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A law school professor of mine once said, "There are no winners in the courthouse." He meant that even parties who prevail in a courthouse do not "win" in the classic definition of the word; they merely achieve monetary compensation for their harms, and this compensation does not cure the harm. Instead, it either returns them to the place they would have been prior to the harm or compensates them for some harm suffered. In short, most people want to simply avoid litigation.
So, it's important to know the advantages and disadvantages of litigating an issue and the forms of dispute resolution available. This column will focus primarily on analyzing a standard civil matter—the sort of litigating you might expect as a wood flooring contractor. Remember, though, no hard and fast rules exist for how much litigation might cost.
Contingency Fees
Contingency fee arrangements, meaning the attorney will take a percentage (usually one-third) of the total settlement, have their advantages. For one, they provide people access to the legal system with little up-front cost. However, if the matter settles quickly, the injured party's settlement can be less.
Suppose a contractor has a claim for $20,000. Under a typical contingency fee structure, the attorney would receive one-third of whatever settlement might be reached. If the contractor prevails and gets the full sum, the contingency fee is $6,000. If the attorney's typical hourly rate is $200, once the amount of time spent exceeds 30 hours, the attorney begins losing money. To go through a full trial from complaint to a jury verdict will almost always take more than 30 hours. However, if the claim has merit, a settlement might be worked out very early on in the process, meaning the attorney will collect a full contingency fee without having to do the extensive work usually required for a full trial.
Settlements
Approximately 99 percent of all civil actions settle without a trial. This is because trials can be expensive and long. It usually takes at least a year from the time the action commences until a case goes to trial. Depending on the complexity of the issue, the number of parties involved and the number of lawyers involved, attorneys can spend upwards of 100 hours on a case from start to finish on cases of moderate complexity. At $200 per hour, that totals $20,000.
In performing the cost/benefit analysis of whether to go to trial, realize that it is highly unlikely that a plaintiff will get the full amount of the claim. The most the party can expect to collect is the value of the contract plus some reasonable attorney fees, and often courts do not grant the latter. Cases frequently settle on the courthouse steps, so remember that until a verdict comes down, a settlement can always be reached.
Alternative Dispute Resolutions
Because trials are expensive, alternative dispute resolutions (ADRs) have increased in popularity. Mediation is the most common ADR. In a typical mediation, a mediator hears both sides of a case and then tries to find some common ground. While mediation decisions are not binding, mediation can be beneficial because it provides a neutral, third-party assessment of the strengths and weaknesses of a case. Also, a good mediator can cut through the emotions that often surround litigation. For example, a plaintiff may be upset with the defendant for a variety of reasons. Perhaps the two were business partners and had a bad split; perhaps the defendant is a supplier who failed to make a timely delivery and cost the plaintiff a job. The mediator can often temper emotional components and help the parties understand the idea of "winning" discussed earlier. A mediator will usually charge approximately $750 to $1,500 for a full day of mediation, and the cost should be split evenly between the parties.
Another form of ADR is arbitration, which more closely resembles an actual trial. Here the parties present their cases to an arbitrator, complete with witnesses and opening and closing statements. The arbitrator then makes a decision, which is usually binding on all parties. An adverse decision can be appealed to a court, but doing so adds expense. Also, although the decision of an arbitrator usually has no precedential value to the court, the decision can still be admitted, and the appealing party has a weaker case. In short, do not enter arbitration thinking that an adverse decision can just be appealed without affecting the court proceeding, but arbitration is nonetheless cheaper and less formal than an actual trial.
More often than not, it does not make sense to go to trial in a civil matter, which is why so few do. However, sometimes a trial is necessary and can lead to a good result, so never be afraid to litigate. Conversely, a trial can also be time-consuming, and parties need to make sure it is worth the time and expense.
BUSINESS Q & A
BY JIM BLASINGAME
What Do I Need to Network.
Q: What should I bring along when I go to a networking event like a trade show.
A: Post this "Networking Checklist" in your office, and check it before you leave for your next event:
• Business cards: More than you think you'll need, too.
• An organizer for your cards: Have one pocket for your cards and have another for cards from other businesses.
• Brochures: Only if recipients can fit one or two in their coat pocket (and give them only if asked for).
• A pen or two: You might have to lend one.
• A PDA: During your followup you can repeat something memorable.
• A positive, open and generous attitude.