Recently, an inmate in a Colorado correctional facility filed an $88 billion suit against National Football League officials for an overturned call in the Dallas Cowboys - Green Bay Packers playoff game. The fan-turned-plaintiff asserts the game hinged on that call and someone should pay up for the mistake. Dallas media outlets surmise he arrived at his damages figure, $88,987,654,321.88, in homage to the receiver whose catch was over-ruled, Dez Bryant, jersey number 88.
FRIVOLOUS SUIT FUN FACTS: COFFEE IS HOT; BURGERS ARE MESSY
Frivolous lawsuits have become so common in the United States most Americans could recite the more shocking ones by heart.
Who could forget when McDonald’s was sued for serving its coffee too hot? A jury awarded the plaintiff in that case $2.86 million, prompting ABC News to call it “the poster child of excessive lawsuits.” More recently, a man has filed suit over the mental anguish he suffered when a McDonald’s employee handed over only one napkin with his order. He contends the experience has left him unable to work.
CRASH AND BURN: AMERICAN TAXPAYERS LEFT HOLDING BILL
The sheer number of frivolous lawsuits filed each year in the United States necessitated some sort of protection for corporations; few disagree on that score. Many companies prefer to settle with their claimants, far-fetched as their lawsuits may be, rather than to tie up time and resources in protracted legal battles. Lawmakers put stopgaps in place to soften the blows and to ensure frivolous lawsuits wouldn’t take companies down for the count.
Legislators took a stab at financially protecting companies from these inevitable payouts and other payments that are legitimate costs of doing business.
“They are allowed to write off settlement payments that are not fines or penalties paid to the government as ordinary business expenses. But a tax loophole has enabled corporate wrongdoers to take advantage of that tax break, too. Some companies that have behaved terribly are benefitting handsomely by deducting amounts meant to punish them for bad behavior. The American taxpayer underwrites a huge percentage of the amounts paid as though any bad act is standard business practice. It’s just so wrong,” says Christopher Huntley of the Huntley Law Firm, the provider firm for LegalShield members in the State of Idaho.
The U.S. Public Interest Research Group reports that at least 80% of the $42 billion BP has paid for its 2010 Deepwater Horizon rig explosion and oil spill that resulted in 11 deaths and unprecedented harm to the ecosystem is tax deductible, saving the company an estimated $10-$14 billion. That savings is money the company keeps and the government does not collect on behalf of taxpayers. Americans who had no culpability in the disaster have, essentially, been enlisted to bankroll BP’s Victim Fund.
Even J.P. Morgan Chase, considered by many to be an architect of the 2008 financial crisis, announced a $13.7 billion settlement payout to the federal government, followed the next day by the CFO’s announcement that $7 billion of that figure would be tax deductible (so investors need not worry.)
Interesting Note: If the government settles a claim with a corporation and the settlement document doesn’t clearly state whether the amount paid is a fine or a penalty, the corporation is likely to try to deduct the entire payment no matter how large the payment nor how egregious the acts
SMALL CLAIMS COURT: JUDGE JUDY IS NOT REPRESENTATIVE OF REALITY
People often find themselves moved to sue their neighbors over property disputes, or mean teachers and administrators, or companies that have insulted them. Mr. Huntley cautions everyone to step back and really consider the situation carefully before taking matters to court. The expense, stress, and bad feelings left in the wake of such an event take a long time to dissipate.
One of the wilder frivolous lawsuits making the news lately stems from a five-year-old missing his friend’s birthday party. The host family incurred a $22 no-show guest fee, which they passed on to their absent guest’s family the following week. The fur began to fly, with both sides squaring off to go to court.
“Here’s the first question I ask: ‘Why are you doing this? Is it to change a circumstance or policy? Have you exhausted all other options? Or is this more for the principle of the thing?’ I will take cases with legal merit, but I find that people suing on principle often need to take a breather,” says Mr. Huntley, who emphasizes that the LegalShield service is ideal for calling to verify rights and the law, but not to file suit on anyone, be they inconsiderate guests or a corporation guilty of a reprehensible crime. “We refer clients to litigation counsel when the situation warrants a day in court, but 90% of the time, it really does not,” says Mr. Huntley.
ENTER: GUYS IN WHITE HATS
The hit parade of corporations who have unjustly benefitted from the tax loophole has angered lawmakers for years, but none has been able to get new legislation off the ground thanks to bipartisan struggles and the sustained efforts of business lobbyists. Perhaps the most ridiculous part of the loophole is the deduction of punitive damages. Last month Senator Patrick Leahy, Democrat from Vermont, introduced the “No Tax Writeoffs For Corporate Wrongdoers Act” in an effort to stiffen the penalties corporations must face when they have committed egregious acts. Senator Charles Grassley, Republican of Iowa, and Senator Jack Reed, Democrat from Rhode Island, also plan to reintroduce similar legislation in this session.
“If you are offended by the idea of your taxes being raised so that a corporation can deduct an amount meant to punish it for wrong-doing, now is the time to call your representative in Congress,” says Mr. Huntley.