The Hot Coffee Lady suit was a 100% legitimate case in which an elderly woman suffered third-degree burns from spilling a cup of freshly-purchased Mcdonalds coffee on her. The injuries were a result of two factors, both of which were McDonalds's fault. First, the lid on the cup was not put on the cup correctly, causing it to spill unexpectedly. Second, the coffee was kept at an extremely high temperature, far beyond any reasonable standard. In the case of the latter factor, this was, in fact, a McDonalds company policy that they had been repeatedly cited for, but that they had kept on the grounds that a lot of people get coffee on the way to work, and if it cools down too much by the time the customer gets to work, that customer will buy coffee somewhere closer.
Initially, the woman only sued for her $20,000 medical costs - a figure that by itself should prove that it wasn't a frivolous suit. The company flatly refused to pay more than $800. Initially, she was awarded $160,000 actual and $2,700,000 punitive damages, with the figure reduced to $640,000 by the judge.
Punitive damages are a part of the American legal system precisely because most companies make so much money that they could easily ignore safety defects and pay off anybody who dares to complain - if it would cost five million dollars to fix a problem that statistically might kill four people, it is cheaper just to settle the wrongful death suits. To ensure that any lawsuit can potentially hurt, the law allows open-ended damages to be tacked on to the judgement (although appeals courts can and usually do reduce them if they get too high), ensuring that even the richest corporation will fix problems before they reach the consumer.