The phrase “without merit” is frequently deployed in response to lawsuits, often as a knee jerk reaction. However, the implications of terming a lawsuit as “without merit” could be more substantial than initially expected, as illustrated in a recent case involving a public company and its CEO.
The lawsuit revolved around securities fraud claims which the public company and its CEO were unable to dismiss. The basis of these claims were statements in 10-Qs and 10-Ks, where a competitor’s trade secrets lawsuit was bluntly termed as “without merit”. The issue was further complicated by reassurances in the company’s code of conduct, promising that it will not resort to “illegal or questionable means to acquire a competitor’s trade secrets or other confidential information”.
In considering this outcome, it is clear that how corporations and their legal teams use language in their official communications carries potentially critical legal implications. The indiscriminate labeling of lawsuits as “without merit” could inadvertently have far-reaching consequences, potentially even strengthening the case of the opposing party.
It’s a clear call for all legal professionals and corporate officials to exercise thoughtful discretion while crafting statements, particularly when faced with lawsuits, or discussing shady business practices of competitors. Never underestimate the far-reaching implications of a prematurely dismissed competitor lawsuit, especially in official documents such as 10-Qs and 10-Ks.
In a legal environment wherein every word matters, the power of accurate, carefully considered communication should never be underestimated. This is not merely a matter of polishing public image, but an essential practice in protecting company interests and avoiding unnecessary legal scrapes.
For more detailed insights into the impact of these statements on the lawsuit, refer to the article published on JD Supra, “Think Twice Before Describing a Lawsuit as ‘without merit’“.