Last month we talked about how establishing goals for litigation “wins” requires taking emotion out of litigation, and clear communication between lawyer and client. We also talked about the need to re-evaluate litigation goals as the facts and issues develop. This month we’re going to discuss the hidden costs of litigation, and the benefits of early resolution.
Time is Money
Litigation isn’t just expensive – it’s time consuming. In most business disputes, clients are required to collect hard copy and electronic files, answer questions in writing, and appear for a deposition. Many courts require the parties to participate in a mediation before trial. There are also numerous phone calls or face-to-face meetings with your attorney to discuss the factual and legal issues in the case. All of that can eat up dozens, if not hundreds, of hours for a single individual. Now imagine that you have 10 employees and four of them were directly involved in the transaction that forms the basis of the lawsuit. Each will be required to work with your attorney to gather responsive files and documents, assist with answering those written questions under oath, and each might be deposed. Now, all of the sudden, 40 percent of your company is spending several hundred hours on this one lawsuit, taking them away from handling their normal job responsibilities. How are they going to meet their sales goals for the year? How are they going to ensure that the company is fulfilling orders on time? How do you, as the company’s president or CEO, maintain the direction of the company and not let that get swallowed up by the litigation? These are important questions, and they point out the hidden cost of litigation. Litigation is a distraction that can devastate your company’s financial future. And that’s not just because of any potential liability to the other side in the case. It also includes the prospect that your company becomes so embroiled in the litigation that it cannot perform its day-to-day tasks, causing you to slowly lose business.
Company Culture
As we said in an earlier post, litigation is emotionally draining. That applies to everyone involved, including your employees. Litigation can impact the relationship and culture that your company has built up. If evidence comes out indicating one of your employees screwed up in a deal, you and the other employees lose faith in that individual. Do you keep them around, or do you let them go? How will the other employees view your decision? These are all important questions that come up that you must be prepared to address.
Settling = Win?
Taking all of this into consideration, finding an early resolution that you are willing to accept may be a “win.” Mediations have taught me a number of things, but the most important is that a settlement almost always means both sides did not get everything they wanted. Statistically, the vast majority of cases settle before trial. If you know that going in, isn’t it worth exploring the possibility of early resolution? Absolutely, if it’s realistic that you could be paying the same amount to settle the case in a year, after you’ve spent tens- or hundreds-of-thousands of dollars on the case.
Tilting the Scales in Your Favor
Last month we discussed clear, comprehensive communication between the client and lawyer. That includes not just the facts and legal issues in the case, but the business issues associated with the litigation. It also means extensive conversations about the possibility of, and the client’s willingness to try to find, early resolution.
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