that they are courting potential disasters (legal action) that could cost them — their company and livelihood. In fact, if you think most business lawsuits effect Fortune 500 companies, think again.

Fifty-seven percent (57%) of lawsuits impact companies making less than $1 million in revenue and 1 in 3 small business owners are sued or threatened with a law suit.

Current trends and small business lawsuit facts may surprise you:

$100 billion: How much small businesses spend on legal action in the U.S. annually

25%: Number of harassment claims has risen since 2006

$404 Million: Price to settle discrimination related law suits each year

$104 Billion: Annual cost to settle tort liability

How to Protect your Business from Lawsuit Abuse

We live in a litigious society. “Any day you get served with a lawsuit is not a good day for your business. You cannot ignore the lawsuit without suffering a judgment against your business, and you know that defending the lawsuit will involve an uncertain amount of time and money.”

Lawsuit abuse hurts small businesses. Joe Ramirez, the CEO of Pacific National Security, knows this fact first-hand.

“[We] started the same way countless other small businesses got their beginnings: with a loan from a friend and a lot of hard work … After spending my own personal money, paying bills with credit cards and with no help from any banks, the entire company’s existence was threatened due to an abusive lawsuit,” said Ramirez.

“Although I had done nothing wrong, my business faced a class action lawsuit alleging violations of California’s incredibly strict employee regulations. Due to the extremely high cost of fighting the lawsuit, I was forced to settle with the plaintiff. It cost my business at minimum $40,000, which affected my financial capabilities and threatened the closure of the company altogether.”

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