The Californian arm of the supermarket chain Trader Joe’s Co. has been ordered to pay $120,000 in legal fees to a union representing some of its employees, following a trademark infringement lawsuit. The judgement, delivered by a California federal judge, highlighted a need to dissuade “meritless claims.”
The legal dispute initially brought by Trader Joe’s centered around allegations of trademark infringement, the details of which have not been fully disclosed. What the outcome underlines though, is an increase in litigation costs for corporations engaging in legal disputes with their workers’ unions, often necessitating them covering legal fees if their claims are deemed groundless. The move has been interpreted as a legal deterrent for corporations to think twice before engaging in litigation.
Cost recovery in such cases is not a new concept, however, and is rooted firmly within the American judicial system. According to the American Bar Association, the principle is long standing, stating that those who undertake to sue others with little to no case, should bear the costs of the litigation. This arguably promotes healthier negotiation practices between corporations and their employees.
As such, it would seem prudent for corporations to ensure their claims hold substantial merit before embarking on a potentially costly legal journey. In an era of increasing corporate governance scrutiny where such costs could raise eyebrows among shareholders, extra caution on the part of corporations could be advisable.
How this ruling might impact Trader Joe’s and other corporations in the long run remains to be seen, but it serves as a reminder of the inherent financial risks tied to launching litigation, particularly when claims may be seen as unwarranted.