Tips and Strategies for Defending Against Consumer Fraud Litigation
Consumer fraud litigation is a risk for many types of businesses. Whether lawsuits come from individual plaintiffs or in the form of class action complaints, consumer fraud claims can lead to both substantial liability and substantial negative publicity. As a result, businesses need to defend against these claims strategically, and business owners and executives should consult with a Miami fraud lawyer at the first sign of potential litigation.
While consumer fraud litigation presents a variety of risks, businesses targeted in consumer lawsuits will often be able to deploy a variety of defense strategies as well. Here are some tips and strategic considerations for defending against consumer fraud litigation in Florida’s state and federal courts:
Promptly Investigate the Plaintiff’s (or Plaintiffs’) Allegations
When facing consumer fraud litigation, or even facing the prospect of consumer fraud litigation, businesses should promptly investigate the allegations at issue. Consumer fraud lawsuits can involve a broad range of alleged corporate misdeeds and failures, and while some claims may be capable of substantiation, many are not. This applies to all types of consumer fraud lawsuits, including (but not limited to) those involving allegations of:
- Anti-competitive commercial practices
- Deceptive trade practices
- Misleading advertisements and other unlawful marketing practices
- Misrepresenting the quality or character of the business’s goods or services
- Financial fraud and insurance fraud
- Consumer credit and debt collection violations
- Privacy and data security breaches
When investigating pending or anticipated consumer claims, it is critical to ensure that the investigation is both unbiased and comprehensive. At this stage, the purpose of the investigation is not to build a defense but rather to gain a clear understanding of the facts at hand so that the business’ leaders can make informed decisions about their next steps.
As they conduct investigations in anticipation of consumer fraud litigation, businesses should work alongside their counsel to ensure that their investigations’ findings are protected under the attorney-client privilege. Additionally, engaging experienced legal counsel during the investigative process will help ensure that the investigation is not compromised by oversights or employees who have their own best interests in mind.
Focus on Building and Executing a Proactive Defense
Too often, businesses end up facing unnecessary costs and risks in consumer fraud litigation because they fail to take a proactive approach to their defense. By evaluating potential defenses and formulating a cohesive defense strategy early, businesses can often steer this type of litigation toward an efficient and quiet resolution. While some business owners and executives may assume that a wait-and-see approach will be most cost-effective, this isn’t necessarily—or even often—the case. Instead, working to take control of the litigation before it builds will usually be the best approach.
Evaluate Potential Cross Claims and Third-Party Claims
In addition to evaluating potential defenses, businesses targeted in consumer fraud litigation should also evaluate potential cross claims and third-party claims. Cross claims involve seeking to shift full responsibility to a co-defendant, while third-party claims seek to shift liability to parties that are not yet involved in the litigation.
Cross claims and third-party claims can arise under a variety of circumstances. For example, if a business is accused of engaging in a fraudulent marketing campaign, it may have a third-party claim against its advertising or PR agency. Or, if a business is accused of failing to adequately protect its customers’ personal information as the result of a data breach, it may have a cross-claim or third-party claim against its cybersecurity company. There are numerous other possibilities as well, from claims against suppliers and wholesalers to claims against former partners and executives.
While many cross claims and third-party claims will involve other businesses’ contractual responsibilities (i.e., indemnification obligations), it is also possible to file tort-based cross claims and third-party claims in consumer fraud litigation. When you engage a Miami fraud lawyer to represent your business, he or she will carefully evaluate all options for protecting your business against both civil liability and reputational harm.
Evaluate Your Business’s Insurance Coverage
Along with evaluating the possibility of shifting liability to a co-defendant or other third party, businesses facing consumer fraud litigation should also evaluate their insurance coverage. If the plaintiff’s (or plaintiffs’) claims are covered, then it may be necessary to promptly engage the business’ insurer to ensure that it has the opportunity to defend the claims as effectively as possible.
Determine Whether the Plaintiff’s (or Plaintiffs’) Claims Are Subject to Arbitration
Another important strategic consideration in consumer fraud litigation is whether the plaintiff’s (or plaintiffs’) claims are subject to arbitration. Many businesses include mandatory arbitration provisions in their customer contracts and terms of use, and while there are limits on these provisions’ enforceability, they are at least generally enforceable in Florida. If the plaintiff’s (or plaintiffs’) claims are subject to mandatory arbitration, ensuring that the case proceeds in the correct forum can both reduce the costs of the litigation and help to facilitate a favorable resolution.
Don’t Forget About the Risk of FTC (or Other Agency) Enforcement Action
Finally, when facing consumer fraud complaints, businesses must also consider the possibility of facing enforcement action from the U.S. Federal Trade Commission (FTC)—or another state or federal agency. Several agencies have statutory authority to investigate and pursue consumer fraud claims, and the FTC has been increasingly active in this area in recent years.
Defending against state or federal enforcement action involves challenges and risks that are different from those involved in defending directly against consumer claims. As a result, if facing enforcement action is a possibility, businesses targeted in consumer fraud litigation must take this into account when investigating and formulating their defense strategies.
Speak with a Miami Fraud Lawyer at Edelboim Lieberman
At Edelboim Lieberman, we rely on decades of relevant experience to effectively represent businesses in all types of consumer fraud litigation. If your company is being targeted in a lawsuit or government enforcement action, we can help, and we encourage you to call 305-768-9909 or contact us online for more information.
