Litigation Costs and Small Business - How to Avoid Financial Catastrophe and Still Win Your Case

Posted July 05, 2008 in Articles | Back to News Archive

Litigation Costs and Small Business:

How to Avoid Financial Catastrophe and Still Win Your Case

©The Bray Law Firm 2007

 

A poorly managed lawsuit can drive a business to ruin before the case ever reaches a jury.  As a small business owner, you should be as knowledgeable as possible regarding the process, its costs and how you can best plan for the needs of contested litigation.  No matter how solid you perceive your case to be, and no matter how skilled you perceive your lawyer to be, a solid financial strategy may literally be the difference between success and failure in the civil court system.

Your decision to engage in litigation will be driven by whether or not you are the plaintiff or the defendant.  The plaintiff is the person or entity that files the lawsuit, while the defendant is the person or entity that defends the lawsuit.  As a plaintiff, you must carefully decide if the risks of litigation are worth your investment into retaining counsel and funding an expensive lawsuit.  This is a difficult decision to make, and one that should be made with the advice of your proposed litigation counsel.  In North Carolina, attorney’s fees are not always recoverable by the prevailing party, so you should not count on their being recouped through a judgment or a settlement.

As a defendant, your choices and the time in which you may make your decision are limited.  If you are sued in the federal courts of North Carolina, for instance, you must respond to the plaintiff’s complaint within twenty days.  In North Carolina state courts, you must respond within thirty days.  In either instance, you need to immediately consult with counsel upon receipt of the complaint so that you are not attempting to engage counsel and respond at the last minute.  No matter the forum, your choices are to either defend the lawsuit or allow the plaintiff to obtain a default judgment against you and/or your company.  Even where you perceive the complaint to be frivolous and completely without merit, a response is absolutely necessary or you may forever waive your rights to contest the plaintiff’s allegations.

Once you have made the decision to either proceed as a plaintiff, or defend against the plaintiff’s allegations, you need to immediately understand and recognize that litigation is a contest which is often won by the party with the best game plan.  Most law firms will charge a retainer before agreeing to represent you in a lawsuit.  Retainers can range from as little as $1,000.00 to $25,000.00 and more.  At the Bray Law Firm, our litigation retainers typically range from $5,000.00 to $10,000.00, which is fairly standard in the Charlotte, North Carolina area.

Depending on the nature of the lawsuit, however, the retainer is simply the first payment of many to your law firm.  For purposes of this article, all estimates are based on litigation in the Superior Court of North Carolina, which is the highest trial-level court in the state.

In the state courts of North Carolina, there are several basic components of litigation which must be addressed: (i) pleadings; (ii) discovery; (iii) mediation; and (iv) trial.  There are other components of litigation that are otherwise within your discretion, such as the filing of motions (summary judgment, etc.) and the retention of expert witnesses.  Your litigation budget and corresponding legal strategy needs to take all of these into account during the early stages of the case, so that your lawyer can best assign priority to certain aspects of your case which you mutually deem more important than others.  For instance, some cases may require that additional resources be spent on discovery, while in other cases you may decide to avoid the more costly methods of discovery (depositions, for instance) and save your financial resources for trial.

Unfortunately, no matter how well you plan, the actions of the opposing party may force you to respond with force if they jeopardize the prosecution or defense of your lawsuit.  These “actions” typically come in the form of motions or aggressive discovery.  For instance, although you and your lawyer may decide during the early stages of your case to bypass motions or depositions, your adversary may decide otherwise, in which case you either defend accordingly or run the risk of losing your case.

Each case is different, so estimates are hard to make.  You should be prepared to spend no less than $10,000.00 on any lawsuit, while more common costs range from $20,000.00 to $50,000.00.  And, of course, your costs may be higher.  With a solid litigation strategy, however, you may best allocate your resources and through carefully planning allow your attorney to take the initiative of the case and thereby direct how it will proceed.

The Bray Law Firm handles all matters of business and commercial litigation.  For more information on our services and how we may assist you and your company, visit our website at www.braylaw.com, or contact us at info@braylaw.com, and by phone at (704) 523-7777.