The Proactive Approach: How Attorneys Can Help You Mitigate Risk
An Ounce of Prevention is Worth a Pound of Cure: Early Attorney Consultation to Avoid Litigation
There are 33.3 million small businesses in the United States. More than 13 million, or nearly 60% of all small businesses have experienced a business-threatening legal event in the past two years. Nearly 60% of these small businesses did not hire an attorney. Forty percent cited cost as the reason and 60% said they could handle the issue better on their own.
But attorneys can help. The trick is to contact an attorney before litigation. So, what is litigation, and how can an attorney actually save you costs in the long run?
What is Litigation?
Litigation is the process of settling a dispute in court. It has five phases: (1) pre-suit negotiations; (2) filing and answering a complaint; (3) gathering information; (4) trial; and (5) appeal. Lawyers bill hourly, so the longer litigation goes, the more expensive the legal fees become. The end price is difficult to estimate. It all depends on how complex the issue is, how much documentation you can provide, and what that attorney’s hourly rate is. Nevertheless, a break-down of the litigation process shows where costs quickly grow out of hand.
Phase One— Pre-suit Negotiations
Often, the first step in litigation is sending a demand letter. A demand letter is a formal document that outlines a dispute between two parties and requests that the recipient take or stop a specific action. Demand letters usually attempt to convince the recipient their chance of success is low or that the expense, time commitment, and inconvenience of litigation is too high. It is a way– albeit confrontational– to kick off the negotiation process before going to court. A demand letter is not a formal requirement, and many lawyers skip it entirely.
Oregon also provides services for two different types of pre-suit negotiations: arbitration and mediation. Arbitration is mandatory for civil claims less than $50,000. It is a legal procedure, and, like a judge, an arbitrator makes rulings on motions, enters orders, schedules proceedings, and may impose penalties. Arbitration’s main advantage is speed; the arbitrator is statutorily required to issue a decision by the end of 13 weeks. The losing side typically pays the arbitration fee (usually $150 per hour), but each side is responsible for their own attorney’s fees. Either side may bring their case before a judge and jury if they do not want to accept the arbitrator’s decision.
Mediation is another pre-suit option. Mediation is a process whereby people reach a mutually satisfactory resolution through the help of a trained mediator. It may involve lawyers, but the idea is that the mediator will help parties reach and draft their own agreements by encouraging effective communication. The parties share the costs of mediation, generally $75 per hour. Unlike arbitrators, mediators do not have authority to unilaterally set schedules or resolve disputes. Thus, mediation is best for low-conflict cases.
Phase Two— Filing and Answering a Complaint
If pre-suit negotiations aren’t necessary or don’t work, the next step is filing a complaint. A complaint is the pleading that starts a case. The plaintiff files it with the court, upon which the court will issue a summons— an order for the defendant to appear in court. The court will give the summons to the plaintiff and the plaintiff is responsible for serving it, along with a copy of the complaint, on the defendant.
The defendant then has a limited amount of time to answer the complaint. The defendant admits or denies the allegations in the complaint, asks for more information or clarification, lists applicable defenses, includes any counterclaims (allegations against the plaintiff).
After the complaint has been filed and answered, the court will issue a scheduling order which outlines the timeline for the lawsuit.
Phase Three— Gathering More Information
This stage is called “discovery” and gives both parties the opportunity to learn everything they can about the case. Lawyers ask questions, interview witnesses, obtain documents, talk to relevant sources, etc. They will sort through evidence, argue legal issues to include or exclude certain pieces of evidence, design their trial strategy. This is typically the lengthiest part of litigation. On average, it takes one and a half years to reach the trial stage in federal court.
Phase Four— Trial
If you make it to trial, congratulations! Less than 1.5% of cases reach trial in Oregon. That’s still higher than the national average, which is below 1%. During trial, attorneys pick a jury (unless they have opted for just a judge to hear the case) and present their evidence. After they finish, the judge explains the law to the jurors who privately deliberate and reach a verdict. This is typically the most expensive part of litigation since attorneys are working around the clock solely on your case.
Phase Five— Appeal
If you are unhappy with the verdict, you may file an appeal. An appeal is not a do-over. The appellate court decides based on the record from the trial court, i.e., no new evidence is presented. Instead, the appellate court double-checks to make sure the trial judge correctly decided on questions of law during the trial and properly explained the law to the jurors. If the appellate court decides the judge did make an error, and that error influenced the verdict, then it may award a new trial.
Total Costs
If litigation sounds costly, that’s because it is. It's difficult to put an “average price” on litigation because, like people, every case is unique. Nevertheless, the National Center for State Courts put out a study in 2013 detailing the median cost of bringing a suit to the appellate level by case type.
As noted above, less than 1.5% of cases even make it to trial, let alone the appellate level. But they do illustrate one fact— the more you fight, the more it's going to cost. Better to avoid a fight in the first place.
Why You Should Consider Working with an Attorney Sooner Rather than Later
You already know how to avoid litigation. Play it fair, keep your promises, be nice. And you can generally expect your business partners to abide by the same rules. So why should you consider including an attorney in the process even before a deal is struck? The answer is simple: to prevent problems from arising in the first place.
Attorneys Help You Prevent Problems
Take, for example, this true story from the owners of a guest ranch. The owners agreed to pay a contractor $8,000 to build a new pavilion to expand their wedding facilities. They had promised a couple they would have the pavilion up in time for their special day, and so gave the contractor six weeks to finish the project. The contractor was well known; people from all over the county recommended him when the ranch owners began accepting bids. He showed up promptly at 8 A.M. for the first day of construction and had finished the tresses by the end of the first week.
As time went by, however, the contractor showed less and less, and the work he did complete was shoddier and shoddier. In the middle of the fourth week, police arrested the contractor as he drunkenly drove his truck and horse trailer– complete with two horses– down main street. Police further found methamphetamines in his truck at the time of arrest. As it turns out, the contractor was going through a tough divorce and so his recent work (and criminal record) had taken a beating. The contractor was in jail; there was no way he could finish the pavilion in time. The ranch owners were now in breach of contract and had to hold the wedding at a fraction of the original cost.
Conclusion
Stories like this are all too common. But attorneys can help. Consulting an attorney before a deal was struck could have given the owners powerful tools— performance-based incentives, liquidated damages, even just a simple written contract— to protect themselves. Since the National Law Review estimates over 77% of people with legal issues do not get an attorney, even a quick consultation can give you a decisive edge over your competitors.
No one can anticipate project issues, like the contractor ending up in jail. While attorneys aren’t fortune-tellers, they have spent years reviewing hundreds of deals-gone-wrong. They know what to be on the lookout for and how to protect your interests. Most importantly, they can give you the piece-of-mind that your deal is safe. That is why you should consider consulting an attorney before taking on a big project.