To Sue or Not to Sue

People do not want to be involved in a lawsuit, and for good reason. They are expensive, they are uncertain, and they take months if not years to see through to the end. It is rarely wise (or profitable) to aggressively seek out litigation, but it is also important not to be afraid of it. Many bad actors count on the non-confrontational nature of good people and use the threat of a lawsuit to get them to abandon their legal rights.

The thing is, when the other party is in the wrong, it is them that should be scared of litigating against you. For instance, consider the scenario of a contract with a major corporate entity who is a purchaser of a small business’ goods and/or services. Let’s say the big business makes up roughly a third of the small business’ revenue, and desires to vertically integrate by replicating the small company’s business internally. The big business may use the threat of a lawsuit to gain an unfair advantages and attempt to intimidate the small business.

Let us take that scenario a step further to illustrate the way a bad actor might use the threat of civil litigation to intimidate a small business. Say the bigger business owes the small business roughly a million dollars for services rendered. The big business might look at that scenario and say you know what, don’t pay them. They’ll sue us, but we can delay the cost for a year or more by paying our lawyers six figures, all the while we will come out ahead when the cash strapped small business settles for 50 cents on the dollar. The bigger business just saved four hundred thousand dollars.

Nine times out of a ten, a lawyer should have a conciliatory mindset. The above paragraph illustrates the exception to that rule. Small businesses can mitigate their risks in their agreements by having their lawyers involved in the drafting and enactment, but if they do not (which many do not) they will need to be prepared to fight, and so will their legal team. Remember, it isn’t personal for the bigger business. It is just numbers to them. Sometimes, the pursuit of maximum profits can lead companies or individuals to do things that are wrong.

One good way to make sure some of the worst actors do not manage to skip out on your bills by forcing you into an “efficient” settlement is to include a business tort claim along with your breach of contract cause of action. Many tort claims give you access to consequential or punitive measures of damages, which are not available under contract law. In some instances, tort claims may also give a plaintiff cause to name individual persons as defendants as well, which can be a valuable tool in turning the hyper-litigious mindset back on a bully.

So let us return to our big business million-dollar lawsuit scenario. If the plaintiff small business appears to be gun shy and ruefully brings only a breach of contract claim, the defendant big company is going to counterclaim for some breach on the plaintiff’s side (which they probably already have employed as a pretense to avoid payment), delay, suggest ADR, and force the plaintiff small company to settle for only a portion of what they are owed, ultimately saving money. However, if the plaintiff small business sends a firm demand letter, files suit in an expeditious fashion, and sues for breach of contract, fraud, and adds a RICO claim that names individual agents or employees involved in the scheme to attempt to defraud them out of a portion of the contracted for price, they are much more likely to recover the full amount they are owed, not to mention any consequential damages or legal fees.

One weakness a bigger company has is that it has more assets to satisfy a judgment. Juries can be powerful tools for protecting the interests of small businesses or individuals, so the risk of a multi million dollar judgment is real, and it cannot be simply be avoided by and large through a bankruptcy. Big companies present big pockets for recovery, so it may be worth asserting a case as forcefully as possible. If cash flow and paying a plaintiff’s firm hourly fees is not feasible, a big defendant with deep pockets can be a good way to attract a lawyer on a contingency basis. Finally, it is also worth noting that a bigger company, especially a bigger publicly traded company, is not going to want bad press covering a public dispute centered around their sleazy business practices.

The other thing worth noting is that the larger, broader, more complex complaint comes with a larger bill from a defense law firm. If a company knows it is going to have to spend two hundred thousand instead of one hundred thousand on defense, the corporate math starts to come up in favor of simply paying the bill. This is especially the case if it is clear to the efficient breaching bigger company that the plaintiff is going to be a bulldog and will not settle for less than they are owed. If you feel that you need a lawyer like that, contact us for a free consultation today.