Want to Sue? Read this First [Part 2]

July 18, 2012

3:00 pm

In a prior post, I explained that before you, as a business owner, spend any time or money fighting or litigating, you need to determine if you are willing to actually file a lawsuit. If not, then your time and money are better invested in your business.

But what should you think about in making this decision?

  1. Can you pursue “preliminary injunctive relief”? A preliminary injunction is a type of remedy that a court may order in certain cases where money is not sufficient. For example, if you sue a former sales executive for stealing your customer list, you wouldn’t just want money from him or her. You would want the court to order the sales exec to give the list back or stop using it until the case is complete. Obtaining this type of relief can give your case tremendous leverage very early in the proceeding.
  2. You need to understand the costs involved in gathering evidence to support your position. Is the dispute based on written contracts that are easily accessible and clearly valid? Or can the major facts only be gathered or developed by “deposing” (or interviewing) multiple people and sifting through boxes and boxes of documents? These considerations inform the expected cost of the discovery portion of the case. Without discovery you won’t have evidence, and without evidence your case is dead.
  3. If the dispute is based on a contract, does the contract have a “fee shifting” provision? In other words, if you sue and lose, will you have to pay the attorney fees of the other party? If so, you need to step back and think twice about the potential of losing. On the plus side, if you win, your opponent must pay your fees.
  4. Who is your opponent and do they have money? Even if you sue and win, you might not get paid if your opponent is “judgment proof,” or doesn’t have enough money to pay your damages.

Having this information in hand before suing will help eliminate unwelcome surprises during the litigation, if you do decide to sue.

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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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