In terrorem
Encyclopedia
In terrorem, Latin
for "in [order to] frighten," is a legal term used to describe a warning, usually one given in hope of compelling someone to act without resorting to a lawsuit
or criminal prosecution. For example, many intellectual property
attorneys
send in terrorem letters, which threaten litigation absent compliance with the written request, to persons that are violating their clients' trademark
rights before resorting to court proceedings.
In terrorem Clauses (referred to in English
as No-contest clause
s) are also used in wills
to keep beneficiaries from contesting the will by either completely disinheriting them from any share, or reducing their share to a nominal amount. These clauses are not uniformly recognized. In some states, in terrorem clauses are disfavored, but can still be enforceable. In New York, for example, the Estates Powers & Trust Law codifies the use of, and the limits of, in terrorem clauses in EPTL 3-3.5(b).
The term was used in the recent U.S. Supreme Court decision Bell Atlantic Corp. v. Twombly
, which stated: "The requirement of allegations suggesting an agreement serves the practical purpose of preventing a plaintiff
with “ ‘a largely groundless claim’ ” from “ ‘tak[ing] up the time of a number of other people, with the right to do so representing an in terrorem increment of the settlement value’ ” (quoting Blue Chip Stamps v. Manor Drug Stores
). In other words, the Court worried that the threat of an expensive lawsuit (that was ultimately groundless) would nevertheless encourage settlements, and thus payments by innocent defendants, particularly in the case of antitrust lawsuits, which have a long and very expensive discovery process.
As the court alluded to in Twombly, the costs associated with discovery often underlay the economic calculus which may motivate the settlement of a in terrorem strike suit
. The Private Securities Litigation Reform Act
of 1995 created a heightened pleading
standard for cases involving violations of securities regulation in the United States
in response to perceptions of abuse in this area. This increased particularity is a departure from the "notice pleading" standard enumerated in the Federal Rules of Civil Procedure
which would otherwise apply.
Latin
Latin is an Italic language originally spoken in Latium and Ancient Rome. It, along with most European languages, is a descendant of the ancient Proto-Indo-European language. Although it is considered a dead language, a number of scholars and members of the Christian clergy speak it fluently, and...
for "in [order to] frighten," is a legal term used to describe a warning, usually one given in hope of compelling someone to act without resorting to a lawsuit
Lawsuit
A lawsuit or "suit in law" is a civil action brought in a court of law in which a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint...
or criminal prosecution. For example, many intellectual property
Intellectual property
Intellectual property is a term referring to a number of distinct types of creations of the mind for which a set of exclusive rights are recognized—and the corresponding fields of law...
attorneys
Lawyer
A lawyer, according to Black's Law Dictionary, is "a person learned in the law; as an attorney, counsel or solicitor; a person who is practicing law." Law is the system of rules of conduct established by the sovereign government of a society to correct wrongs, maintain the stability of political...
send in terrorem letters, which threaten litigation absent compliance with the written request, to persons that are violating their clients' trademark
Trademark
A trademark, trade mark, or trade-mark is a distinctive sign or indicator used by an individual, business organization, or other legal entity to identify that the products or services to consumers with which the trademark appears originate from a unique source, and to distinguish its products or...
rights before resorting to court proceedings.
In terrorem Clauses (referred to in English
English language
English is a West Germanic language that arose in the Anglo-Saxon kingdoms of England and spread into what was to become south-east Scotland under the influence of the Anglian medieval kingdom of Northumbria...
as No-contest clause
No-contest clause
A no-contest clause, also called an in terrorem clause, is a clause in a legal document, such as a contract or a will, that is designed to threaten someone, usually with litigation or criminal prosecution, into acting, refraining from action, or ceasing to act...
s) are also used in wills
Will (law)
A will or testament is a legal declaration by which a person, the testator, names one or more persons to manage his/her estate and provides for the transfer of his/her property at death...
to keep beneficiaries from contesting the will by either completely disinheriting them from any share, or reducing their share to a nominal amount. These clauses are not uniformly recognized. In some states, in terrorem clauses are disfavored, but can still be enforceable. In New York, for example, the Estates Powers & Trust Law codifies the use of, and the limits of, in terrorem clauses in EPTL 3-3.5(b).
The term was used in the recent U.S. Supreme Court decision Bell Atlantic Corp. v. Twombly
Bell Atlantic Corp. v. Twombly
Bell Atlantic Corp. v. Twombly, , was a decision of the Supreme Court of the United States involving anti-trust law and civil procedure. Authored by Justice David Souter, it established that parallel conduct, absent evidence of agreement, is insufficient to sustain an anti-trust action under § 1...
, which stated: "The requirement of allegations suggesting an agreement serves the practical purpose of preventing a plaintiff
Plaintiff
A plaintiff , also known as a claimant or complainant, is the term used in some jurisdictions for the party who initiates a lawsuit before a court...
with “ ‘a largely groundless claim’ ” from “ ‘tak[ing] up the time of a number of other people, with the right to do so representing an in terrorem increment of the settlement value’ ” (quoting Blue Chip Stamps v. Manor Drug Stores
Blue Chip Stamps v. Manor Drug Stores
Blue Chip Stamps v. Manor Drug Stores, 421 U.S. 723 , was a decision by the United States Supreme Court, which ruled that only those suffering direct loss from the purchase or sale of stock had standing to sue under federal securities law....
). In other words, the Court worried that the threat of an expensive lawsuit (that was ultimately groundless) would nevertheless encourage settlements, and thus payments by innocent defendants, particularly in the case of antitrust lawsuits, which have a long and very expensive discovery process.
As the court alluded to in Twombly, the costs associated with discovery often underlay the economic calculus which may motivate the settlement of a in terrorem strike suit
Strike suit
A strike suit is a lawsuit brought by a single person or group of people with the purpose of gaining a private settlement before going to court that would be less than the cost of the defendant's legal costs...
. The Private Securities Litigation Reform Act
Private Securities Litigation Reform Act
The United States Private Securities Litigation Reform Act of 1995, Pub. L. 104-67, 109 Stat. 737 implemented several substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation, and...
of 1995 created a heightened pleading
Pleading
In law as practiced in countries that follow the English models, a pleading is a formal written statement filed with a court by parties in a civil action, other than a motion...
standard for cases involving violations of securities regulation in the United States
Securities regulation in the United States
Securities regulation in the United States is the field of U.S. law that covers various aspects of transactions and other dealings with securities...
in response to perceptions of abuse in this area. This increased particularity is a departure from the "notice pleading" standard enumerated in the Federal Rules of Civil Procedure
Federal Rules of Civil Procedure
The Federal Rules of Civil Procedure govern civil procedure in United States district courts. The FRCP are promulgated by the United States Supreme Court pursuant to the Rules Enabling Act, and then the United States Congress has 7 months to veto the rules promulgated or they become part of the...
which would otherwise apply.