Legal Definitions - sham action

A sham action refers to a legal proceeding or activity that, while appearing to be a legitimate use of the legal system, is actually a deceptive maneuver. Its true purpose is not to genuinely pursue the legal claim or objective it purports to address, but rather to achieve an ulterior, often improper or anti-competitive, goal. It is a pretense, an insincere use of legal processes designed to mislead or gain an unfair advantage.

Here are some examples to illustrate this concept:

• Imagine a large, dominant company that files a series of patent infringement lawsuits against a smaller, innovative startup. On the surface, these appear to be legitimate attempts to protect intellectual property. However, if the dominant company knows these lawsuits have little merit and their real intention is to overwhelm the startup with legal costs, drain its resources, and prevent it from competing effectively, then these would be considered sham actions. The lawsuits are not about genuine patent protection but about stifling competition.

• Consider a situation where an individual is facing significant financial judgments from creditors. To protect their assets, they might conspire with a friend to initiate a fake lawsuit against themselves, claiming a large, fabricated debt to the friend. The individual then allows a default judgment to be entered, making it appear that their assets are legally owed to the friend. This entire legal proceeding, from the initial filing to the judgment, would be a sham action because its true purpose is to fraudulently shield assets from legitimate creditors, not to resolve a real dispute.

• Suppose a local government agency repeatedly initiates environmental impact reviews and permit challenges against a specific housing development project, even though the project consistently meets all regulatory requirements. If the agency's true motivation is not genuine environmental concern but rather to delay or prevent the project from being built due to political opposition from a vocal minority, then these regulatory challenges could be deemed sham actions. The legal and administrative processes are being misused as a tool for obstruction rather than for their intended purpose of ensuring compliance.