Litigation is an inevitable challenge for many companies, whether it involves breach of contract claims, partnership disputes, shareholder conflicts, fraud allegations, and so on. While litigation may sometimes be necessary, many people enter the process without fully understanding its complexities.
Litigation is rarely simple- it is expensive, time-consuming, unpredictable, and disruptive. These challenges often catch business owners off guard. The key to success in litigation is not just having the right legal arguments but also having a strategic and comprehensive plan before even filing a lawsuit (or answering one).
Below are some hard truths of business litigation, followed by key practical considerations for deciding whether to litigate, and finally, what business owners should look for when hiring legal counsel.1
I. Business Litigation Hard Truths
1. The High Cost of Litigation
One of the biggest shocks for people facing litigation is how expensive the process can be. Standard business disputes can cost hundreds of thousands of dollars in legal fees alone, with complex cases exceeding seven figures. These costs range from attorney fees, court costs and filing fees, expert witness fees, discovery expenses (e.g., document review, depositions, subpoenas), trial preparation and litigation support, and so on. Beyond legal expenses, litigation can also cause indirect financial strain by diverting company resources, disrupting operations, and damaging business relationships.
2. The Unpredictability of Outcomes
Many business owners assume that having the law on their side means they will win their case. However, litigation is inherently uncertain. Judges and juries interpret laws and contracts in subjective ways, meaning even strong cases can yield unexpected outcomes. Factors that contribute to unpredictability include judicial discretion and varying legal interpretations, as well as jury decision-making based on emotions and perceptions. Also relevant is changing case law and procedural complexities, and unforeseen evidentiary or procedural issues. Indeed, two similar cases can have vastly different results depending on the court, judge, or even the skill of opposing counsel.
3. The Lengthy and Disruptive Process
Business litigation is rarely resolved quickly. Even standard cases can take 12-24 months, and appeals can extend that timeline further. Throughout this process, key personnel may need to provide testimony, financial records may be scrutinized, and company operations may be impacted.
4. The Emotional and Reputational Toll
Litigation can be a stressful and public ordeal, particularly for businesses involved in disputes with partners, shareholders, or customers. Legal battles can damage reputations, erode trust with stakeholders, and lead to internal discord among leadership teams. Business owners must weigh these factors before engaging in litigation.
II. Practical Considerations for Deciding Whether to Litigate
Before initiating a lawsuit, businesses must consider whether litigation is the best course of action. A strong case requires not only legal merit but also strategic practicality. Three critical factors should be evaluated:
1. Clear Liability: Do You Have a Strong Legal Basis?
Litigation is most viable when there is a clear breach of contract, fraud, or other wrongdoing that can be easily demonstrated with evidence. Cases with ambiguous contracts or disputed facts can lead to prolonged battles where success is uncertain.
2. High Damages: Is the Case Worth the Investment?
Even if liability is clear, pursuing litigation only makes sense if the potential recovery justifies the cost. If the damages are small compared to legal fees, litigation may not be the most efficient solution. Considerations include without limitation the financial harm suffered, whether damages can be proven and quantified, and the likelihood of recovering substantial sums in court.
3. Collectability: Can the Defendant Pay?
Winning a judgment is meaningless if the opposing party cannot pay. Before litigating, businesses should assess whether the defendant has assets or insurance coverage to satisfy a judgment. For instance, business should consider the defendant’s financial solvency and any asset protection strategies that may shield funds. They must also consider whether collection efforts could require additional litigation. In some cases, pursuing negotiation or settlement may be a more practical and cost-effective option.
III. What to Look for in Business Litigation Counsel
Choosing the right attorney can mean the difference between a well-managed case and an unnecessarily prolonged and expensive battle. Business owners should look for legal counsel who offer experience, strategy, and modern technology-driven insights.
1. Deep Litigation Experience
An attorney’s track record matters. Business owners should seek lawyers with experience in handling complex litigation, understanding judicial trends, and effectively presenting cases in court.
2. Strategic Thinking and Alternative Dispute Resolution
A great business litigator doesn’t just fight in court- they also know when litigation is not the best option. An attorney should conduct thorough risk assessments, explore mediation and arbitration options, and anticipate opposing strategies and proactively adjust
3. Use of Technology and AI for a Competitive Advantage
Modern litigation involves data-driven insights. Attorneys who leverage technology can provide a distinct advantage, including:
- AI-powered legal research to anticipate case outcomes
- Predictive analytics to assess judge and jury tendencies
- Efficient eDiscovery tools to streamline document review
By incorporating cutting-edge technology, businesses can gain faster, more cost-effective solutions in litigation.
Conclusion: Litigation is a Business Decision, Not an Emotional One
Understanding the real costs, risks, and strategic factors of litigation can help make smarter legal decisions. While litigation is sometimes necessary, it should always be approached as a business decision, not an emotional reaction. With the right legal team, businesses can navigate disputes efficiently, protect their interests, and minimize unnecessary legal battles.
1 This article focuses on litigation where no insurance coverage applies, and the party is forced to finance the litigation directly. In prior articles, we discussed how important it is for businesses to ensure they have proper and sufficient insurance coverage for anticipated claims that may arise doe to the nature of their operations.