When a legal dispute arises, often a business owner’s first inclination is to declare war, i.e., file a lawsuit and engage in protracted litigation. However, that impulse should be resisted, says Adam Rome, attorney in the Litigation Practice Group and the Restructuring & Insolvency Services Group at Levenfeld Pearlstein, LLC.
“Litigation should always be a last resort,” Rome says. “Too many times a complaint is filed without determining a clear goal. A number of factors must be analyzed before making a decision about the proper course of action.”
Smart Business spoke with Rome about how to approach a dispute to achieve your desired outcome while keeping your expectations in check.
What are the first things to consider when a dispute arises?
Clearly, a major concern to a business in determining whether to engage in litigation is cost. However, cost cannot be the only factor analyzed. A business, with the help from its trusted business adviser or lawyer, must analyze the probability of its success. Success is defined by the client, which is why it is so vital to set a clear goal before filing a complaint.
After determining its goal, a company must consider all of its options. Not all options are based on the filing of a lawsuit. Savvy lawyers and businesspeople can, and should, get creative. Options are based on leverage. A business can use its leverage to obtain a successful result, without participating in an expensive lawsuit. If a company has little or no leverage, filing a complaint is a quick way to create it.
A business must also understand that a lawsuit is time-consuming. A company is going to have to use its resources responding to discovery requests, sitting for depositions and engaging in litigation strategy, which is time taken away from running the business.
A business should also weigh the impact of its lawsuit in the business community. Filing a suit will have a negative impact on the entity or individual being sued. Therefore, if this customer produces a large revenue stream for your business, it may not make economic sense to sue the customer over an issue that may have a less disruptive solution. A company should also determine whether a lawsuit could negatively impact its relationships with other clients or potential customers.