If you're a small business owner, you know that disputes with suppliers, contractors, vendors and even customers can happen. That makes it important to understand the process of litigation — and how to best avoid it.
Learning to interpret the signs that a simple dispute might escalate to litigation can save you countless headaches as well as a great deal of money.
What are the steps to litigation?
You can't always count on litigation to be linear. Something may happen that causes situations to veer off course. However, most legal actions will follow a basic route:
- Sending a certified demand letter to the person or business with specific requests for resolution (usually performance or payment).
- Filing a petition with the court naming the defendant(s). These are fairly simple and don't require any evidence. You simply describe the problem and how the rule of law supports your position.
- The defendant files a motion to dismiss the complaint and includes an explanation of why it lacks validity and should be dismissed.
- The longest, most difficult and costly phase of litigation begins — the discovery process. It may include scouring through emails or taking depositions. It's also where cases regularly derail, as both parties file motions to quash the other side's requests or actions.
- You (and, quite probably, the other party) ask for a summary judgment. A party is only likely to get this when there is strong, compelling evidence to support their position.
- The case is set for trial. This can produce the most anxiety for litigants.
- A verdict is rendered, which can be appealed by either party.
Is litigation always necessary in a dispute?
Absolutely not. In fact, the goal of the early steps of business litigation is usually to find a way to avoid the more expensive steps, e.g., discovery, trial and appeal.
For example, the initial letter, while formal and insistent, does not necessarily have to threaten a lawsuit. An urgent and determined tone could be enough to resolve the problem. If it doesn't, you can always follow up with a second letter warning the other party that you'll file a complaint if you don't get a satisfactory response.
You'll generally be more successful at avoiding business litigation when you're open to negotiations. Consider wording your initial letter in a way that encourages communication and compromise whenever possible.
Source: Construction Executive, "Litigation and Settlement Basics – The Litigation Lifecycle," Jared Marx, accessed Jan. 25, 2018