At some point in your small business career, the odds are great that either you will be suing someone or someone will be suing you. Litigation normally has a mystique to many people, and the process can be very frustrating, intimidating, stressful, uncertain and expensive.
However, by avoiding the classic mistakes that small businesses make, you will be better able to deal with the litigation process from a position of perspective and insight. You could be suing someone for a debt owing, or breach of contract or negligence. No matter what catalyst is causing you to think of suing, the following pitfalls to avoid should be kept foremost in your mind.
Lawsuit based on emotion
You might feel that you have been wronged for whatever reason and you are naturally very upset. Your decision to sue though, should be based on hardnosed business realities. Maybe there is not much money involved but a matter of principle. In that case, give yourself some time, maybe several months, to see if your emotional intensity has subsided. The litigation process itself has enough negative emotion and energy associated with it.
Unrealistic expectations of outcome
Many people assume that they are in the right and that they will “win” at the end of the day. However, the interpretation of the facts can vary and very few issues in law are black and white. The litigation process is inherently unpredictable. In addition, when you factor in your legal fees from any judgment in your favour, maybe you are not ahead of the game at all. If you win, the court costs you are awarded only amount to about l0%-25% of your legal fees, so you still lose. And then you have the pleasure and challenge of attempting to collect on the judgment.
Not assessing the defendants assets
You could “win” at trial, but still be a big time loser. The reason is that the personal or corporate defendant could have no assets in their name or have all their assets levered up with debt.
Not weighing potential gains vs. losses
In this situation, you need to realistically assess the relative pros and cons of litigation. In other words, the costs in money and lost productivity. Can you afford the fight to the end? Have you obtained various quotes as to the cost of complete pre-trial and trial process? Is the cost to pursue the matter going to be a lot more than the amount you are claiming? What if you lose? In the latter case, you will be out not only legal fees, but court costs as well. What if the defendant counterclaims against you and wins? You get the idea.
Not considering a settlement
The pragmatic and practical reality is that settlements occur all the time. Only about 5-l0% of lawsuits ever end up at trial, with the exception of small claims court. Even small claims court has a settlement hearing process before trial, in many provinces. The purpose is to see if both sides could agree on striking a deal and getting on with life. Settlements save a lot of court time. You have heard of people settling the case on the court house steps. The reason is the uncertainty of the trial process outcome. Settling for 20, 30, 50 or 70% of the original claim is better than the risk of getting nothing and being out legal fees as well.
Suing too early
In this situation, you commence your action before you have all the facts. Ideally, you want to have all the facts in your favour determined and included in your claim. It will show your opponent that you have done your homework.
Suing too late
If you wait too long, you could miss a statutory time limit to commence your action. In other words, you snooze, you lose. Different types of actions and different provinces have different time limits.
Lack of expert legal advice
You want to have a lawyer experienced in litigation matters review your case. Better still, have a minimum of three lawyers give you candid and objective feedback on your chances at trial, how long it will take and how much it will cost. If you contact the lawyer referral service in your province, most initial consultations are free or at a nominal fee. This will be time well spent.
Before you decide on any lawsuits, consider each of the above points and then sleep on it for a month. See if you have the same opinion at the end of that time. Remember the axiom, “act in haste, repent at leisure”.
