America’s business legal climate has reached a tipping point
Our legal system is costly and often counterproductive.
The term predatory litigation often evokes the image of a sleazy ambulance chaser out to make an easy buck. But the real bandits have their sights set on much larger targets. This practice of weaponizing the legal system in an attempt to extort big payouts from businesses has become an industry of sorts, costing companies, and ultimately their customers, millions of dollars to fight or settle.
According to the U.S. Chamber of Commerce Institute for Legal Reform, America has the world’s most expensive legal system and 79% of American voters see the number of “frivolous” lawsuits as a problem. One study found the cost of the tort system in the United States amounted to $264 billion in 2010, or $3,428 for a family of four. At a time when we are working to recover from the economic shocks of the COVID-19 pandemic, America can ill afford such a significant drain on its economy.
One case that is still playing out in the courts stands out as an example of how massive the cost of litigation abuse can swell in certain circumstances, and how it can have a significant impact on our nation’s businesses.
In March 2018, a jury awarded San Francisco-based tech developer HouseCanary a $706 million award against property valuation and title insurance firm Amrock (then known as Title Source) for allegedly misappropriating trade secrets related to the development of a piece of home appraisal software known as an automated valuation model (AVM). Notable was the disproportionality of this award based on the $5 million per year contract the parties had entered into, and how the award came about only after HouseCanary failed to deliver a functional product to Amrock several months after the contractual due date. Even worse, it also turns out there was no technology to steal.
After Amrock sued due to HouseCanary’s failure to deliver, very much in the bounds of standard business practices, the case then swerved into the realm of perplexity. HouseCanary countersued, lobbing claims that Amrock had misappropriated its intellectual property in the creation of their own automated valuation model called MyAVM. The lawsuit was remarkable in that HouseCanary had no proof it delivered any property…