What You Wish You Knew Before Filing a Business Lawsuit
July 12, 2021 | Sherrard Roe Voigt & Harbison Blog I Eric G. Osborne
When business disagreements turn into lawsuits and commercial litigation, various idioms may come to mind:
- “Cutting off one’s nose to spite one’s face.”
- “Burning down your house to smoke out a rat.”
- “Throwing the baby out with the bathwater.”
- “Destroying the village in order to save it.”
No matter how intense and contentious, business litigation doesn’t always end with either party’s desired outcome. The perverse logic underlying the expressions above is often more than apt when contemplating whether to bring or defend a business dispute.
The costs in time, money, uncertainty, frustration, and ruined relationships can make even victorious business litigants question whether the “destruction” wrought by a lawsuit was worth whatever was being “saved” in the first place.
Undoubtedly, litigation is sometimes the best or only recourse in a commercial dispute, whether with a customer, competitor, or business partner. Perhaps other attempts to resolve the conflict did not bear fruit, or a party needs immediate court intervention to protect or vindicate a company’s rights. In these cases, business owners need tenacious, skilled trial lawyers to advance their interests in the courtroom.
However, before you ask your attorney to head to the courthouse and file a lawsuit on your company’s behalf, here are important lessons to consider.
Even the “Simplest” Business Lawsuits Can Metastasize Into a Years-Long Ordeal
In litigation, the litigants, lawyers, and the judge can turn the simple into the complicated – intentionally or not. In a business lawsuit, it happens often. Sometimes, it is by design, such as when one party executes a scorched-earth strategy to leverage every means available to make the lawsuit tremendously costly and painful to the other side.
Unfortunately, in Tennessee and courtrooms across the country, the rules and realities of business litigation mean a case that seems simple and straightforward can devolve into a years-long ordeal. Even if your lawyer does everything possible to keep the proceedings moving along, there are plenty of ways the other side can slow-roll a case.
The parties may engage in lengthy motion practice, with briefs and responses and hearings on various issues. Discovery (the process of gathering evidence and taking witness depositions) can take a long time and cost a lot of money. Depositions may be held in distant locations and involve travel expenses, and experts may need to be retained and paid for their reports and testimony. Thousands of pages of documents or electronic records may need to be gathered and reviewed.
Discovery may not only consume a great deal of time and resources, but it can also place a burden of time and disruption on your shoulders.
Business owners and key employees may need time to prepare for and attend their depositions, while other employees may spend hours upon hours combing through files and servers in response to subpoenas or document requests. All of this can disturb a business’s operations.
There Is No Such Thing as a “Slam Dunk” Business Lawsuit
If parties to a business lawsuit do not reach a negotiated resolution of their dispute, the case will go to trial. No matter how brilliant an advocate your lawyer is, at the trial’s conclusion, your fate lies with a judge or 12 individuals who may not see things the same way as you and your attorney.
Despite your faith in the strength of your case, your company could be on the receiving end of a substantial judgment if the other party has a successful counterclaim. Alternatively, all of the time and money you’ve invested in your case may be for naught if the jury or judge rules against you and denies you the damages you seek. Depending on the language of any contract or agreement involved in the suit, the losing side may also suffer the indignity and expense of paying the prevailing party’s attorney’s fees.
A Judgment Is Just a Piece of Paper
Of course, you may ultimately prevail in your business lawsuit. Your company may obtain a considerable judgment for a large sum of money after trial. But no matter how many zeros are in that judgment, there are two essential things to remember.
First, whatever the judgment, subtract from that sum the amount your company paid your attorneys. That can reduce a large judgment into a much smaller one. Second, even if you succeed in adding your costs and fees to the judgment, you may spend even more money on efforts to collect what you are owed.
Many things can stand between the order that directs the other side to pay you and actually seeing that money in your company’s bank account. The losing party may be insolvent, file for bankruptcy, or take you and your attorney down a rabbit hole of asset protection strategies specifically designed to stifle your efforts to collect on your judgment. The other party may also fight on, filing motions for reconsideration or a new trial or appealing the trial’s outcome to one, if not two, higher courts. The result of the appeals could be a reversal or even an order for a new trial, in which case the entire process starts all over again.
Again, all of this is not to say that business lawsuits are always destructive or counterproductive, far from it. Sometimes, it is the best or only way to obtain the relief to which your company is entitled. But if you’re a business owner ready to cry “sue” and unleash the dogs of litigation, you should first understand what you could face.
Do You Want Your Lawyer to Be a Bulldog or a Peacemaker?
Perhaps the most critical decision you can make when faced with a business disagreement is your choice of lawyer or litigation posture.
If your dispute is an existential, bet-the-farm dispute, an aggressive strategy with a battle-tested and combat-ready attorney might be the best route. But if a speedy and inexpensive resolution is your goal, or if you want to maintain the business relationship with the other side after the dust settles, you may prefer an attorney who protects your interests through mediation, arbitration, negotiation, or other dispute resolution proceedings.
No matter the nature and scope of your business dispute, entering into formal litigation is rarely, if ever, a win-win proposition. Many would argue that, like a divorce, neither side truly prevails. That’s why you need an experienced lawyer and legal team – they will establish reasonable expectations, advise you on a range of strategies and potential outcomes, and counsel you on the tangible and intangible costs associated with a lawsuit.
