A Litigator’s Guide to Early Resolution of Business Disputes

Ted Edwards Business Litigation, Ted Edwards

Litigation is expensive, time consuming and a drain on a company’s resources. Even relatively simple litigation can result in significant legal fees while more complex civil litigation can even strain the budgets of Fortune 500 companies and drag on for years before being resolved. Regardless of whether a case is relatively simple or complex, the drain on the company’s resources is real, especially when the intangible costs such as damage to business relationships, loss of productivity and loss of goodwill are considered. Because we know most all cases will eventually settle prior to a trial, (the statistics from courts around the country consistently tell us that over 95% of commercial litigation cases are settled prior to trial), it make sense to focus on early resolution of business disputes. The question is how to resolve business disputes without having to resort to litigation or, if litigation is filed, how to settle the matter in the most efficient and least expensive way possible.

These questions have long troubled executives and while there is no “one size fits all” method for reaching quick resolution of all business disputes but there are proven techniques that consistently bring parties closer to identifying mutually acceptable terms for the resolution of their disputes. This article will discuss some of those techniques in hopes of providing a toolkit for use when business disputes arise.

1: Conduct an Objective Assessment of the Facts

Emotion often plays a large role in disputes. Whenever possible is it useful to take emotion and personal feelings out of the calculus by having the dispute reviewed by people who weren’t involved in the transaction conduct an independent investigation into the matter. Whether this is done by an attorney or management at the company, an independent, objective assessment of the facts is usually the first step towards resolution of a business dispute. In addition to assessing the relative merits of each side’s position, this is also a good opportunity to review how the conflict began and whether procedures can be implemented to reduce the risk that future conflicts will develop.

2: Identify the Conflicts

Most disputes involve more than one area of disagreement. It is vital that each area of conflict is identified as it is often the case that some issues are more important to one side than the other. Once all the points of contention are identified, the parties can begin discussions in a logical manner that can lead to “win-win” situations or at least to a narrowing of the scope of the dispute. 2: Document the dispute. Memories quickly fade and details about what happened and why are often lost if they are not recorded. Experienced litigators know that often facts that do not seem important at the outset of a dispute become critical by the time the dispute is resolved. The company should be sure to document as much about the dispute as possible including relevant dates, times, product or service details, summaries of internal discussions as well as conversations with the other party or other third parties.

3: Understand the Other Side’s Objectives

Disputes often arise from misinformation or a misunderstanding of what the other side wants. Be sure to ask the other side what they want and why. Often there are non-monetary solutions that can ease the path to resolution of the dispute. In most cases, each party understands the cost and hassles that are associated with litigation and each party would rather settle the dispute than expend their resources on litigation. By taking the time to understand the other side’s position prior to initiating litigation, many disputes can be resolved without formal litigation being filed.

4: Be Direct

Whenever possible, direct communication between the decision-makers of the parties is ideal. The decision makers are more likely to understand the big picture and the value in resolving the dispute quickly. They are also most likely to be objective and willing to concede that each party’s position has merit. If attorneys have been engaged, consult with them to determine how and when to make the most effective use of the decision-maker in the settlement negotiations.

5: Always Negotiate in Good Faith

Trust is vital in resolving disputes. If one party believes that the other party is not being truthful or not obeying the law, it is unlikely that an informal settlement will be reached. Moreover, companies also do considerable harm to their reputation and ultimately, their profitability, when word spreads that they do not negotiate in good faith. We truly do live in a small world in which executives move from company to company and share their past experiences with other companies . Even if resorting to deceit and unethical practices does lead to a short-term advantage, the harm it causes to the company’s reputation and ability to negotiate future deals almost always offsets the temporary advantage.

Negotiating a quick settlement of a dispute is usually the best course of action. It allows the company to maintain its focus on its core competencies, it relieves the company of the unknown liabilities associated with litigation and it frees to pursue potentially profitable opportunities. While there are instances when a quick settlement of a dispute is unattainable, these situations should be the exception rather than the rule. By developing a structured, systematic approach to dispute resolution, companies can improve their both their productivity and their profitability.