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How to Handle Lawsuits Filed by Your Company's Consumer Base

By George Khoury, Esq. on August 29, 2017 | Last updated on March 21, 2019

While the best way to handle a lawsuit filed by a customer is to just apologize privately, not admit liability, and settle out quickly and cheaply, sometimes that's just not an option. No matter how proactive you are as a GC or in-house, some lawsuits you just can't avoid.

When your company is facing a lawsuit, particularly a class action, filed by your customer base, public perception matters (especially consumer perception). After all, your customers are who pay your company to work. If the case concerns a safety issue, failing to address the underlying issue can severely damage a company's reputation. Unfortunately, although a court may not accept remedial measures as evidence of liability, the public will see it as a dead giveaway that you're company's liable.

Keep Calm and Don't Bash the Filer(s)

Coming out guns blazing and levying accusations that the plaintiff is abusing the legal system, has no case, or has a questionable history, is like walking through a minefield, particularly in this day and age of social media. The public loves to criticize companies, so rise above the name calling.

Issuing a neutral, non-evaluative statement advising the public that the company is investigating the claim and plans to do the right thing is much better than issuing a blanket denial while vowing to vigorously defend the claims. While it's technically possible to recover litigation costs, reputational damage might be unsalvageable.

Be a Wizard

A recent case provides a good example of a company that survived the serious criticism and litigation brought by some of their most loyal consumers. Wizards of the Coast, a division of Hasbro, famous for making the games Dungeons and Dragons and Magic: the Gathering, has been embroiled in litigation and controversy over their "judge program" for the Magic collectible card game.

Basically, for two decades, Wizards has run a voluntary program to certify people who play the game as game judges. However, rather than paying the individuals who become certified, the program is entirely voluntary. The stores and tournament organizers that make money by holding events often provide judges with promotional items, such as valuable Magic cards (some worth hundreds of dollars), for judging events.

When the case was filed, Wizards issued an official statement to their customer base to assure everyone that everything would be okay, and to provide more factual background about the claim.

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