Lawsuits and Your Small Business

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If you're in business, chances are you'll eventually either sue someone or be sued. The higher the stakes in a dispute, the more likely it will end up in court. If you are thinking of bringing a lawsuit over business matters against anyone, you should have your attorneys prepare an assessment of your case. You should also consider the disadvantages and advantages of filing business litigation or lawsuits.

Assessment of the Case

Once you have decided that you want your business to pursue legal action against someone else, you should contact an attorney. Some businesses have attorneys on staff (in-house counsel) and some do not. In either case, you will need at least one litigator (a lawyer who tries cases) to perform an early assessment of the facts and legal issues of the case.

Your attorneys will conduct preliminary interviews, look at documents and make a review of the legal issues. Then they should discuss with you:

• The nature of the case
• The basic strategy they prefer
• The short-term objectives
• The methods for strategic choice and law firm staffing
• An estimate of initial and perhaps overall costs

These are the bare-bones essentials that you should accept in an early assessment of a potential case.

In addition to obtaining an early assessment of the case, you should consider the advantages and disadvantages of business litigation.

Disadvantages of Business Litigation

The disadvantages of business litigation include:

• Costs. Unless you are lucky enough to find a lawyer to take your case on a contingency fee basis, business litigation will be extremely expensive. It can cost you thousands of dollars, at a minimum.
• Time. If you decide to pursue a lawsuit, it is going to suck up huge chunks of time that could rob you and your company of weeks or even months of productivity. You will have to help your lawyer prepare the case, have your deposition taken, go to court and sit through the whole trial.
• Loss of privacy. By filing a lawsuit, you may expose proprietary information and other business records not only to the other side but also to the public at large. Defense lawyers have an arsenal of tools that they can use to get you to answer questions and turn over documents. They can also subpoena (a court order) other people and use similar tactics on them. They will be looking for dirty laundry and smoking guns. So the affairs of your company had better be in order before you decide to sue anybody.
• Unwanted publicity. Most legal proceedings are public records, so everything that comes up in a legal proceeding is not only going to be available to the other side but also the public at large. Your business could become an open book to the media and even to your competitors. Publicity on a lawsuit can also adversely affect business relationships and draw unwanted attention to your business from taxing authorities and regulatory agencies.
• Countersuits. There are two sides to every story, and there's always a good probability that you will get countersued, which is when the opposing party decides to file a claim against you, to be decided as a part of the case, so be prepared for it.
• Obsessing over a case. It's not at all uncommon for people to become obsessed with pursuing a lawsuit to the point that it adversely affects their business and even family relationships. You should never pursue a lawsuit out of principle. Your decision must be based on sound business judgment and not on emotions, no matter how you feel, you don't want to waste resources on efforts that could be counterproductive.
• Delays. Trial dates are usually delayed for months and years at a time. You may find on the eve of trial that no courtrooms are available and that the matter has been continued to a date months into the future. This can result in huge legal fees that many people do not anticipate.
• Dissatisfaction with the outcome. People are seldom satisfied with the final result in any business lawsuit.

Advantages of Business Litigation

The advantages of business litigation include:

• Monetary gain. Most business lawsuits are brought over monetary disputes, such as for services provided or goods sold. A case based on lost profits is speculative unless you can prove consistent earnings over a period of time. It may be possible to recover other types of monetary awards such as compensatory and punitive damages.
• Injunctive relief. You may benefit tremendously from getting an injunction or restraining order against someone who is irreparably harming your business, such as a former employee or competitor who is misusing trade secrets or other proprietary information.
• Strategic considerations. You should always consider the present and future strategic consequences of bringing a lawsuit in the decision-making process. If you are in a position of strength, it may make more sense to bring suit.

Pursuing a lawsuit is not an endeavor for the faint-hearted. You should candidly assess where you may end up if you choose to go this route to resolve a business dispute.

If you are thinking about filing a business lawsuit, contact a small business lawyer in your area.

Questions for Your Attorney

• My business made a partial payment for a manufacturer's goods, which were never delivered. Should I sue the manufacturer?
• A former employee has started a business that competes with my business. Can I sue him for misuse of trade secrets?
• The cost of business litigation has already exceeded the projected cost. Should I get a new attorney?

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