Basically, the judge can say "even if all the plaintiff's allegations are true the defendant will still win, so lets skip the trial." That's probably what will happen here.
The closest you'll get is that very few lawyers will take your case if it completely sucks. And it can get thrown out pretty much off the bat from the the judge
Criminal cases do have grand juries which weigh the merits of a case before going to trial.
I'm wondering if this method of "business" has ever been attempted?
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.
So yes the loophole is there, but the loophole itself is kind of self destructive for anyone dumb enough to try it.
How many issues are being exploited that don't warrant such public outrage? My guess is more than a few.
Your comment about using the legal system for extortion is a real problem.
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.
(I'm Canadian here, so excuse my ignorance)