Enlist State or Federal Government Assistance

April 13, 2006

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The civil litigation system itself represents a significant risk factor and exposure to liability. Therefore, it is important that small business owners employ the various strategies that allow them to control the risk factors in litigation.

Usually, consumers enlist the assistance of the government in claims made against small business owners. Thus, the potential for government involvement in a case usually amounts to a serious risk factor for small business owners.

However, involving the government in an action is not limited to the protection of consumers. Small business owners who suffer losses due to fraud or unfair business practices in dealings with other commercial parties should always consider filing a complaint with the government and requesting that the government take action against the other party.

Even a small business owner who is a defendant in an action brought by another commercial party may be able to use this strategy, through the assertion of a counterclaim.

Filing a complaint with the federal or state government can be an extremely effective strategy for small business owners. If the government pursues the matter, then the government will bear the full cost of the claim. Thus, the small business owner, in effect, will have hired a large, qualified law firm free of charge and with minimal effort (i.e., the filing of a letter of complaint).

Further, the government has immense resources that usually cannot be matched by the other party. This puts the other party at a significant strategic disadvantage and, in many cases, will force the other party to settle the case. The settlement normally would require full restitution to the aggrieved party (in this case, the small business owner).

Common ways that small business owners, as plaintiffs, can enlist the assistance of the federal or state government are when there are violations of the Federal Trade Commission (FTC) Act, as well as violations of other various statutory limitations such as the state counterparts to the FTC Act, the FTC's franchise regulations, the state franchise laws and the RICO Act.

In addition, these statutes, with the exception of the FTC's provisions, also authorize private causes of action and, if the party is successful, make the loser pay reimbursement of attorney's fees and related costs, as well as punitive damages. Thus, small business owners may also consider this option, especially if the government fails to take action.