Litigation Avoidance Lowers Business Costs
Litigation avoidance strategies can save companies big bucks. It may sound obvious, but litigation is expensive. The average person knows this, even if the source of that knowledge is based on the (sometimes) unfair stereotype that lawyers are greedy. What the average person does not know is how expensive litigation can truly be. Based on a Litigation Cost Survey of Major Companies conducted by Duke Law School, the average amount spent by large companies on outside counsel to proceed to trial on complex litigation exceeded $2,000,000. On average, one fourth of that amount (or $500,000) was spent on discovery costs before the cases were even trial ready. Those high-dollar costs do not even eliminate all risk, especially since the outcome of litigation can prove unpredictable based on a variety of factors outside the control of the company and its legal counsel. For smaller companies, the threat of litigation can be an “Armageddon Scenario,” a term coined by Douglas R. Richmond in his article, Saber-Rattling and the Sound of Professional Responsibility, printed in the American Journal of Trial Advocacy in 2010. In other words, litigation—even litigation where a company will ultimately triumph—can bankrupt a company.
With that in mind, it is vital for companies to engage lawyers to discuss and implement litigation avoidance strategies and policies before disputes arise. As corporate counsel, our attorneys help clients prevent and discourage litigation through the following steps:
- Maintaining an open channel of communication between business and its counsel; not just when a dispute arises. Counsel should participate in training of management and operating personnel, especially on key areas of the law and emerging lawsuit trends that befall certain industries. The more educated the company, the more likely the company is to (a) avoid obvious mistakes, and (b) require engagement with counsel.
- Counsel needs to see, revise, draft, and give input on all contracts before execution. Careful draftsmanship, including indemnification and alternative dispute provisions are vital to litigation avoidance and not concepts for the novice businessperson to draft on his or her own.
- Emails, emails, emails. While it is okay to “dance like no one is watching,” it is imperative to “email like everyone is watching.” Hyperbole and jokes through email, while understood at the time by the recipient, can come back to harm a company. For example, after the BP oil rig leak in the Gulf of Mexico, a geologist from BP sent an email to Haliburton stating, “thanks for the shitty cement job.” Joke? Perhaps. Used against the company in litigation? Absolutely.
- Companies need to inform counsel of potential disputes before they result in complaints or formal lawsuits. An early investigation, even one that yields disappointing findings, gives counsel an opportunity to resolve the issue internally and before expenses accumulate and before there is a trial in the public eye.
These are just some of the ways to avoid litigation. Companies of all sizes, especially those without in-house counsel, should consider retaining legal counsel to draft and implement these strategies. The initial cost of doing so pales in comparison to the high costs of litigation.