Litigation: The legal shakedown

The dirty little secret of consumer class actions

The Mafia is well-known for the “shakedown;” threatening to harm small businesses if they don’t pay protection money. A similar practice frequently occurs in consumer class action litigation, albeit in a more subtle and non-violent way, especially in California, which is well-known for having consumer-friendly consumer protection statutes. This article shall refer to this practice as the legal shakedown.

The legal shakedown typically begins when a consumer class action attorney sends a notice letter  to a business, claiming that the business is selling a product or service with false or misleading advertising. The letter demands that the business immediately correct its advertising and refund all consumers who purchased the offending product or service. Otherwise, the lawyer warns the business that it will bring a consumer class action lawsuit on behalf of all those who purchased the product or service.

This puts the business in the undesirable position of buying its peace from one person, and hoping that no other attorneys sue it for the same alleged conduct; incurring significant expense by agreeing to a class-wide settlement; or rolling the dice and defending the lawsuit, with the aim to either get the case thrown out at the outset or, if that is not a viable option, to defeat class certification. 

Three of the more common grounds upon which to get the case dismissed at the outset are:

Contributing Author

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Daniel Silverman

Daniel Silverman is a litigator in the Los Angeles office of Venable LLP. He has a successful track record of litigating a broad spectrum of...

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