Real World Examples
“In short, frivolous lawsuit can be treated as a form of “legal extortion” and every year excessive tort costs sums up to an estimated $589 billion in the United States. “To learn more about frivolous lawsuits, take a look at the two famous examples below:
UNNECESSARY LITIGATION A CASE AT THE DRY CLEANERS, on May 3, 2005, Roy L. Pearson, an administrative law judge in the District of Columbia, sued the owners of Custom Cleanings over a lost pair of trousers. The pair of pants was mistakenly taken to another dry cleaner’s shop and was returned five days after the initial pick up date. However, Pearson refused to accept it, claiming that it wasn’t the original pair which he left with the cleaners, and demanded an amount of over $1,000 as compensation. Later on, Pearson filed a lawsuit against the Chungs, the owners of the dry cleaning shop, demanding a combined amount of over $67 million for “inconvenience, discomfort, and mental distress and attorney fees”. Pearson argued that the “Same day service” and “Satisfaction Guaranteed” signs advertised outside the store was misleading and thus fraudulent. Throughout the case, the Chungs presented three settlements of $3,000, $4,600 and $12,000, but Pearson rejected all three offers. In the end, Judge Judith Bartnoff ruled in favor of the dry cleaners and Pearson was sanctioned $12,000 for creating unnecessary litigation.
STELLA AWARD THE MCDONALD’S COFFEE CASE, on or about Feb. 27th, 1992, Stella Liebeck, a woman ordered a cup of coffee from the drive through window of a McDonalds restaurant in Albuquerque, New Mexico. After her purchase she placed the cup of coffee between her knees so she could add her sugar and cream. Consequently, she tried to open the lid, she then spilt the coffee over her lap and she then suffered third degree burns on six percent of her skin. She had to undergo skin grafting and remained in the hospital for eight days. Dissatisfied with the settlement offer, she sued then McDonalds claiming that the coffee was “too hot” and McDonalds was negligent about its potential danger. The twelve-person jury reached its verdict and awarded Stella $2.86 million in damages. These damages were later reduced to $640,000. This case, is often quoted as the poster child of excessive lawsuits. In fact, the Stella Award, an award established to mock outrageous lawsuits, was named after this case.
Asset protection is the positioning of assets to make it legally unreachable by creditors. Many people have the wrong impression that asset protection is the same as hiding assets or evading taxes but this is not true. Asset protection helps you avoid “unnecessary” liabilities Consider asset protection as a form of economic self-defense to shield against financial predators.
Ultimately there is no way to reduce risk unless you cut off all contact with the world. Hence the best way is to reduce the business’ exposure to risk through implement asset protection techniques.