In today’s litigious world, it is all too common for a disgruntled former business partner to file a lawsuit based on legally weak, if not outright frivolous, claims of wrongdoing. One common reaction is to fight fire with fire by filing counterclaims for abuse of process and/or other similar causes of action. While there is a time and place for pursuing such counterclaims, they should be carefully vetted and not instituted based on emotion and/or simply to create leverage. Indeed, as the defendant in Barnum v. Tubifi, Inc. learned just last month, filing a retaliatory counterclaim can result not just in a little wasted time and money, but could lead to court imposed sanctions.
In Barnum, the plaintiff sued Tubifi, claiming that he was misclassified as an independent contractor when, in fact, he was an employee of the company. In response, Tubifi filed counterclaims, including counts for interference with contractual relations and breach of the implied covenant of good faith and fair dealing. Barnum then filed a “Special Motion to Dismiss” these counterclaims under the Commonwealth’s Anti-SLAPP Statute, M.G.L. Chapter 231, §59H.
In deciding a Special Motion to Dismiss under the statute, the court first looks to see if the claim sought to be dismissed is based solely on what is known as “petitioning activity.” Such activity “includes written or oral statement[s] made before or submitted to a legislative, executive, or judicial body.” In Barnum, Tubifi’s counterclaims for tortious interference and breach of the implied covenant of good faith and fair dealing were based solely on petitioning activity because they were expressly grounded in allegations that Barnum had made:
[A] false wage claim [and other] claims he in fact assured [individuals] at Tubifi that he was not entitled to.
Once it is established that a claim is based solely on petitioning activity, Chapter 231, §59H mandates dismissal of the claim unless the party opposing dismissal can show that the claims (i) lack any reasonable factual support or any arguable basis in the law and (ii) caused the opposing party to suffer actual injury. In Barnum, all Tubifi did was steadfastly deny the factual allegations in Barnum’s Complaint; Tubifi did not refute them with affidavits or other evidence. Accordingly, Tubifi failed to carry its burden of proof, and the counterclaims for tortions interference and breach of the covenant of good faith and fair were dismissed. Further, and to add a metaphorical insult to injury, because Chapter 231, §59H calls for a party who is successful in its Special Motion to Dismiss to be awarded attorneys’ fees, Tubifi was also ordered to write a check to Barnum.
So, the next time a company business person wants to pursue a counterclaim simply to “to make the other side think it has something to lose” or another such reason that does not seem objectively supported by facts, remember Barnum. By doing so, in-house counsel may be able to prevent his or her company from exacerbating an already frustrating situation.