Legal Definitions - sham suit

A sham suit refers to a lawsuit that, while appearing to be a legitimate legal action, is actually filed for an improper or ulterior motive, rather than to genuinely seek a legal remedy or resolve a dispute. The party bringing the suit does not truly intend to win on the merits of the case but uses the legal process as a tool to achieve an anti-competitive goal, harass an opponent, or delay a legitimate process. Such a suit lacks a genuine legal basis and is primarily a pretext for an underlying improper purpose.

Here are some examples to illustrate this concept:

• Example 1: Business Competition

  A dominant technology company files a patent infringement lawsuit against a small, innovative startup that is about to launch a competing product. The dominant company's legal team knows their patent claim is weak and unlikely to succeed in court.

  Explanation: This would be a sham suit if the dominant company's true intention is not to win the patent case, but rather to tie up the startup's limited financial resources in legal defense, delay the launch of their competing product, or force them into a costly settlement, thereby stifling competition. The lawsuit itself is a pretext for an anti-competitive business strategy.

• Example 2: Environmental/Community Opposition

  A real estate developer wants to build a large complex in an area where a local community group is actively organizing against the project due to environmental concerns. The developer files several lawsuits against key members of the community group, alleging minor procedural violations or defamation, even though the claims are flimsy.

  Explanation: These lawsuits could be considered sham suits if the developer's primary goal is not to win these specific cases, but to intimidate the community members, drain their personal funds and time defending themselves, and ultimately discourage their opposition to the development. The lawsuits serve as a tactic to suppress dissent rather than to genuinely seek legal justice.

• Example 3: Contract Dispute/Delay Tactic

  Two companies have a contract, and one company (Company A) is clearly in breach, owing a significant amount to Company B. To avoid immediate payment and delay the inevitable, Company A files a complex, multi-count lawsuit against Company B, alleging minor, unsubstantiated breaches by Company B.

  Explanation: This could be a sham suit if Company A knows its claims against Company B are weak and unlikely to prevail. Its real purpose is to create a counter-claim, complicate the legal process, and force Company B into a lengthy and expensive litigation, thereby delaying Company A's obligation to pay and potentially leveraging a more favorable settlement. The suit is a delaying tactic rather than a genuine attempt to resolve a dispute on its merits.