I love the challenge of litigation, including learning new subjects, developing strategy, and, hopefully, winning. At the same time, litigation is an expensive, time-consuming, and often risky proposition. Thus, most of the posts on this blog focus on minimizing risk and avoiding litigation. (For purposes of this post, the discussion also applies to arbitration, although there are differences).
Even if a company takes all precautions, the simple fact is that it may become involved in a dispute that may lead to litigation. Such a dispute may cause your company to consider filing a lawsuit, or you may find your company on the receiving end of a lawsuit. If you find yourself in a dispute that may lead to litigation, make sure you are being advised by a litigator (an attorney who regularly handles litigation), and listen to the litigator.
These points may seem obvious, but are not always followed in practice. Many companies use a corporate (transactional) attorney as their primary legal adviser. For most purposes, a corporate attorney can be an excellent trusted adviser, but not for litigation.
In my book, An Insider's Guide on Hiring a Business Attorney, pp. 42-43, I offered the following reservations about corporate attorneys when it comes to advising clients about disputes:
"First, purely corporate attorneys tend to put complete faith into contracts and documents."
"Second, for reasons I honestly cannot fathom, purely corporate lawyers almost always overstate what can be achieved in litigation."
Let's expand on these two reservations. On the first reservation, first, let's be clear: Properly drafted contracts and legal documents are very important. Having proper contracts and documents substantially decreases the risk of getting into litigation. Further, if your company becomes involved in litigation, properly prepared documents will strengthen your case greatly.
But no contract can prevent the possibility of litigation. Opposing litigation attorneys are experts in crafting arguments supporting a contrary view. In the past, this was called finding a "loophole." Most corporate attorneys are not trained or experienced in responding to these types of arguments, and complete blind faith in documents is rarely warranted.
On the second reservation, yes, it is true. Corporate attorneys almost always overstate what can be accomplished in litigation. When my book came out, I received an email from an experienced in-house litigation attorney stating that truer words were never written. Again, I am not sure why this is the case, but it is.
There have been many times I have had to talk a client off the ledge, so to speak, regarding a possible litigation matter that the client had already discussed with a corporate attorney. The conversations tend to go something like this.
Client: "Joe [fictional corporate attorney] tells me we are certain to win and we will make them pay your fees in defending the case."
The reality is that there is always some uncertainty and that in the U.S. attorney's fees are rarely awarded in most jurisdictions.
Client: "Jim [fictional opposing party] says we promised him this order. That's just a lie and I'm not going to pay a liar one red cent. Joe [corporate attorney] says we are not going to let Jim get away with it."
When the conversation turns to how to prove that Jim is a liar, there may be no documents contradicting Jim (or, worse yet, documents that seem to support Jim's version). It may also turn out that the employee who dealt with Jim has left the company or has been terminated. In other words, Jim may indeed be a liar, but proving it will be a challenge.
Client: "We've done business with Joe and your firm for many years. I would rather pay you to beat them than to pay them a dime."
It is always a good thing to have a client who is satisfied with the firm and committed to the case, but clients almost always underestimate the expense of litigation, and, perhaps more importantly, the disruption litigation will cause to their business. Instead of devoting time to productive activities, clients must spend time assisting in gathering documents and responding to discovery, sitting in depositions, and devoting their mental resources to litigation rather than business.
Advising a client who is enthusiastic about litigation (often as a result of comments made by a corporate attorney) is a tricky business. It is important that the client understand the cold realities of litigation. It is also important that the client understand that, if litigation proceeds, you will do your absolute best (within ethical boundaries, of course) to fight for the client to win.
Important warning about some litigation attorneys: If a litigation attorney is enthusiastic about talking you into litigation and does not mention the uncertainties, costs, and limitations of litigation, be very careful. Such attorneys are probably more interested in their business development efforts than the best interests of your company.
Look for a balanced evaluation. Look for someone who lays out the risks, benefits and costs of proceeding with litigation, along with the practical effects of litigation. Look for someone who is more interested the law firm's long term relationship with your business than in making a quick fee by rushing to court. If an evaluation does not seem balanced, seek a second opinion.
The other point made at the outset of this post is to listen. After an experienced litigator understands the facts, he or she can usually give a fairly accurate prediction of the likely outcome, or at least the range of likely outcomes. Using this knowledge can lead to an early reasonable settlement, which can save tens or even hundreds of thousands of dollars in legal fees.
Although a litigator must always be prepared to take a case to trial if necessary, the reality is that 96 to 98 percent of civil cases settle. Because is it likely a case will settle at some point, realistic early case evaluation can lead to a prompt and fair settlement and save thousands of dollars in legal fees, and avoid the disruption of litigation.
Clients who do not listen often spend more than is necessary, and sometimes a lot more. Although there have been others over the years, one case stands out in my mind where we told the client early on exactly how the case would come out, gave the client a reasonable range for settlement, and advised the client to settle. The client wanted to fight. Along the way, there were multiple times when the chances of reaching a more favorable settlement were good. The client refused to budge. Finally, after some rulings on motions that came out exactly as predicted, the client finally settled. We could have gotten the same (or better) settlement early on and saved the client thousands of dollars.
Sometimes, even despite taking all efforts to minimize risk, litigation cannot be avoided. In such circumstances, seek advice early on from an experienced litigation attorney. Understand the process. Seek a second opinion if necessary. It will likely save your company considerable expense, disruption and aggravation. And, if circumstances make a fight unavoidable, you will have someone ready to take action.