Like it or not, lawsuits are a reality of doing business in America. With many millions of cases filed each year throughout the state and federal civil justice system, statistically, it is just a matter of time before one of these commercial litigation lawsuits hits your company. This is true no matter the type of industry you do business in. Healthcare, real estate, oil and energy, retail, technology, transportation, products, services – you name it, and commercial litigation is possible anywhere and everywhere. In light of this recognition that litigation may be unavoidable for many businesses, business owners need to think about how to best prevent litigation from occurring and whom to call if you find yourself in the middle of a business dispute.
Why Do Businesses Get Sued?
Business disputes of all sorts can give rise to litigation. Typically, the dispute is known to the company before a lawsuit is ever filed, but it may first present itself in the form of an informal complaint, negative review, or demand for payment. Based on experience, these are some of the most common controversies that eventually develop into formal lawsuits:
- Breach of contract
- Employment-related cases involving discrimination, harassment, wages, leave, and other employee rights.
- Negligent misrepresentation
- Fraud and fraud in the inducement
- Breach of fiduciary duty
- Shareholder and partnership disputes typically over distribution or company contributions
- Deceptive trade practice
- Consumer complaint
- Whistleblower complaints about alleged violations of governing regulations
Mistakes to Avoid When Your Company Is Subject to Litigation
Representing yourself. As the saying goes, “the man who represents himself has a fool for a client.” The point of the adage is that you would be foolish to try to venture into something as serious as formal litigation without hiring an experienced, knowledgeable representative to fight on your behalf. Additionally, parties tend to be too close to the issue to be able to assess the matter objectively. Hiring outside counsel allows you to equip yourself with a representative who is well versed in legal principles and procedures but is far enough removed from the situation to make strategic decisions not based on emotion.
- Believe that a case without merit will go away on its own
Just because you think a case is no merit does not mean that the case will automatically go away. First, as mentioned above, sometimes those closest to the issue are so personally invested, they become incapable of seeing the dispute from the other side. This emotional bias can lead a party to underestimate the merits of the other party’s case. Further, even if your assessment of the merits of the matter is spot on, the American judicial system gives lots of latitude to litigious persons. In other words, the lawsuit could gather just enough momentum to cause significant damage to your business if not taken seriously and handled strategically at the outset.
- Involving the media
We are in the Age of Information and live in a culture where social media reigns. But publicizing your business dispute is rarely – if ever – a good idea. One important consideration is that any statement you make will be captured and archived. Committing to a position publicly could later harm your defense by limiting what you can assert during the litigation or by forcing you to admit that your prior statement was incorrect (at best) or false (even worse).
- Pursuing victory of short-term battles
Focusing on winning short-term battles is a mistake many people make in the context of business disputes. Commercial litigation more often resembles a marathon than a sprint. Having a strong overall defense strategy to win the case is far more important to the ultimate success of your business.
- Withholding information from your attorney.
Failure to provide full disclosure to your attorney can have devastating effects on your case in any legal matter, including in commercial litigation. By withholding information or being dishonest with your attorney, you only put your lawyer at a disadvantage, and by extension, you undermine your own position.
- Selecting the wrong attorney.
Choosing the best attorney to represent your interests is a difficult but critical decision to make at the outset of your case. Hiring a lawyer with specialized expertise in the type of case you face can make an important difference in your likelihood of success. You should consider an attorney’s area of specialty, prior experience (both inside and outside the courtroom), and general reputation before putting the fate of your business in his or her hands.
Defense Strategies that Have Proven to Be Successful
- Work as a team.
A client’s active participation in the defense makes a world of difference in any case. No one knows your business better than you do. So regardless of how much experience your attorney has, he or she will not be an expert on the internal workings of your specific business. For the best results, it is important to work together as a team. Coupling your internal expertise and access to information with the prowess of your legal advisor makes for a winning combination.
- Motion practice.
Some cases can be decided on the basis of a legal technicality such as a statute of limitations, jurisdiction, or another procedural issue that could preclude the claim from moving forward. In such an event, the underlying details or merits of the situation might not be relevant to disposing of the matter in its entirety. Experienced litigation counsel will consider and prepare appropriate defense motions early.
- Explore alternative dispute resolution.
Many civil courts require that the parties engage in alternative dispute resolution before a case gets too far underway. Thus, aside from meeting the court’s requirement, spending time to negotiate a settlement or participate in mediation can often provide an inside look into the opposing party’s theory of the case. Even if these efforts do not end up resolving the case immediately, knowing what your opponent believes about the case and how they value their position can prove useful throughout the duration of the litigation.
- Conduct a thorough internal analysis.
Conducting an internal investigation to verify or falsify allegations serves as a critical defense strategy in most cases. Importantly, this type of fact-finding mission should be done under the direction of your legal counsel in anticipation of, or for the purpose of, defending the litigation.
- Know your audience.
Depending on the case, the ultimate decisionmaker may be a judge or a jury. Throughout the case, you and your attorney should make strategic decisions with your audience in mind. How to prepare your defense can vary depending on who will be considering the facts and evidence. A presentation to a judge with years of experience handling issues similar to yours would not be as well received by a jury of laypersons who are unfamiliar with legal precedent or terms of art specific to your industry.
- Businesses get sued all the time, mostly by former employees, divorcing partners, dissatisfied shareholders, or unhappy customers.
- The key to protecting your business and your assets is to organize an intelligent, proven, and long-term defense strategy.
- This defense strategy must be true teamwork with a lawyer you trust, who has the right type of experience, and who pursues your business objectives.
The commercial litigation defense team has provided this article at Oberheiden, P.C.