Economic Downturn Worsened by Surge in Frivolous Lawsuits Against Small Business

Inflation may be one of the most serious difficulties that Alabama’s small companies face, but frivolous lawsuits exacerbate the matter.

Many lawsuits are genuine. If you have been wronged, you have the constitutional right to seek redress. Unfortunately, some lawsuits are filed for the wrong reasons. They’re submitted because someone sees an opportunity to make money.

Small enterprises have narrow profit margins. Instead of using their limited resources to run their firms, owners must pay thousands of dollars in legal expenses and, in certain cases, make large cash settlements. This makes it more difficult for small firms to expand and create jobs, while also raising insurance costs. Insurance firms include the expense of potential legal actions in everyone’s premiums. This leads to higher pricing for all Alabamans.

That is why Alabama’s small companies rely on legislators to support House Bill 420 and Senate Bill 293, the Lawsuit Fairness Act of 2024.

The current legal system lends too much power to plaintiff trial lawyers who profit by suing firms. House Bill 420 and Senate Bill 293 would not prohibit people from suing if they have been really injured, but they would ensure that both parties are treated equitably.

It would put a spotlight on third-party financing corporations that cover the costs of cases that do not affect them. It would also ensure that any experts called to testify understand what they are talking about, and the legislation would compel truth in advertising so that lawyers could not misrepresent how much money they have won in court.

Currently, litigation abuse is like a hidden tax on everyone. According to The Perryman Group’s 2021 study, litigation abuse costs the typical Alabaman $731 per year and the average household $1,016.

Simply put, litigation abuse raises prices for everyone who lives here, and the situation worsens. Paying increased insurance premiums and monetary settlements compels employers to make difficult options, such as raising prices, laying off staff, or even liquidating their business.

Even the fear of a lawsuit makes doing business risky. When new entrepreneurs are concerned about being sued, it is difficult for them to launch their businesses. And, if costs rise due to inflation, it becomes even more difficult for small enterprises to make ends meet.

The Alabama legal system should provide a level playing field for everybody.