26 Apr 2016

To sue or not to sue, that is the question.

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As a business owner, before you sue someone, you need to figure out what you are trying to accomplish. For instance, is this a one-time situation that is unlikely to be repeated? Will your lawsuit discourage others from doing the same thing? Or is this a larger moral issue where your lawsuit will affect others and prevent further damage?

Knowing your goal is important because litigation is time-consuming, expensive and the outcome can be uncertain. The various steps include:
• Creating initial court papers
• Getting the answers from the defendant
• The discovery phase – investigation of each party’s evidence
• The deposition phase – pre-trial testimony
• Special pre-trial requests to make decisions about motions
• Numerous meetings and conference before the trial
• And finally, the trial

The process can take over a year, so is it really worth your time to proceed?

Let’s take a case in point. Someone has breached a contract with you that causes you a financial loss or damage of around $5,000. It was a one-time situation and won’t be repeated. The cost of litigation will be around $15,000. Is it really worth pursuing?

In another instance, someone has breached a contract and is causing on-going harm to your business, and possibly to other businesses. In this instance, you may have no choice but to sue, even if the cost is prohibitive.
There are really 10 steps you should follow when considering pursuing legal action:
• Good Case — do you have a genuine legal claim that the courts will support?
• Final demand — have you taken the time to make a final demand to allow the person or business at fault to make the situation right, rather than going to court?
• Compromise — try looking at the case from the other party’s point of view. Do they have a valid argument? Can you adjust your own position? Can you reduce the damages and reach a compromise?
• Collect Damages — can you actually collect a financial settlement from the party you are you going to sue. If the other party doesn’t have the financial wherewithal the pay damages, what is the point of a lawsuit.
• Finances — do you have the money to pay for an attorney and handle the expenses related to filing a law suit? It may be cheaper to settle.
• Time and Resources — Do you have the time and resources to pursue a lawsuit?
• Statute of Limitations — are you within the statute of limitations (time frame) to pursue a lawsuit?
• Location — if you are suing someone from a different state, which state will have jurisdiction over your case? Suing someone in another state under their jurisdiction will probably be more expensive for you.
• Small Claims Court — can you take your case to small claims court. Many states have small claims courts that will only hear disputes under a certain amount (generally $5,000 or less).
• Represent yourself — you may be able to represent yourself in small claims court (but not if you are a corporation). While you may save attorney’s fees, you still probably want to pay an attorney to coach you how to prepare for the case.

Some of these issues can be resolved by having good contracts that are specific to you in the first place. A good contract does not mean there will be no problems, but they can limit or control what the effect of a breach of contract is and what it will cost to pursue the other party.

Assuming you do not have a helpful clause in your contract the issue of whether to sue or not is balancing the risk of losing or spending the time, money and emotion on a case versus what you will gain if you go forward.

Finally, if you are pursuing “justice” in a civil case, you better have provable substantial damages because otherwise you are probably “tilting at windmills” (Cervantes’ Don Quixote”) and are unlikely to find what you are looking for.