Opportunity Costs of Litigation

Litigation is a tool in the toolbox for protecting and enforcing your rights, but before you reach for it consider all of the costs of doing so.  Aside from the financial impact, litigation has far reaching effects that are not always explained by attorneys at the beginning of a case.

Developing a business relationship or friendship can require persistence, trust building, and years of work.  Think of all the time and effort you invested to land that client or win the bid for that contract.  Business relationships require continual nurturing, and the occasional compromise to ensure they continue to flourish.  For that reason, at the first sign of a dispute, a party should carefully consider the consequences of threatening to file a lawsuit.  Once the litigation card is played, that business relationship you invested so much time developing will in all likelihood be severed — forever.  Therefore, you should select counsel who understands your priorities in resolving a dispute and explores all options with you before resorting to litigation.

If you have explored all other possibilities and ruled them out, then litigation may be the only means to protect your rights.  Be sure to gain a full understanding of how litigation will affect your business’s operations.  In today’s age of ever-evolving technology and communication, the demands of discovery are increasing.  Discovery is the process through which one party asks the other to produce documents and other information relating to topics germane to the litigation.  If your company communicates via email, text messages, instant messaging, social media, or other electronic means, be prepared to spend significant time talking with your counsel about how your company communicates, how it stores those communications, and how to produce the communications to the opposing party.  This is especially a concern if your company has developed its own proprietary communications system.  If your company has a technology manager or department, then they will devote several hours, if not days, collecting communications to produce to the opposing party.  If your company does not have a technology department, then that task likely will fall on the employee who knows the most about your company’s technology and communications systems – most often you, the business owner.

In addition, you and the employees involved in the events that prompted the litigation will spend significant time with your legal team being interviewed and discussing the facts of the case.  Similarly, your vendors or others in your industry who have knowledge about the dispute may be interviewed by your counsel and the other party’s lawyer.  When depositions are taken, you will spend several days with your counsel reviewing documents, preparing, and ultimately being questioned by the other party’s attorney.

Throughout the case, your counsel should update you on recent developments and upcoming deadlines and events.  These updates are opportunities for you to gain an understanding on where the litigation budget stands, and how much of your and your team’s time will be needed.  Never be afraid to ask for this information from your counsel; while he  may not be able to estimate precisely what future costs will be, he should provide you with enough information for you to make an informed decision on whether pursuing the litigation is worthwhile or if alternative dispute resolution is warranted.

The vast majority of cases settle or resolve through motion practice.  Less than 5% of civil cases go to trial.  The percentage is even lower for business disputes.  Despite the judiciary’s efforts to expedite litigation, most cases will not reach trial until 18 months after a lawsuit is filed (and many are even later).  Once a case reaches trial, you may count on spending several days, if not weeks, before trial preparing with your counsel.  During the trial itself, you or another member of your company, will be present for the length of the trial.

It is important to engage experienced counsel early in a dispute so they may guide you through the myriad of ways to diffuse the controversy before you resort to litigation.  The adage of an ounce of prevention is worth more than a pound of cure still rings true.

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