Want to do business in the USA? Prepare to be sued

IT IS GENERALLY agreed that the USA urgently needs tort reform. But if you are thinking of coming to establish your business in the big business playground that is the States, you should absolutely prepare to be sued.

Strangely enough, I was never sued when I lived in a small modest home. It was not until the business flourished and I moved into a large home that the lawsuits started coming.

Having five wonderful children who are not wonderful drivers did not help. At one time we had four legal actions resulting from their driving prowess, but as my colleague and fellow ex-Dragon Bobby Kerr would say, “Let’s get down to business!”

Large companies will sue their smaller competitors simply because they know that the small companies cannot afford to get engaged in litigation.

They do not have a loser-pays system in the USA, unless it is ridiculously frivolous – and the bar for frivolous litigation is very high, meaning it is almost impossible to prove.

Here are a couple of personal examples that show even the smallest of cases will cost at least $75,000 – while the bigger ones run into millions.

One of my clients was recently sued and the jury, just because they could, added on $700 million in punitive damages. Absolutely ridiculous. It will be overturned eventually, but not before they spend a few million dollars in appealing.

In my case, I had a group of company shareholders, who had voluntarily resigned, sue me on the basis that the company was going to be sold and they were entitled to a share estimated in millions of dollars.

In fact I never did sell so much as a share in the company, but the lawsuit dragged on for over a decade before finally being settled for a fraction of the claim. It still cost me over $100,000 to defend.

This is my advice to any company thinking of coming to the USA:

• Definitely take the plunge as it is worth it. It is the most successful country in the world for a reason. They add an extra zero onto everything BUT do your research on your competitors and their patents
• If you are partnering with a distributor try and make sure that their legal liability insurance covers your product – and if it does not, arrange for them to get you added. It will cost a lot less than you taking it out yourself
• Take out director’s liability insurance and balloon insurance. I took out balloon insurance on my home as I have a pool with a water slide and a tragic accident would have completely bankrupted me
• Finally, when you are sued, go to a really good, highly reputable law firm and pay to get a formal legal opinion on the merits of your case. If your case is strong, you will be able to get one of the smaller law firms to represent you on a contingency basis

A company I owned was sued by a firm in Alabama for millions around patent issues. We were served with a “cease and desist” letter, which meant that if we continued to sell the product we risked triple damages. All our suppliers were served at the same time.

The company had to stop trading. I got a seven-page letter from King and Spalding, one of the top law firms in the south-west, going into great detail about how we would absolutely win if it went to court. I got a contingency firm to represent me, it went to court, trial lasted a week, we finally won, and they took their 33% of the damages awarded.

Peter Casey is the founder and executive chairman of Claddagh Resources, an author and a former panellist on RTÉ’s Dragon’s Den.

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