Business Law Civil Litigation Legal Topics

Educate Before You Litigate

lawsuit_87717735When representing a business itching to file a lawsuit, always remember that the client is engaged in a commercial business—not in the business of litigating. Start by educating your business clients on the possible consequences of litigation.

Winning a lawsuit can be good for a business on many levels, but a legal victory can sometimes result in an ultimate loss if the company has been ravaged by the litigation.

Here are some considerations you should thoroughly discuss with your business client before filing suit:

  • Employee morale. Failure to sue a former employee or a competitor who acts wrongfully against the business may adversely affect the morale of the client’s employees. But if that suit is lost, the business may suffer loss of esteem in the eyes of employees and business associates.
  • Relationships with third parties. Suppliers, customers, and competitors are often drawn into litigation once a complaint is filed, whether your client wants it or not. If these third parties resent being caused this inconvenience and expense (including the need to retain a lawyer), your client may find that someone once friendly has become an adversary.
  • Risk of divulging business information to competitors. It is common in litigation dealing with actionable activity of competitors to obtain a stipulation or court order ensuring that trade secrets and confidential data will not be divulged to the outside world or in some cases even to adverse parties. The problem is that, once a secret leaks out, there is little remedy (if the leak can be traced, contempt may be available for violation of the order) and in any event you can’t put the cat back in the bag.
  • Effect on continuing unlawful business acts. Filing a lawsuit often has a deterrent effect on the defendant. The defendant’s lawyer may counsel the defendant to avoid the conduct at issue. This means that simply filing the case could bring the relief the plaintiff wants.
  • Alternative preventive approaches. The ultimate issue to be decided before a lawsuit is launched is whether the litigation will benefit the client. Part of your job is to present the advantages and disadvantages of litigating, so that the client can decide the probable effect on his or her business. The client may decide that it will be better to forego the litigation and guard against future violations through preventive measures, such as drafting agreements between the client and key employees, vendors, customers, and suppliers. When there is a trade secret problem, a number of alternatives can cut down on future piracy, e.g., consultant contracts, agreements not to solicit employees, and trade secret agreements. Your client may opt for an ounce of prevention.

For discussion of all of these the pre-litigation considerations, as well as everything you need to know about litigating a business case, turn to CEB’s California Business Litigation. For coverage of new developments in business law, including business litigation, check out CEB’s program Business Law Practice: 33rd Annual Recent Developments [2013], available On Demand.

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© The Regents of the University of California, 2013. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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