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Want to Sue? Read this First [Part 1]

sue startups

Inevitably, your business will face a dispute. It might be a founders’ divorce or it might be a claim against a customer, but no matter what it is, you will have to weigh the decision to spend time and money to litigate.

Business disputes often begin with letter-writing campaigns. You talk to Lawyer A about the problem. Lawyer A sends a letter to Lawyer B, telling Lawyer B all about how Lawyer B’s client (your adversary) is a dirty, rotten, no-good…you get the idea. Lawyer B responds in kind, and the two sides go back and forth for a while.

This is a useful exercise…to a point. There will inevitably be a stalemate because, in most cases, neither side has sufficient leverage to get the other side to do or stop doing anything. When the stalemate occurs, the parties either have to move on or engage in litigation.

Before you pay your lawyer a few thousand dollars to write letters and investigate the facts, you should know that, in most cases, you will need to actually sue to get anywhere. You must determine from the beginning if you’re willing to commit significant resources to the fight. If so, then the process should begin. But if not, it’s likely not worth paying for the letter writing in the first place.

Filing a lawsuit tells your opponent, unmistakably, that you are serious and that you are really going to pursue the fight. Filing a suit also puts your opponent at risk for the first time. Often, the real facts cannot come out until formal “discovery” starts, which can’t begin until a lawsuit is filed. These facts are vitally important to allowing the parties to determine their relative positions in the litigation and whether to press on or settle.

Before hiring an attorney to begin the litigation process, you should be sure that you will see the process through. If not, save your time and money for product development and marketing.

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About the Author

Clint Costa is an attorney and CPA with the Chicago law firm of Harrison & Held, LLP, working with startups, entrepreneurs, and privately held companies on all manner of official-sounding legal and tax matters. Reach Clint at ccosta@harrisonheld.com or (312) 803-7104.

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