Four score and seven moons ago (which, if my math is correct, translates to roughly “some time ago”) I brought forth on this blog a new post, conceived in liberty, and dedicated to the proposition that you could take certain precautionary steps to lessen the risk of a lawsuit being filed against your business. If you were paying attention then chances are you’ve since stood atop a mountain and proudly proclaimed “Don’t Sue Me Bro!” (if you actually did that you probably have problems that I can’t help address – seek professional help). But reducing your risk of being sued is only one piece of the pie. The other piece of the pie (wait… is there such a thing as a two-piece pie? ) is what you need to know when the tables are turned – what happens when someone has (to use the formal legal term) screwed you and you’re now considering filing a lawsuit? I’m glad you asked, because that’s exactly what we’re covering today.
Let’s start with the proposition that preparing to be a plaintiff in a lawsuit is not all that different from preparing to be a defendant – at least insofar as long term strategic planning is concerned. Much of what you can do to decrease litigation risk will likewise put you in a stronger position should the need arise to file a lawsuit yourself – for example, having (and enforcing) clear e-mail and social media policies, implementing a sensible document management and retention system, and including favorable terms in your contracts/purchase orders will help regardless of whether you’re a potential defendant or plaintiff. Putting yourself in the strongest possible position before a dispute arises is just as (if not more) important than the considerations in play while you’re teetering on the edge of deciding whether to file a lawsuit or not. Indeed, the more prepared you are and knowledgeable of the potential skeletons in your own closet, the better you can evaluate whether to file a lawsuit in the first place and what your potential costs (both financial and emotional) might be.
Did someone say “potential costs”? Talk about a smooth segue into addressing the 800 lb gorilla that is currently saddled up on the elephant in the room (yes – I too would pay to see that). Any discussion of what you should consider before rushing to file a lawsuit usually (though somewhat foolishly – more on that later) begins with the financial costs associated with doing so. This may come as a shock to you but litigation is not cheap. Most attorneys don’t make their millions writing witty litigation advice articles (present company sadly included), and we therefore don’t usually litigate your business disputes pro bono (Latin for “doesn’t pay my mortgage”). Litigation is expensive and it is not always easy to ‘guesstimate’ how much so – I can offer a general idea to my clients of how much a case may cost through certain milestones (like filing a complaint, engaging in discovery, filing a motion for summary judgment, etc.), but the truth of the matter is that it takes two to tango. While I can predict what actions make sense for my client to take, it is usually impossible to predict how your opponent will litigate the case. Expansive discovery requests and frivolous motions/appeals are often used by unscrupulous litigants to drive up the cost of litigation and delay the proceedings. And while each can and should be addressed during the course of the lawsuit, the fact remains that it takes time (and therefore your money) to get from point A to point B. All of this must of course be weighed against your potential recovery in the case – are the costs worth the potential reward (as there are no guarantees in litigation)?
Money is clearly an important consideration, but why is it ‘foolish’ to consider it first? Well, as the saying goes:
A fool and his money are easily parted.
What I mean by this is that litigation costs should not be calculated in a vacuum (I’m not really sure anything is best done in a vacuum… except maybe vacuuming). How much financial pain you are willing to endure in a lawsuit is directly related to your prospects of success, and therefore your first step should be an honest assessment on the strengths – and more importantly, the weaknesses and potential problem areas – of your claim. Unfortunately, many business owners get snared into paying substantial legal fees to pursue a flimsy claim because certain
charlatans attorneys are more interested in selling a bill of goods than providing an honest assessment of the merits of a dispute. Remember – just about every case requiring litigation in the courts is going to have weaknesses/holes and will involve some level of risk – if someone is only willing to tell you that the sky is blue, you’re probably paying too much for his services.
So what goes into assessing the strengths and weaknesses of a case before it is filed? Well, a lot of things. You know you’ve been wronged – Bad Company X lied to you about the quality of its widgets which led to you taking delivery of $100,000 worth of worthless merchandise (note: in the legal world, “widgets” are the source of all evil in this world). If growing up with G.I. Joe taught me one thing, it’s that good guys always fire red lasers. If it taught me a second thing, it’s that knowing is half the battle – proving your case is the other half. Let’s make the wild assumption that Bad Company X is not just going to roll over and admit to everything it has done – what evidence do you have (other than your word) that Bad Company X did what you are alleging it to have done? Who are the relevant witnesses and what are they going to say?
You’re obviously in a better position if you have e-mails/letters from Bad Company X which confirm the alleged statements and written proof of the defects than if all you have is your own memory (understanding that most lawsuits involve events occurring a year or more before the lawsuit is filed). That’s not to say you should not pursue your claim if the evidence is not overwhelming (after all, you don’t really know what evidence stockpile Bad Company X is sitting on until you obtain it in discovery), but a lack of initial evidence affect may affect what costs you are willing to voluntarily incur in pursuing your claim.
The decision to initiate litigation is never an easy one – the number of considerations (both personal and financial) that go into the decision are far too many to adequately discuss here. For example, whether you seek to mediate first, arbitrate vs. litigate, the venue that you file suit, whether to sue in federal (if possible) or state court, whether the lawsuit could negatively impact your public image/business relations, whether you will be able to collect on a judgment, and whether your prospective defendant may counter-sue you for its own gripes (whether legitimate or otherwise) are but a few of the many issues that every company should consider before making the decision to sue. Whether it makes sense to sue or not is ultimately your decision, but it is one that can (hopefully) be made easier with a full understanding of the risks and the assistance of experienced (and honest) counsel.