David Lerner Associates: The Trap of the Lawsuit Frenzy

David Lerner Associates: The Trap of the Lawsuit Frenzy

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class action law suit frenzyWe live in a very litigious society. Every day the courts are choked up with a plethora of suits filed against individuals, companies, and even the government. It seems that today’s method of attempted enforcement of claims—legitimate or illegitimate—is to throw it to our already beleaguered justice system and hope that a lawyer can wrest out a favorable decision, either through judgment or settlement.

It is not that difficult to file a lawsuit; you can get step-by-step instructions on the internet, and proceed without a lawyer. Once the suit is filed with the court, the defendant is automatically served. At that point a great deal of time, money and effort is taken to answer the suit, followed almost immediately by the even more costly steps of discovery. If the defendant doesn't respond to the suit right away, a motion for a default judgment can be filed, and the court can rule against the defendant awarding the plaintiff damages. The defendant then has to either dispute the judgment or pay it.

It can be easily seen that a lawsuit pins down a defendant from day one. Beyond the compelled legal proceedings, if the defendant is at all newsworthy, the media is going to pick up the story and run with it, adding words such as “allegedly” so as not to incur accusations of libel and taking broad liberties in “deciding” guilt or the lack thereof. The defendant then has a double burden: defense in the court of law, and defense in the court of public opinion—a much more difficult proposition. The Internet has made this situation much worse, as anyone can add fuel to the fire with unregulated blog posts and articles that have not been fact-checked.

Lawyers know how easy it can be to file a suit and, more importantly, how willing a defendant might be to settle the case in order to keep their name out of the media. Hence, law firms could do nothing but create class action suits, in which they solicit a number of plaintiffs and file suit against a company, gambling on a settlement to avoid bad publicity and/or the serious expense of a jury trial.

If you are contacted by such a firm with a promise of a big payout, ask yourself what the motive of this law firm might be. Are they really out to help you right a wrong or address a grievance—or are they simply on the hunt for a hefty percentage of a settlement or award? Is the defendant in this lawsuit truly guilty of wrongdoing or a lucrative target who is, in the eyes of some ill-motivated law firm, prime for fleecing?

Getting caught up in such a suit as a class-action plaintiff can be made to seem sorely tempting by these law firms. In the end, however, the plaintiffs may very well be left with a fraction of the promised “winnings”, and have even that substantially reduced by the law firm’s 30 to 40 percent contingency fee. In a large number of cases, that percentage is why the suit was brought in the first place—it had nothing to do with justice.

Before getting caught up in the lawsuit frenzy, take the time to really familiarize yourself with a case. Listen to both sides, not just the lawyers. You may very well find the real secret behind such a case: there is no case.


Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates,Inc. (DLA). This material does not constitute an offer or recommendation to buy or sell securities and should not be considering in connection with the purchase or sale of securities. Member FINRA & SIPC.


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At David Lerner Associates we believe in the sensible middle ground of investing. We do not run with the herd. We pursue these fundamental investment principles regardless of market conditions. We offer many investment opportunities, some designed to provide income.

Founded in 1976, David Lerner Associates is a privately-held investment company with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY. For more information contact David Lerner Associates 1 877 367 5960

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Jake Mendlinger
Account Manager
516.829.8374 X 232

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