Bogus Lawsuits, Quirky Question # 34

Quirky Question # 34:

We continue to confront periodically lawsuits from former employees that are utterly frivolous.  Some of the claims make you shake your head in disbelief.  We’d like to file malicious prosecution lawsuits against the individuals who file these bogus claims. Are there any downsides to this approach?  Could someone argue that the lawsuits we are contemplating are “retaliatory?”

Dorsey’s Analysis:

Let me begin by stating, “I feel your pain.”  As a defense attorney, there are times when, like you, I have marveled at the fact that the plaintiff has had the temerity to bring a lawsuit based on the facts alleged.  More discouragingly, I have been disappointed that he or she has been able to find a lawyer to draft, serve and file the Complaint, rather than simply advising the client that the claims lack any merit whatsoever, or that they are fatally flawed (e.g., time-barred).

Now, lest I invoke the wrath of the plaintiffs’ employment bar, let me add that at times I certainly understand why claims have been brought.  Many plaintiffs’ cases have merit, and many others involve facts that certainly support the plaintiffs’ position, even if they are insufficient to persuade a fact-finder.

But, your question does not involve the legitimate, or even the close, plaintiffs’ cases.  Your question referenced the “utterly frivolous” case.  When confronted with those kinds of claims, you have three options.

First, the most typical corporate response is simply to defend the case and prevail.  This can be costly but many companies simply attribute these expenses to the “cost of doing business.”  Moreover, a convincing win, well publicized by the company, can communicate to other employees that the company will not capitulate and settle when confronted with dubious lawsuits.  This outcome has value and suggests that in the long-term, settling insubstantial cases for even modest amounts can be counter-productive.  For example, a number of years ago, contrary to my advice, one of my clients opted to resolve all employment claims brought against it, justifying the decisions on the ground that defending the lawsuits would cost more than the settlement amounts.  When the number of separate lawsuits climbed into the 50s, and certain plaintiffs acknowledged the widespread employee perception was, “Sue the company, get a car,” the company’s willingness to settle evaporated.  We obtained a series of summary judgment wins and quickly saw both the amount of the settlement demands and the frequency of claims plummet.  The “free car” days were over and the remaining employees knew it.

A more aggressive defense response is the one about which you’ve inquired – filing a responsive lawsuit.  This could take two forms, which represent the second and third options referenced above.

The second option available to you is to assert a counterclaim for abuse of process in the original lawsuit.  The third option is to wait for the lawsuit to conclude, either at the motion stage (motions to dismiss or for summary judgment), or by verdict, and then consider how you want to proceed.

Personally, I am not a fan of the second option for several reasons.  First, until the plaintiff’s lawsuit is concluded, your abuse of process claim is not really ripe.  Second, I don’t like the atmospherics of a counter-claim in the original lawsuit.  I’d rather have the fact-finder focusing exclusively on the issue of whether the underlying claims are legitimate.  Third, I think there is a greater risk of a compromise dismissal by the trial court if the counterclaim is part of the initial lawsuit.  This is true both at the motion stage and when the parties are working through any settlement, even if the resolution does not require the defendant to provide any compensation to the plaintiff.  In that context, it simply is too easy for the judge to pressure the defendant to give up the counterclaim – indeed, that offer can become the judge-advocated rationale to the plaintiff for why he/she should drop the claim without compensation.  Fourth, overworked courts want to see litigation end; this means the entire case, not just the plaintiff’s claims.

The alternative, a post-victory abuse of process lawsuit, is a rarely pursued, but very intriguing idea.  Although you may subsequently encounter an argument that this is a form of “retaliation,” in my opinion this contention lacks merit.  Your company has a right to seek redress in the courts in response to improperly asserted litigation.  The countervailing consideration, that undoubtedly will be argued by the plaintiff, is that allowing a post-dismissal or post-trial abuse of process claim will “chill” the exercise of statutorily protected rights under federal or state anti-discrimination statutes and adversely affect the important public policies those statutes were designed to advance.  This argument may initially appear reasonable but I don’t believe it withstands scrutiny.  How does allowing an entirely bogus lawsuit, which often will consume significant administrative agency time (whether at the EEOC or state counterpart agencies) and significant judicial resources advance the interests of the anti-discrimination statutes?  One could make an equally plausible argument that this litigation not only wastes scarce resources but also diminishes the goals of the anti-discrimination statutes, because frivolous lawsuits generally undermine public perceptions of legitimate claims and the statutory schemes on which they are based.

I am aware of one recent case, Greer-Burger v. Temesi, No. 2006-1616 (Dec. 12, 2007), that implicated the issues raised by your inquiry.  In the Temesi case, the Ohio Supreme Court held that it was not necessarily retaliatory for a defendant to pursue an abuse of process lawsuit against an employee who had unsuccessfully prosecuted a discrimination lawsuit.  In the case decided by the Ohio Supreme Court, the original plaintiff (Tammy Greer-Burger) had sued Laszio Temesi and her employer for sexual harassment.  The case went to trial and she lost.  Temesi then sued her for abuse of process, malicious prosecution and intentional infliction of emotional distress.

In response to Temesi’s lawsuit, Greer-Burger filed a new Charge of Discrimination, alleging retaliation, with the Ohio Civil Rights Commission (OCRC).  An Administrative Law Judge (ALJ) concluded that Temesi’s lawsuit was retaliatory, and recommended that the OCRC block the litigation and award Greer-Burger $16,000 in attorneys’ fees.  The OCRC followed the ALJ’s recommendation.  Temesi then appealed to the trial court; he lost again, with the trial court affirming the OCRC’s conclusion.  Temesi did not give up, appealing the case to the Ohio Court of Appeals.  There, he lost for the fourth time.  Temesi pursued the case to the Ohio Supreme Court, where he finally was vindicated.

The Ohio high court repudiated the notion that any claim brought against a person who previously had pursued a discrimination claim was retaliatory.  The court stated, “we hold that an employer is not barred from filing a well-grounded, objectively based action against an employee who has engaged in a protected activity.”  The court further rejected the notion that Temesi’s claim for punitive damages somehow proved retaliation.  “Although some may argue that allowing an employer to seek punitive damages will have a chilling effect on employee lawsuits, a blanket prohibition on employer punitive damages would open the door to truly frivolous cases.”

The Ohio Supreme Court went on to observe that unless the abuse of process lawsuit proves to be a “sham,” there is a Constitutional right to seek redress from the government.  Thus, unless Temesi’s lawsuit was “objectively baseless,” it should not be barred.  The procedure adopted by the Ohio court was to have the ALJ evaluate the legitimacy of Temesi’s lawsuit under the standards it had articulated.

The divided Ohio court recognized that it was balancing competing interests of employees and employers.  While not wanting to chill discrimination claims, the court was unwilling to preclude employers in all instances from seeking judicial redress in response to a frivolous lawsuit.  This analysis applied even to a case that went to verdict, as it should.  As you may know, the summary judgment standard is often an easy standard for plaintiffs to satisfy, even when their claims are razor thin.  As the Ohio court implicitly recognized, surviving summary judgment should not be the measure by which the abuse of process theory is assessed.

Bottom line: assert your retaliation claims but make judicious decisions regarding when you elect to do so.  Be prepared for the the types of arguments advanced by Greer-Burger, as described above.  From my perspective, it would be very interesting to see the law develop  further in this arena.