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Is Tort Reform Necessary to Protect Small Business?

According to a survey by the Institute for Legal Reform, release in May, more than half of small business owners polled are not all that concerned about being sued. But, as I pointed out in a post earlier this month (see The Lawsuit Risks of Having a Website), we live in a world of lawsuit happy people, who want anyone to blame but themselves.

That seems to be the circumstances, in my opinion, in the case of the D.C. judge who sued his neighborhood dry cleaner for $54 million over a misplaced pair of pants. Apparently Judge Roy Pearson dropped of a pair of pants at Custom Cleaners, owned by Soo and Jin Chung, to be altered. According to his side of the story, when he returned to pick up the pants, the Chung’s said they couldn’t locate them. A week later they returned pants to him, but Pearson claims they were not the one’s he brought in.

Here’s the thing though, the pants were half of a suit worth $1,000. Pearson initially demanded $1,150 from the Chungs in a letter, but when they did not respond, he filed suit, claiming it was the principle of their “Satisfaction Guaranteed” sign that resulted in his $54 million claim. To me, that is utterly ridiculous! Not to mention the fact that Pearson passed up settlement offers from the Chungs of $3,000, followed by $4,600 and a final offer of $12,000. All of which are way more than Pearson ever deserved and he should have accepted. You would think that a judge would know better.

The case finally went to trial last month and the judge who heard it ruled in favor of the Chungs, stating that Pearson had no proof that the pants they tried to give him were not the pants he brought in (that he could have brought in the wrong pants to begin with). Judge Bartnoff seemed to be appalled at Pearson’s demand for $54 million, despite the fact that he cried on the stand.

According to a Washington Post article on the case, Judge Bartnoff wrote the following in a 23-page ruling:
“A reasonable consumer would not interpret ‘Satisfaction Guaranteed’ to mean that a merchant is required to satisfy a customer’s unreasonable demands or to accede to demands that the merchant has reasonable grounds to dispute. . . [Pearson] is not entitled to any relief whatsoever.”

Following the ruling, the U.S. Chamber of Commerce Institute for Legal Reform issued a statement to the public saying that this case “proves that the system is truly broken and in bad need of repair.” And I whole-heartedly agree. As a legal secretary, most wouldn’t believe the stories we get from someone who calls wanting to sue. Someone once called wanting to sue the state of Florida for taking too long with finalizing her divorce. That’s just one example in hundreds of calls we get each month from people just wanting money and looking for any way to get it.

And even when a small business defends itself against a lawsuit, it’s attorney fees alone may result in bankruptcy. Not to mention the mark that a lawsuit puts on any business, whether the suit is legitimate or not. It can be hard, however, to get small business owners to side with the tort reform movement. Many times it is small businesses that find the need to sue their big business counterparts for unfair competition and the like. Tort reform would limit everyone, and thus limit the damages sought on even legitimate claims.

Despite that fact, I am fully on board with tort reform. We need protection for our small businesses from the lunatics out there that have no regard for anyone but themselves. Their goal is to be sitting pretty for a long time with someone else’s money. Fortunately, in the Pearson vs. Chung case, the prevailing party was the correct one. But it doesn’t always work out that way, and something must be done about it to protect our nations small business future.

• After the $54M Dry Cleaner Lawsuit

Related Small Business Buzz Posts:
When to Consider Bankruptcy as an Option
Being Sued by Big Business Competition
Pulling Your Teen Out of the Financial Hole
Teaching Your Child About Money
Avoiding the Courtroom: Tips for Deterring Litigation

By Michelle Cramer
Thursday, May 31st, 2018 @ 12:05 AM CDT

Business Law |