January 26, 2011

D.C. court tosses Alan Grayson’s frivolous lawsuit

By D.C. court tosses Alan Grayson’s frivolous lawsuit

Author: Timothy Sandefur

A Washington, D.C., court decided on Friday to throw out a frivolous lawsuit brought by former Congressman Alan Grayson. He was suing AT&T because when customers don’t use the whole amount on their pre-paid calling cards, the company keeps the money instead of just turning it over to the government. Grayson, of course, wasn’t suing on his own behalf, but supposedly on behalf of victimized customers, and the question the court had to confront was whether someone can do that in Washington’s courts. Of course, they’ve long been able to do that in California’s courts, as my colleague, Deborah La Fetra, noted in a Washington Examiner article in July:

California’s disastrous experiment with gutting the rules of standing should flash warning signals to the judges who are considering Grayson’s case—and to the D.C. business owners and residents who would be the ultimate losers if he wins.

California’s Unfair Competition Law was a classic example of a consumer protection law that didn’t help consumers nearly so much as it enriched ethically challenged lawyers…. Lawyers who specialized in this lucrative practice would form “watchdog” or “consumer” front organizations, and scour public records on the Internet for ridiculously minor regulatory or legal violations by small businesses. Favorite targets were family-run restaurants, often owned by immigrants.

When a “mark” was identified, the unfortunate business would be notified that it was being sued.

The attorneys would follow up by contacting the owner and generously pointing out that a quick settlement would make things go away.

These litigation mills amassed huge sums by chiseling small settlements from thousands of intimidated business—all in the name of redressing “harms” that nobody had suffered.

Unfortunately, although the court of appeals threw Grayson’s case out on the grounds that he hadn’t even claimed anyone was actually defrauded, it did not impose a meaningful standing requirement; any plaintiff who simply claims in his complaint that the general public was harmed by something is still free to sue. Citizens and businesses in Washington, D.C., will therefore continue to suffer from frivolous lawsuits into the foreseeable future.

Here’s the brief PLF filed in the case.

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