Malicious prosecution is something most people think about in terms of criminal charges and out-of-control prosecutors -- but it's also used to describe the actions of private individuals or companies as well.
Sometimes, the term is used to describe opportunists who try to use the legal system to bully a company into paying them "nuisance money" to go away rather than run up a legal bill in court. Essentially, these people bet that you'll throw a few thousand dollars their way to make a frivolous lawsuit disappear in order to save thousands more in legal fees to fight it -- even though you know you're in the right.
Either of those things can be destructive to your company and end up putting you out of business. If you get the reputation for being easy to bully, you can end up being targeted by one shady lawsuit after another. It may be better to take the long view and forget about the most cost-effective methods of handling nuisance suits in the short-term until you establish a reputation for refusing to pay off extortionists who are manipulating the legal system.
Here are two signs that you're being targeted by opportunists who simply think that your company has deep pockets:
1. Serial Filers
Hop online at the county records' website and look up how many civil suits this individual has been involved in over the past five or 10 years. If there's one or two and they seem legitimate (involving something like a car accident), that's probably no problem. If this person has a significant history of filing civil lawsuits, you can just about bet this newest one aimed at you is nothing more than a cheap money grab.
2. Disproportionate Claims
If someone catches the hem of their wool coat on a nail that's jutting out and snags a thread on the seam, that's a $10 or $20 repair by a seamstress -- not a $10,000 claim. If the coat is torn and ruined, you shouldn't have to pay someone $20,000 for a coat that cost them $200 a couple years ago. Someone can have a legitimate complaint, but if they're making outrageous demands for compensation, you're being targeted for your perceived ability to pay.
Don't let someone use the legal system to target your business for cash. Hire a business attorney to help you defend your livelihood against malicious fraud.
Source: FindLaw, "Malicious Prosecution," accessed Aug. 17, 2017