legal sanity

To Sue or Not to Sue?
By: Arnie Herz

Keeping your business disputes out of the courtroom might be your best strategy for a winning resolution.

(As appeared in the March/April 2005 issue of the New York Enterprise Report)

Although litigation has a bad rap in today’s business world, it’s not inherently evil. Like many other things, litigation can be a tool for doing good, but is often tainted by abuse and excess.

People typically race to their lawyers at the first whiff of a business dispute, convinced that any wrong they supposedly suffered can be righted only by a day in court. When that day turns into years and the years translate into huge legal bills, much time away from the office and heightened uncertainty, the same people become incensed with the very monster they helped create. As an entrepreneur with limited time and financial resources, you must beware of the litigation trap. The real challenge for businesspeople is to identify those situations where the win-lose dynamic of a lawsuit is the best and only way to restore business health. Most “must-litigate” disputes can be discerned by candidly addressing the following questions:

Do you know exactly what you want and are you sure that this goal serves your real business interests?

Tom came to me to sue the company that bought his business the year before. The relationship had soured into mutual threats of litigation. Tom had a penchant for standing up to wrongdoers and wanted to fight and win. But when I asked him, he admitted that his vision for the future did not include protracted and expensive litigation. What he really wanted was freedom from his non-compete provision so he could go back into business for himself. I told Tom that this revised goal better served his long-term business and personal interests. His adversary was on the verge of bankruptcy, so the chance of Tom’s actually collecting any money damages was tenuous at best. With this shift in perspective, Tom saw just what he stood to lose by blindly proceeding toward his initial, short-sighted goal of a litigation battle.

Do you understand your chance of success in court?

Most people overestimate their chance of success in court because they look at the dispute solely from their perspective. When I first asked Tom to forecast how his case would end, he stated that the court would find that his adversary mismanaged the company and would order that it be returned to Tom. Tom got a reality check when I informed him that, although he had a good case on most of his proposed claims, the governing contract terms and case law undermined his position. Understanding that his case was far from airtight, Tom reconsidered his charge into litigation.

Are you aware of the investment of money, emotions and time that litigation requires, from filing to disposition to collection?

Even the simplest litigation will likely take a year or so from start to finish, with larger business disputes spanning many years. The real world is very different from The People’s Court, where litigants file a complaint and, presto, find themselves in a courtroom poised to face the judge right after a commercial break. In real time, the continuum of stipulations, conferences, motions, discovery, trial, appeal, judgment and collection is long and arduous. It’s also more expensive and emotionally draining than any potential litigant ever imagines. Tom was envisioning a quick fix to his legal dilemma. After hearing my candid appraisal of the major investments of time, money and emotion he likely faced, he opened up to exploring alternative paths to achieving his real goal in the matter.

SIDE BAR

Is your lawyer pushing you to litigate?

Sometimes litigation is unavoidable. But it is only a last resort. Here is my checklist of what you must
receive from your lawyer by the end of your first or second consultation if she is pushing to litigate:

* Identified goals that are crystal clear, worthwhile and attainable.

* A precise estimate of the cost, time commitment, and your chances of success.

* A confidence that your lawyer has superb interpersonal, communication and negotiation skills with a proven track record of quickly resolving even difficult cases.

* A lawyer who believes in and engages in mediation. Referrals to ten satisfied clients and check out 5 of them.

* A list of credentials, awards and peer review ratings check out Martindale-Hubbell (www.martindale.com) to
see if your lawyer has been peer reviewed.

* A lawyer who treats you with respect, is committed to keeping you informed and knows the importance of keeping you involved.

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Arnie Herz is a highly regarded mediator, business lawyer and public speaker with offices on Wall Street and in Port Washington, N.Y. He is the author of the popular blog Legal Sanity (http://legalsanity.com) and can be reached at arnie@arnieherz.com.