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To Litigate or not to Litigate: Practical Considerations for Every Business

January 21, 2016 Marwa Elzankaly

It should come as no surprise that business is booming in Silicon Valley, although with the growing number of businesses comes increased potential for conflict and litigation.

Know that litigation is serious business.  In the midst of high emotions over a business deal gone awry or a competitor’s unscrupulous methods, it is important to take a deep breath and carefully weigh some key factors:   

1. The Law And The Facts.

Having an attorney evaluate your case seems like an obvious first step, but it must be more than an initial cursory review.  Take a close and careful look at the law and the facts.  Be sure to look at important documents and talk to those involved.  Cases often get decided based on a simple distinguishing fact or subtle exception to the law.     

2. Expense.

Litigation expenses vary, depending on case complexity, number of parties, experts involved, potential for early resolution, and the risk of protracted litigation.  Also, consider whether there is a provision in a written contract or a statute that gives the prevailing party the right to recover attorneys’ fees.  This may or may not work in your favor and is usually limited to what a judge considers “reasonable.”               

3. Disruption To Your Business.

Keep in mind the time and energy your company may have to expend.  You will have to educate counsel and experts on the facts and your business; review, gather and preserve electronic evidence and information; respond to discovery and potentially subject company leaders and employees to depositions and trial testimony.  Consider also how your decision may affect employee morale. 

4. Ultimate Goal.

Carefully assess your priorities.  If you are looking for a monetary recovery, consider the opposing party’s solvency or whether the recovery is covered by insurance.  A case may still be worth pursuing if you are seeking injunctive or equitable relief, ordering the opposing side   either to refrain from doing something or to take some affirmative action that is equally or more important than monetary damages.  Finally, in some cases, a claim may be important to set a precedent for future business dealings.  

5. Public Perception and Reputation.

Public perception and reputation are key to good business.  Depending on the subject matter, your litigation may generate public interest.  Think how your company, or your case, may be portrayed in the media or among your business partners and colleagues.  Work with your lawyer to have a plan in place, such as a formal company statement, proactively to address any issues without compromising your case.     

6. Relationships With Third Parties.

Disputes often involve third parties.  Consider whether your suppliers, customers, competitors, or others may be drawn into the litigation either as witnesses or new parties.  Weigh the litigation’s importance against the potential risk to these relationships and how you may be able to protect those relationships.  

7. Risk of Divulging Proprietary Information.

Essential to any litigation is discovery.  You may risk having to produce proprietary information.  Although your counsel may secure a protective order, limiting the use or disclosure of that information, consider the risk of a potential “leak.”  On the other hand, it may be that the opposing side faces a greater risk of having to produce their proprietary information.  That risk alone may bring them to the resolution table.  

8. Opening The Door To More Litigation.

In an effort to gain an advantage, cut losses, or subject your company to the threat of extensive discovery, your opponent may file cross or counter-claims or join new parties.  Consider the merit of such potential claims and their effect on the litigation.  Such claims may distract the Court from the real issues.  Consider also any information that may come out in discovery and potentially subject your company, or the opposing party, to other litigation. 

9. Your Opposing (Or Co) Party.

It is likely your opposing party, or even a potential co-party, has similar considerations.  Put yourself in their shoes and evaluate their primary risks or concerns.  You may be able to use that to your advantage.    

10. Strategic Resolution.  

Cases are often resolved early on or without litigation.  Rather than sending angry emails or making threats, a simple phone call may get the parties talking.  Discuss with your counsel how this can be done without compromising your case.  You may be able to resolve the matter informally through early mediation or other alternative dispute resolution.  Sometimes, opposing parties have even been able to reinstate their working relationship. 

Tread carefully when considering litigation.  Talk to counsel, weigh all relevant factors, and plan the best course of action. 

 

Marwa Elzankaly is an attorney with McManis Faulkner.  She represents individuals and businesses in general civil and commercial disputes, including trade secrets, breach of contract, and unfair competition.