Article provided by Ciesla and Ciesla, PC. Please visit our Web site.
Small and medium-sized businesses work differently than larger businesses in many important respects. One significant difference is how businesses of different sizes handle litigation. Larger companies typically expect to be sued as a regular course of business, and have legal departments to manage litigation and refer claims to outside counsel. However, for companies of other sizes, the expense involved in prosecuting or defending a suit may not always be expected.
Therefore, small to mid-sized companies must take steps to manage risk and avoid the expense of litigation when possible. And when litigation is necessary, it is important to marshal resources wisely.
One common problem that often leads to litigation between businesses is a lack of specificity in purchase orders. Each party may believe that they are fulfilling the order per the terms of the agreement, but if the terms are not specifically spelled out, this can lead to disputes, allegations of breach, and litigation. In order to prevent litigation at the outset, an experienced business attorney can help to review and draft contracts.
For smaller claims, it may not be worth the expense to undertake extensive litigation. Attorneys’ fees can end up costing close to or more than the amount at stake. And while attorneys’ fees may be granted in rare instances, most judges do not grant the successful party attorneys’ fees. Therefore, even a successful party is not likely to come out “whole” after a dispute.
Mediation is usually the best way to resolve disputes involving smaller dollar amounts. In mediation, the parties work with a neutral mediator to resolve the dispute at hand. While each party is usually represented by counsel, and there is some expense to hiring a mediator, the legal fees involved in mediation are not as high as the expenses involved in discovery, summary judgment motions, and when necessary, a trial. Mediation can work in disputes of all sizes, but can be a particularly effective method to resolve smaller claims.
Another issue related to litigation is collectability. Particularly in very small claims, while a debtor may clearly owe the amounts of money claimed, it may not be possible to collect anything substantive from them. In cases like these, taking extraordinary steps to collect on a judgment may not be worth the time and effort. Another problem with litigation is the uncertainty. An experienced attorney will never guarantee a result before a trial. There are too many factors, and different judges will weigh the evidence in different ways. Even if one party appears to be clearly liable, a judge may not see it that way. And business litigation involving a jury may be even more uncertain. And while an adverse result can be appealed, appellate courts typically show deference to the trial court’s ruling. And of course, there will be legal fees for preparing and presenting an appeal.
There are obviously instances for every small or medium-sized company where litigation is the only way to resolve a problem. If the dispute involves significant amounts of money, or if the future of the company is at stake, litigation, and the expenses that go with it, will be necessary. However, many disputes can be avoided with some foresight and good planning. Hiring a lawyer to review and draft an agreement can save both time and money in the end.