Business Litigation Process and Strategy Practice Points

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This blog entry offers some practical observations and practice points about strategies in business litigations. Many of the issues discussed here have come up and continue to come up in business disputes. Although each case is different, there is one overarching theme – coordination between counsel and clients to optimize business objectives and formulate strategies based on the procedural rules that govern the case.

Pre-Litigation Case Assessment and Alternatives

The majority of business cases eventually settle, but the settlements come at different stages of the cases. In some disputes, the parties may be able to resolve their differences early (maybe even before litigation begins), but others may need to go through each of the stages of the litigation process before they are resolved.

It is not always necessary to file an action in court to obtain a desired objective. In certain cases, it may make sense to try to engage in pre-litigation settlement discussions before diving into long and expensive litigation. Informal dispute resolution may actually be required by contract. Certain business contracts contain language requiring the parties to engage in informal dispute resolution methods (such as good faith management discussions or non-binding mediation) before rushing into litigation. Whether these informal negotiations are effective, however, depends on whether each side makes a good faith attempt to make them succeed.

Litigation may be the only option in certain situations. For example, it may be the only way to force the other side to deal with the dispute and/or the only way to preserve a right to the claim (such as if there is a looming statute of limitations). Still, litigation does require careful analysis and preparation. Before filing any complaint in court, the plaintiff needs to analyze the pros and cons of the case, and also needs to establish specific business objectives and litigation strategy. The Plaintiff should try to anticipate what potential counterclaims could be filed as part of defendant’s response to the complaint, the anticipated costs of litigation, the likelihood of recovery from the defendant if the plaintiff successfully obtains a judgment, the impact on the business and other factors in the cost benefit analysis (remarkable how often these issues are given short shrift).

Considerations During Litigation Proceedings

Once the complaint is filed, there are specific court rules that govern the dispute. If the case cannot be dismissed in the very beginning as a matter of law, the defendant needs to weigh the costs of defending against options and costs for settlement. There are many factors impacting whether litigating makes sense and also what litigation strategies to employ, including (in no particular order) the litigation costs, time, publicity, impact on business, potential counterclaims, defenses, reputation, whether other parties are involved, witness availability, evidence, business objectives and others.

The litigation fees and costs definitely start rising as the parties engage in the discovery process, which requires negotiating schedules and orders, confidentiality, service of document requests, document production and e-discovery (which can be extremely burdensome and expensive), fact witness depositions, filing motions to compel, doing more document production, more motions and so on. And then, in most cases, after this fact discovery stage, the parties proceed with expert discovery, including expert reports, expert depositions, and potentially additional motions to compel and so on. Each of the stages during discovery can be viewed as a mini-fight. For example, a damaging deposition of a key witness or expert can be have a very serious effect on the other side’s case and may be a good time to put pressure towards a resolution.

The discovery process generally leads to the summary judgment motion phase, where either side can request that the judge evaluate the case based on the law and on undisputed facts. Unless the case can be resolved during this stage, the case is likely to proceed to trial. Many judges require the parties to mediate or hold court supervised settlement discussions once the summary judgment motions are filed. This is because there is a threat that the Court may rule in favor of one party and against the other party, and potentially end the case, which may put pressure on one side to settle.

The realities of the judicial system also impact the analysis in many cases. Many courts are currently overwhelmed with cases and simply do not have sufficient resources to devote days (or weeks) to trials of business cases. Many courts have hundreds of criminal cases pending and view business litigations as the types of cases that should be settled by the business people involved, so judges often pressure litigants towards settlement rather than a trial. Even if the parties do get through trial, there is potential appeal. Some companies think of appeal as another normal stage in the litigation process and look for strategies for prolonging cases.

Good litigation strategy generally requires coordination between counsel and clients to insure that the risks are being considered through the different stages of the litigation process and that the right business objectives are identified and pursued. This analysis sometimes requires businesses to face unpleasant truths about their cases during the pre-filing investigation and case preparation stages. Different stages of litigation are also bound to put pressure, whether through court imposed mediation or the motion filings from the adversary. But understanding the different process and developing a strong, coordinated strategy can make or break the prosecution or the defense.

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