So theoretically, an organization with large enough pockets could literally destroy a competing organization with lawsuits designed only to ensure the victim expends large amounts of cash on legal fees, correct?

I'm wondering if this method of "business" has ever been attempted?

When the Golden Gate Bridge was being built, the ferry companies (who would be put out of business by the bridge) tried to sue the bridge to death with something like 2000 trivial lawsuits. While each of these was easily defeated, the only thing that stopped the ferry companies was that the local populace boycotted the ferries until they stopped the lawsuits.

So yes, it's been done before, is probably being done now, and will happen again. You can counter-sue trivial lawsuits to make the plaintiff go away (and stop filing suits against you), but it takes some work and laying out some money to lawyers.

Thanks for the background. This whole thing strikes me as a horrible loophole in the legal system. I'd imagine the same is true in most western countries.

Sadly it is the same in most western countries, however if you sue me because I wore a pink hat (frivolous lawsuit) I have the right to counter-sue you (which would be a non-frivolous lawsuit). Yours would be thrown-out and cost you money and probably a lot to get a lawyer to take it on, mine however would likely be taken on on a no-win-no-fee basis by basically any lawyer because it would be so easy to win. So your suit would cost you money, and mine would likely cost me nothing or make me money.

So yes the loophole is there, but the loophole itself is kind of self destructive for anyone dumb enough to try it.

Yet the example you gave would have been successful had it not been for outraged civilians mounting a boycott.

How many issues are being exploited that don't warrant such public outrage? My guess is more than a few.

That's basically what's happened to my company (the lawsuit is still ongoing).

You're aware of the RIAA's lawsuits against file sharers, correct?

Your comment about using the legal system for extortion is a real problem.

The RIAA, as much as it pains me to say this, is acting within the letter of the law, in that I would not call their suit frivolous. Immoral and unethical sure, but not frivolous.

They've put forward a case that explains that a particular person has broken an existing law and caused them damages of x amount, and the court has agreed with them in most cases.

Theoretically yes but there are some practical issues that can make this complex.

I don't doubt its been tried.