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When to Litigate and When to Avoid It

Author: Basil Plastiras
July, 2010 Issue


I have been a litigator for nearly 35 years. I tried my first case the day after I was sworn in as a lawyer, so it might come as a surprise that I avoid litigation whenever possible. Like surgery, it’s always the last resort.

What does litigation mean?

Technically, litigation means the filing of a lawsuit in the court system, if you’re a plaintiff, or the filing of an answer and defending one, if you’re a defendant. The lawsuit might be for personal injury damages, breach of an agreement, or a dispute with a neighbor. Trial is only a part of any lawsuit, but in the context of this article, I’ll use the word “litigation” to mean the trial portion of the lawsuit, and “litigants” to mean the plaintiff(s) and defendant(s).

There are three, sometimes four, steps in any civil lawsuit:

1. Pleading. This usually consists of a complaint and an answer. The complaint, usually drafted by a lawyer, contains the barest information forming the claims made by the plaintiff. The answer usually contains a general denial of all facts asserted by the plaintiff, and a list of affirmative defenses to the claim (for example, “Even if I breached our agreement, I could do so because [the plaintiff] breached first”).

2. Discovery. This is where each side uses a number of procedures (depositions, document demands, written interrogatories and so forth) to investigate facts and legal theories that pertain to the case.

3. Trial.

4. Appeal. This only happens sometimes.
 

Why do most cases settle before trial?

The vast majority of lawsuits resolve, by settlement or dismissal, before reaching trial. In some counties in California (Marin, for example), only 2 percent of all suits filed go to trial. Most counties in California resolve more than 90 percent of all civil suits prior to trial.

The preferred method of resolving legal disputes in California is by settlement. This is the “public policy” of our state. Settlement is usually less expensive for all concerned, less stressful and far less risky than going to trial. The truth is, all courts (as well as many litigants) lack the resources to try all the cases filed. Trials are very expensive; they require a courtroom, a judge, bailiff, clerk, court reporter, at least two attorneys and often a jury, nearly full-time, for days to months at a time. Even though the litigants pay a portion of these costs, it’s only a small portion. Most of the costs of trial (as opposed to the costs for discovery) are paid for by the taxpayer, not the litigants. (Notwithstanding this, if you’re paying hourly for legal representation, trials can still be very costly to you.)

Lawyers never really know the outcome of a trial beforehand; the best we can do is provide an educated guess as to who will win. We never know what the total cost of the litigation will be, as so much depends on whether, and when, the case will settle, how much discovery will be necessary, what motions will be filed and so forth.

We don’t know, at the beginning of any lawsuit, what the true facts are (or, more accurately, whose testimony or interpretation of events the judge or jury will conclude is most accurate). It’s rare that the lawyers are present at the events in question, so we have to rely on what the client tells us, and it often turns out that there are facts the client is unaware of, events the client has misinterpreted or, as is common, failures of memory.

Our ability to predict the ultimate outcome of a trial may improve during the discovery phase, when we acquire sworn testimony from the parties and witnesses. But ultimately, the outcome is up to the judge or jury. In most trials, there’s a winner and a loser (although often the judge or jury awards less than the plaintiff thinks he deserved, and more than the defendant thought he ought to pay). Usually, at least one side is surprised by the outcome; often, both sides are surprised.

Because trials are so unpredictable, lawyers are ethically forbidden from guaranteeing results. Ultimately, this unpredictability is an important reason cases settle.
 

When to settle

Serious settlement negotiations often don’t take place until well into discovery and close to trial. This is an opportunity to take a serious and realistic look at the cost of winning or losing. Even in those cases where there’s a decision to settle, it’s usually necessary to maintain one’s “trial posture” to procure the best possible result. The following factors should influence any decision whether to settle:

If the trial is going to cost you, as the plaintiff, more than you’ll likely win. If your attorney concludes that, if you win at trial, you’ll most likely win $50,000, but tells you that a three-week trial is going to cost you close to that amount in fees and costs (over what you have already paid or incurred), settlement is your best alternative. What good is winning $50,000 at trial going to do you (even assuming you’ll be able to collect that money from the defendant), if you have to turn all that money over to your attorney, the court system and the expert witnesses for their fees and costs? Your net “profit” would be $0. Alternatively, a $20,000 settlement offer is a net gain for you at that point in the case.

Overall legal costs. Obviously, it’s important for you to closely monitor the costs of your litigation from the beginning and to periodically ask your attorney for cost estimates versus what you’re most likely to win. It occasionally happens that, at the end of the case, litigants find they’ve incurred more in fees and costs than the case was worth. More often, plaintiffs (and their attorneys) learn late in the discovery phase that the case isn’t worth what they’d assumed it would be.

If settlement will cost you, as the defendant, as much as or less than the costs of trial. Often, a realistic plaintiff and his or her attorney will conclude their case isn’t worth what they originally estimated, and will offer to settle for an amount that’s close to your cost of a trial. Paying that settlement not only avoids the cost of the trial, but eliminates any risk of losing at trial and ultimately paying more than your own attorney fees and costs.

If the outcome of your case is highly unpredictable, and you cannot afford to lose. Your case, after discovery, appears to be unpredictable—even a long shot. You might win big, but if you lose, the costs (including the other side’s costs and, sometimes, their attorney fees) will seriously damage your lifestyle. In this situation, you have to put aside your commitment to what is “right” and look at what is the least harmful to you financially.

If the relationship with the opposing party or a third party is too important to damage. It’s a sad fact of litigation that family members, business partners, coworkers and even professional colleagues sue each other. Sometimes, it appeared necessary to do so at the time, but later on, the parties realize a trial will destroy a relationship that, over the long term, is more important than winning. Often, litigation takes on a life of its own. It becomes more expensive, disruptive and damaging than was anticipated at the onset. This is common in trust and probate disputes, dissolutions and, less often, in business and professional disputes. It’s difficult to put strongly held feelings aside and to consider the bigger picture and longer term, but there are times when a lawsuit will damage or destroy one or both parties relationships with third business affiliates, family members, children and even larger communities such as congregations, small communities, neighborhood associations and such.

There are many factors that must be weighed when deciding whether to settle or to roll the dice and go to trial. Any litigation is a gamble, so it’s important to consider these issues and make a careful decision before rushing to the courtroom.

Basil Plastiras is an attorney, expert witness, mediator and real estate broker. He is the founding partner of Plastiras & Terrizzi in San Rafael, a general civil litigation law firm. He can be reached at (415) 472-8100 or basil@ptlegal.com.


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