Litigation Costs May Exceed Benefits
In my role as a forensic accountant, I've had a front-row seat in numerous small-business disputes in which lawsuits and countersuits were filed. As the cases progessed, sometimes over a period of years, I've noticed one thing they almost all have in common--costs that exceed the expected benefits. As a general rule, I believe it's true...the only ones who win in litigation are the lawyers (and perhaps the forensic accountants).
My advice to most anyone involved in a business dispute is to make every effort to work out an agreeable settlement to avoid getting embroiled in a legal battle. Don't be too quick to sue someone, even when you've got every right to do so. If it costs $300,000 in professional fees and countless hours of management time taken from running your business...to "hopefully" (you never can be certain how the judge or jury will rule) collect on your alleged loss of $200,000, it's simply not worth it. Similarly, if you're the one being sued, it might be prudent to go ahead and cough-up some early settlement dollars, even if the lawsuit is frivolous.
Admittedly, in some instances, the right thing to do is to pursue justice at almost any cost. For example, to help remove an embezzler from the workplace or to deter other employees from following in his or her footsteps. Defendants may elect to stand firm to protect their reputation when wrongfully sued by a vindictive opponent. Regardless the situation, it's important to weigh the costs as best as you can before getting in too deep. If you're not careful, the case will deteriorate, funds will dissipate, and your once-thriving business will suffer greatly from the legal distraction.
I'm increasingly supportive of utilizing various forms of alternative dispute resolution, such as mediation and arbitration, as a way to avoid or reduce litigation costs and time. The National Arbitration Forum Blog included a recent post entitled, "Business and Mediation, A Popular Combination," which includes the following quote:
Madison, Wisc.-based attorney, Terry Peppard, says that "mediation is now an exceptionally well-proven business process, and there should be no business executive anywhere in America who is not intimately familiar with the mediation process and its benefits.” Peppard, who recently published "Arbitration and Mediation of Business Disputes" says, “You can't be a good executive if you don't know that this is out there and what it can do for you.” According to Peppard, there are several instances when mediation is the “best way for a business to go.” These are when:
Frequently Asked Questions: Arbitration
Frequently Asked Questions: Mediation
If you've got an opinion on this topic, please post a comment so we can benefit from your insights. Input from attorneys, ADR specialists, and parties to present or past business disputes are especially welcome.
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