Litigation – Look Before You Leap
I have a friend, who is also a lawyer, who was about to go into a four week trial that settled at the last moment. It shouldn’t have been a four week trial. It probably shouldn’t have even been a four day trial. What happened was a professional firm got stiffed on its fees. So it sued for the fees and the defendant did what all financially pressed companies do – it acted like a caged animal and it struck back with a multi-million dollar counterclaim for negligence. This forced the professional firm’s insurers to get involved and a two day trial gets dragged on into a four week trial. Ultimately, a small amount was paid to the defendant to avoid the cost of a four week trial but my friend’s client ends up with (a) no payment on the fees that they were stiffed on in the first place; and (b) the joy of having paid legal fees for the past few years.
To give another example, I have a client who was owed money for equipment that was sold but never paid for by the defendant. The defendant says “we can’t afford to pay in full, so we’ll agree to a settlement for $X per month and as security for payment, this individual will give a guarantee.” Big surprise, the company doesn’t pay. So a demand is sent to the individual on his guarantee. He doesn’t pay. So the client goes back to the lawsuit and seeks its money. The individual, again like a wounded animal, lashes out and starts claiming that the settlement was induced by fraud. Total b.s. but if nothing else it will delay things as my client defends against these allegations.
Another example, a client tried to obtain payment from a customer (who was also somewhat related to the client) and the customer turns around and tries to petition the client into bankruptcy. The client then proceeds to fight the bankruptcy application and ultimately wins and now has to go against the customer for not only payment but for improperly using the court process.
And the examples can go on and on. So, let’s have fun mixing metaphors to show they can apply to litigation:
- The best defence is a good offence: you should be prepared that the other side will try to bring up a counterclaim to distract the court’s attention from the real issue (for which they have no defence);
- Don’t bring a knife to a gun fight: if you think the other side is going to try and bring a counterclaim, see what you can do to stop it before you even sue. If you think they’re going to complain about the quality of your goods / services, then it would be best to get even an e-mail from them confirming that they have no complaints about that but what they really want is extra time. That way you have something from them that rebuts whatever excuse they later advance in their defence;
- If you can’t take the heat, stay out of the kitchen: in some respects, this is similar to “don’t take a knife to a gun fight” in that before you start litigation you should be prepared for the other side to hit back hard and to not necessarily act rationally. To use one of the examples above, you should be prepared for a fight that is really over tens of thousands of dollars to face a counterclaim for millions. If you can’t take the pressure of such a claim then you should probably try to avoid starting the lawsuit in the first place. And realize that “heat” can come in many forms: costs in terms of money paid for legal bills, costs in terms of time (for example, while you’re busy dealing with the lawsuit, you’re not out there making money, selling products, selling services, etc.), and costs in terms of stress (either to yourself or to those around you either at work or at home).
The last statistic I heard was that over 95% of all lawsuits settle. Why? For many reasons. But at least some of them are due to one side or the other making the decision that it is just not worth it to fight any further. Fair enough. But it’s better to ponder these issues before you sue rather than having to consider them after you have already started the litigation and your options may be more limited.
Something to think about.
CALC