Does a no-litigation condition get triggered by a frivolous lawsuit filed at the last minute?

Usually not, if the condition is drafted with any real precision — a well-drafted no-litigation closing condition typically requires more than the bare fact that some lawsuit exists; it's commonly tied to litigation that is material, that seeks to actually block or unwind the transaction itself, or that could reasonably result in a significant loss to the target business, rather than any claim of any size filed by anyone.

A frivolous, clearly meritless suit filed at the last minute, with no realistic chance of success and no real financial exposure, generally wouldn't meet a properly drafted materiality threshold, and a party trying to use it as an excuse to avoid closing would likely be seen as acting in bad faith relative to what the condition was actually meant to address. That said, a loosely drafted no-litigation condition — one that refers simply to the "absence of any litigation" without a materiality or purpose qualifier — creates real risk, since a technically true but frivolous filing could arguably satisfy its literal wording even though it was never meant to derail a legitimate deal over a nuisance claim.

Precision in how this condition is worded is what actually protects both sides, which is exactly what a Treadstone business lawyer should be checking before you sign.