The Top Three Myths About Business Lawsuits

By Harlan E. Jones

I spend all my time as a lawyer working on business lawsuits. I do not make real estate deals or help people to patent new inventions. In the 25 years I have been handling lawsuits, I have discovered that even experienced, sophisticated businesspeople often have important misconceptions about lawsuits. This article is about some of those misconceptions.

But if you really want the straight story about lawsuits, do not listen to me. Talk to businesspeople who have recently been involved in lawsuits. Ask them about their experiences. You will rarely, if ever, hear a happy story. Most wins do not feel as good as they should because they come at great cost in terms of money, business disruption, and personal exhaustion. Most losses are, from the point of view of the loser, injustices.

But lawsuits, although not desirable, are sometimes unavoidable. If the other side is trashing your contract, you may have no choice but to ask a judge or jury to make things right. If the other side sues for money you do not owe, you may have no choice but to defend.

If you recognize that a lot of popular thinking about lawsuits is based on myths, you will be able to make decisions within a lawsuit and come out of the lawsuit in the best possible way. If you rely on the popular myths, a lawsuit can turn into a disaster.

Myth 1: A Lawsuit Allows a Judge or Jury to Do Justice By Seeing How Right I Am and How Wrong the Other Side Is

This is not always a myth. I recently tried a case in which the judge ruled in favor of my client on every single issue and made it clear that she considered my client to be honest and the opposing party to be, shall we say, a bit of a storyteller. I am happy to tell you that the judge was absolutely brilliant and absolutely right. But the expectation that your lawsuit will turn out this way may not be realistic.

Statistically, only a very few lawsuits are resolved by a judge or a jury. Most cases, particularly cases involving business disputes, are resolved without a trial. The odds are overwhelming that your case will not be one of the two or three out of every hundred that are actually resolved by a judge or jury. Just based on the numbers, "vindication" through a verdict is an unrealistic expectation.

Even if your case goes to a judge or jury for decision, remember that the decision presents three possible results: you will win, you will lose, or the judge or jury will split the baby. Only one of those three results is a victory. The other two are complete or partial losses.

While judges and juries on the whole do an amazingly good job of finding the truth and common sense buried in piles of conflicting evidence, judges and juries sometimes get it wrong. Most good trial lawyers will tell you they have won cases they expected to lose, and lost cases they expected to win. A colleague of mine is fond of saying that the other side has a 20 percent chance of winning if it just shows up at trial.

The way you smile during your testimony may strike the jury as an arrogant smirk. (Even Presidents have this problem.) The accountant who lays out your damage claim may get confused about his own numbers in front of the jury. (Even articulate and well-prepared experts get flummoxed in the pressure cooker of a courtroom.) The jury may agree that the other side breached the contract and caused you the damages you claim but award you a smaller, "fairer" amount than the contract calls for. (Juries often lack experienced businesspeople, and the typical jury may not be as inclined as businesspeople to agree that "a deal is a deal.") A trial is a trial not only of facts and law but also of the personalities, predispositions, and individual experiences of everyone in the courtroom. There are a thousand other variables, many of which can be neither isolated nor controlled.

Myth 2: Trying to Settle Shows Weakness and Should Be Avoided

Deciding when and how to raise the possibility of settlement with the other side is an important strategic decision. The process needs to be started early enough that unnecessary future litigation costs (including fees for people like me) can be avoided but late enough that the parties have had a chance to realistically evaluate the strengths and weaknesses of their positions. Settlement efforts that are timed incorrectly will fail because the parties will not have enough information to determine what a reasonable settlement should look like.

But I often hear it said that "our" side should wait for the other side to initiate settlement talks because we do not want to appear weak. Occasionally, there may be something to that thinking. If after reviewing all the evidence we believe we have a very strong case, and if we are sure the other side knows it has a weak case, then perhaps saying nothing about settlement makes sense.

But such situations are rare. There is usually at least some reasonable chance that our side could lose and the other side could win. (Both sides would ordinarily see it that way.) In such situations, initiating a settlement process is a sign of common sense and good business judgment, not a sign of weakness. That we view our case as strong and their case as weak may play powerfully into the terms of a settlement, but it does not mean that there should not be a settlement.

Remember that if there is no settlement, the result is that the two sides, who know everything there is to know about the dispute, will ask a judge or jury, who know absolutely nothing about it, to make the decision for them. That is a calculated risk, and like any business risk, it should be taken only because no reasonable alternative has worked. If my client makes a realistic effort to settle a dispute through the efforts of a skilled mediator and is unable to do so, then we go to trial because that is the method our system prescribes when all else fails. But in my view, if we go to trial without that effort to settle, then we are taking a risk without having found out whether we need to. That is simply not good business.

Myth 3: A Lawsuit is an Efficient Way to Resolve a Dispute

Because the trial system has been around for hundreds of years and is now controlled by very precise court rules and statutes, it makes sense to think of it as a well-oiled machine that moves steadily and efficiently toward trial. Right?

Not usually. Moving a lawsuit to trial can on occasion be a smooth process if the parties are reasonable, the lawyers are skilled, and the judge makes the parties play by the rules. But if a party wants to make things difficult, or a lawyer is inattentive or untalented, or a judge allows disregard of the rules, litigation can become frustratingly slow and burdensome.

Oregon's court system is currently overburdened. One result is that judges are impatient with disputes among parties about pretrial matters. Picture this situation: the other side was obligated under the rules to give us certain important documents a month ago. We have repeatedly asked for the documents in the correct way, but we have been ignored. Finally, in desperation, we file a motion asking the judge to order the other side to give us the documents. Typically, the judge will start the hearing with a lecture about the need for parties to act like grownups and not involve overworked judges in silly arguments about documents. Then the judge will order the other side to produce the documents within, say, ten days. By now, you are receiving the documents late by two months or more, and you have had to pay for the cost of the court process to get them.

This is but one example of dozens that could be offered to show why no one should assume that a lawsuit will move smoothly and efficiently on a steady path toward trial.

In fact, even when a lawsuit proceeds "smoothly" toward trial, it is almost always a major business disruption. Any dispute complicated enough to generate a lawsuit is also likely to generate a need for the parties to locate and produce business documents to each other and to take depositions of key witnesses. (Today, locating documents can involve searches for deleted emails using sophisticated computer software.) Preparing for and participating in a deposition can consume many days' labor of numerous key employees — days that are not used to operate the business. Many business disputes require the services of expert witnesses, who require access to people and documents for their analyses and, of course, payment for their services.

While the American trial system is the fairest and most efficient in the world, it is still a system that leaves most people who get pulled into it surprised and frustrated with how herky-jerky and even unfair it can be. In the end, the system, at its best, is just people trying to do their best, and anyone who has ever served on a committee of three people knows that even a simple process inevitably gets complicated when you factor in the human variables.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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