Government reports indicate that regulations have been ineffective in improving quality of care in many nursing homes. Some analysts feel that litigation against nursing homes may be the result of quality problems that are monitored during the inspection process, some contend litigation merely causes quality problems by diverting financial resources away from patient care, and some argue that litigation is duplicating the efforts of the inspection process. Given that the relationship between litigation and inspection-oriented measures of quality is not clear, this article explores the relationship empirically. When a significant relationship is found, the empirical results suggest that litigation is associated with a decline in inspection-oriented measured quality in the nursing home facing the legal claim. In contrast, litigation against a chain has a very different relationship to firm-level quality, where firms within a chain that is being sued have higher levels of inspection-oriented quality. Our results suggest that legal claims may result from quality problems that go unmeasured during the inspection process. However, more research in this area is warranted.