Commercial Litigation

When litigation cannot be avoided, setting goals, establishing a budget and developing an appropriate strategy at the outset is key.

Overview

Very few businesses view courtroom battles as a productive use of company resources. But often, such fights cannot be avoided. In such an instance, it is important to have counsel that is experienced in all phases of litigation, so that you know what is coming and how to plan for it.

 

Initial Strategy: Goals and Resources

Too often, businesses rush to court without first considering what they want, whether they can get it, how much it will cost, and how it will affect their relationships. If monetary recovery is the goal, what will be the net gain once the cost of litigation is factored in? Does the other side have sufficient assets to pay a judgment or settlement? Will the litigation affect customers, employees or other key relationships? How will admissible evidence be obtained to prove the case?

It is also important to ensure that a party solidifies its position before entering into litigation. Have contractually required notices been provided? Are there statutes of limitations or repose? Are there potential counterclaims?

Another key consideration is where a case should be litigated. Most lawyers will be inclined to file a complaint in their “hometown.” But that does not necessarily mean that the local court has jurisdiction over the other side, or that the venue is appropriate. By the same token, a party sued in another state will often focus on dismissing or transferring the litigation; without first considering the cost or advantages of doing so.

Finally, there are certain procedural choices that must be made at the time of filing a complaint, or an answer. For example, if a party is entitled to a jury trial, that choice must often be made at the very beginning of the case.

All of these issues should be answered before the complaint is filed. Or, if it seems likely that another party may be the one initiating the lawsuit, it is important to address these issues before process is served.

Drafting, Filing and Serving a Complaint

The complaint should be drafted to allege the required elements of each cause of action and meet pleading standards. Fighting unnecessary motions to dismiss can cost months of time and thousands of dollars in fees.

It is also important to carefully consider what evidence exists to support each allegation of the complaint. Clients are often questioned about the statements made in their complaint at deposition. Inaccurate or unprovable assertions can blow up in a party’s face.

Many complaints also suffer from over-inclusion, which results from the fear of missing a potential claim. But sometimes one claim can undermine another; as in the case where a claim for misappropriation of trade secrets preempts other, stronger claims.

Serving a complaint on defendants can be straightforward, or a sticky mess that eats up months of time. Dropping off a copy of the summons and complaint with the receptionist is usually not sufficient. Out-of-state, or even more challenging, overseas defendants may trigger special service requirements, such as through the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters .

Of course, applicable statutes of limitation, statute of repose, contractual and other time limits should be identified so that deadlines are not missed.

Responding to Complaints

The key question often faced by defendants is whether to answer the complaint or move to dismiss all or part of it. Of course, there are limited bases on which a court will dismiss the complaint at the outset of the case without the opportunity for the plaintiff to obtain or present any evidence. Potential bases include: plaintiff’s failure to properly allege all essential elements of a claim; the lack of jurisdiction over the defendant; the failure to file the claim within the statute of limitations; and the preclusion of the claim by a prior judgment.

Even if a defendant can move to dismiss, it does not mean it should. If the motion will only result in some but not all of the claims being dismissed, then it might only be worth the cost if it will significantly reduce the scope of discovery. Also, courts often given plaintiffs an opportunity to “re-plead” defective complaints, meaning that a motion to dismiss might serve to merely alert them to problems with their case that they can easily remedy at such an early stage.

In the end, most defendants err on the side of moving to dismiss if they can do so. The mere possibility of ending the case early is often enticing enough to try.

If there is no such motion, or if a motion to dismiss fails to dispose of the case, then an answer must be filed. Defendants too often simply deny all allegations of a complaint without doing any upfront investigation. Just as with the allegations of a complaint, carelessly drafted answers can create problems later in the case when clients are being questioned under oath.  Answers are also an opportunity for defendants to assert affirmative defenses, counterclaims against the plaintiff, cross-claims against other defendants, and third-party claims against those who are not involved in the lawsuit yet. Claims not properly asserted during the lawsuit (such as for indemnification) can be forever waived.

Discovery

Discovery is the process through which the parties to litigation obtain evidence from each other, as well as from third parties. It is infamously the most common culprit for the high cost of commercial litigation. It is generally divided into written discovery and oral discovery. There may also be inspections of property, as well as mental and physical examinations of persons.

There is often an inclination to view discovery as the end-game.  In other words, parties will try to: make the other side produce as much information as possible; reveal as little as possible themselves; and worry about the building blocks for their case later. To be sure, such a strategy can force a resolution, since the cost of discovery often motivates the side with less resources to settle. But if the case does not settle, then discovery conducted without a strategy for prevailing on summary judgment or trial strategy can undermine a party’s position.

Written discovery is often conducted through interrogatories, which are written questions that must be answered under oath by other parties, and document requests, which require the production of written documents, as well as electronic data such as e-mails, electronic documents stored on computers, servers, and in the cloud, as well as texts and social media. Production of electronic data often proves to be the most contentious, since review even just a few e-mail boxes for potentially relevant documents can cost thousands of dollars, or even more.

Most parties serve written discovery requests that are extremely broad. The recipient then usually objects to requests that it considers to be overly broad, unduly burdensome, vague, and not reasonably calculated to lead to the discovery of admissible evidence. Most courts require the parties to attempt to resolve their differences first, and then bring any unresolved disputes to the court’s attention. This entire process of serving requests, crafting objections, negotiating resolutions, asking the court to intervene, and actually reviewing and producing answers, documents and data often takes months of time.

Oral discovery refers primarily to depositions, in which an individual must answer questions under oath posed by attorneys for the other parties. Although the depositions themselves are often limited to several hours or one day (unless a longer time is agreed upon or ordered by the court), preparing for them is often a time-intensive task. Answers given at the deposition are usually binding and are often the first time that the individual witnesses get to “tell the story” of what happened directly (as opposed to indirectly through lawyers).  Because deposition transcripts or videos are often used during summary judgment or at trial, the wording of both the questions and answers have great influence over how the story is told.

Parties can also issue subpoenas to third parties, not involved in the litigation, for documents and deposition testimony.

Summary Judgement

One or more parties can ask the court to grant summary judgment in their favor on one or more issues in the case. Usually, but not always, a motion for summary judgment motion is filed after discovery is completed. Just as with a motion to dismiss, summary judgment is not always appropriate. Specifically, the court cannot decide issues of contest fact. Rather, there must be “no genuine dispute as to any material fact,” and the evidence must be supported by documents and sworn testimony.

Summary judgment motions can be expensive and time-consuming. Many parties try to obtain summary judgment, since the cost and risk of proceeding to trial is so high.

Trial

Most civil cases, and especially commercial litigation, never make it to trial. Some estimates are that 95% of civil cases or more are resolved before trial.

Does that mean that trial preparation is not important? Absolutely not. For one thing, the reason that many cases settle is that one or both sides see that the other is ready for trial and understand that the evidence may not be entirely in their favor. Further, focusing on the trial (whether it ultimately happens or not) helps frame issues in discovery and potentially avoid wasted efforts seeking information that might never be relevant.

In a bench trial, the judge makes all decisions. In a jury trial, the jury makes decisions of fact (i.e., who is telling the truth), while the judge still rules on issues of law (i.e., interpretations of a statute).

Appeal

Time limits for filing an appeal for extremely tight (generally thirty days) and cannot be extended. Further, if multiple orders were entered in a case, parties may need to specifically identify which orders are being appealed.

There are limited bases on which a party can appeal. For example, a fact-finder’s decision to believe one party and not the other generally cannot be overturned. As a result, it is important to carefully structure an appeal to prioritize arguments that are likely to be received favorably by the appellate court.

If a judgment has been entered against a party that is appealing, a bond usually must be posted to stay enforcement (i.e., collection of that judgment) pending appeal.