To Litigate or Settle - A Business Conundrum

We’ve now completed 2/3 of 2015.  From a practice standpoint, this has been our busiest transactional year ever, although with volume come deals that don’t close and (occasionally) disputes that stem from those abandoned term sheets or forfeited escrow deposits.

I started practicing law in 1993.  During my first 9 years as a lawyer, I primarily handled litigation and dispute resolution matters.  I was lead counsel in more than 60 jury trials, ranging from felony assault to complex business disputes.  Since 2002, my practice has evolved into one where I urge clients to work towards settlements of disputes as early as possible, especially in business matters.  The time, expense and energy associated with taking a commercial dispute all the way to trial can be astronomical and can cripple a business.

But it never ceases to amaze me how long it sometimes takes clients to recognize that a strategic settlement is the correct path.  If a case is going to cost $100,000 in legal fees and if your best case scenario is a “zero verdict” then doesn’t it make good business sense to allocate risks and shoot for a settlement in the $50,000 range?  The answer is yes – although emotions can get in the way of good business decisions.

The legal system is not perfect, especially where litigation is concerned.  Plaintiffs don’t have to pass a test to file a lawsuit – and as soon as one is filed, you as a business owner have two choices: (i) cowboy up and start paying $400 per hour to aggressively defend the allegations; or (ii) conduct a risk-reward analysis and determine if early negotiations are a good idea.

Don’t get me wrong.  Some cases need to be fought for reasons both financial and moral.  But a smart business owner should always – and I mean always – consider settlement as a strategic alternative to years in court.