At every stage of my career, I have worked with businesses, the government, and individuals engaged in litigation against vendors, competitors, investors, and even their own partners (and former partners). Clients that I have worked for have included:
- A fledgling telecommunications company in a dispute with the owner’s former company over non-compete and non-solicitation agreements with employees leaving the old company to join the new company.
- Top-of-the-line providers of legal, accounting, and valuation services attempting to collect their professional fees from a former client who claimed the entity they had serviced was defunct.
- Investors in a Delaware corporation required to “pay-to-play” when the company issued a new round of preferred stock, substantially diluting their investment.
- A tenant sued for damages by its commercial landlord whose floor buckled when the tenant stored its equipment on the site.
- A private equity firm accused of misappropriating trade secrets that it allegedly learned about the former client of a related business consulting firm.
- The owner of a struggling business trying to secure a fair separation from her partner and the general counsel he brought on board.
- A business owner trying to keep control of his company from his former attorney, who claimed that the terms of a business loan allowed him to purchase a controlling interest.
Generally speaking, businesses hate litigation. It is expensive, disruptive, and distracting. In short, it’s bad for business. Still, there are times when litigation is the correct strategy, the necessary alternative either to negotiation or capitulation. And sometimes litigation isn’t a choice at all—some fights come looking for you. The lack of control over the process, the challenges in predicting outcomes—or even when a lawsuit might arise—and the time devoted to assisting counsel and providing information are all frustrations that I have heard from business clients. Oh, and the costs. (Did I mention the costs?)
Sophisticated consumers of legal services approach litigation as another facet of their business. Generally speaking, there is no sense throwing good money after bad. There are some instances in which it is wise to stand on principle, where the expected recovery cannot be measured in dollars and cents, but in the realm of commercial litigation, those situations arise less often than attorneys might hope expect.
Accordingly, at every stage of a business dispute—both before and after suit has been filed—it is important to have an accurate valuation of your position. Does it make sense to keep fighting or should you try to settle? Answering that question requires some insight into the range of potential recovery (and the likelihood of doing so), the costs of proceeding, and how the settlement negotiations might proceed. At the same time, you need your counsel to work diligently to improve that settlement position—both by developing your case and preparing to proceed to trial. In a game of litigation trial chicken, nothing is worse than having to blink first in the negotiations because your counsel is not prepared to try the case.
How I Can Help
The solutions to some of these problems come in three flavors:
1. Information and Insight
An experienced attorney should be able to provide the client a clear lay of the land—both the anticipated costs of litigation and the expected recovery or loss, discounted to reflect the prospects of a range of outcomes. This assessment, known as the “risk-adjusted settlement value” of a case, is often used in settlement discussions (or should be), but is a valuable tool throughout litigation. Your counsel should help you to sharpen this analysis, taking into account a wide range of possible outcomes (and costs), while keeping an eye on how events within the litigation might shape those results. This process should be collaborative, and is an essential tool in developing litigation strategy.
2. Containing Costs
Since the financial crisis several years ago, there has been a shift in the way that sophisticated consumers of legal services have been selecting their litigation attorneys. Driven to lower-cost counsel out of necessity, many companies have discovered that a higher hourly rate does not necessarily reflect more dedication, a better skill set, or more valuable advice. At the same time, improvements in technology, particularly in document management and other litigation support services, have leveled the playing field substantially, making it easier for smaller shops to go toe-to-toe with large firms without fear of being outgunned. By selecting an experienced attorney with a lower hourly rate, businesses can improve their bargaining position and their bottom line at the same time.
3. Preparation is Power
Most civil litigation ends with settlement. Statistically speaking, almost all of it does. Often, those settlements occur very close to trial. There are a lot of very good reasons for this. Facts become clearer by the end of the discovery process. Important rulings from the court about the nature and scope of claims may shape the value of the case late in the process. Ultimately, however, the prospect of a looming trial creates a natural deadline, a decision point at which the disputants have one final chance to control the outcome themselves.
There are also some bad reasons for settlements often occurring close to trial, such as reluctant counsel changing their settlement advice because they are afraid to try the case.
Here’s a secret: many litigators fear trials. In some cases, this is a rational fear of the unknown—the opportunities for big-firm lawyers to try a case before a jury have become increasingly scant. Even those who aren’t afraid to try a case to a jury handicap their ability to do so by not preparing as thoroughly as they should. The costs of those hours of preparation add up quickly at big-firm rates, and most cases settle before trial. If your hourly rate is high, there is some pretty compelling economic logic against investing the time it takes to get ready for trial. Sometimes that calculus saves clients money. Other times, it merely forces the client to blink first.
I love trials. I do them recreationally. More importantly, the combination of trial experience and a reasonable rate allows me to be fully prepared for trial efficiently, with fewer wasted hours and costs. In my experience, negotiations when you are ready for trial—when your alternative to holding out for what you need does not fill you with dread—are more successful.