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The Process of Business Litigation: What to Expect
Partnerships, joint ventures, shared research, alliances, and co-branding are common among businesses. Through these business relationships, companies can tap into different markets, exchange ideas, or mutually earn higher profits. Sometimes, however, disagreements occur, often to the point of major escalation. These differences eventually become legal issues, leading to one or both companies filing a dispute against the other. This is where business litigation plays a significant role, which is a process that aims to settle these disputes in a court of law.
What is Business Litigation?
Business litigation is often the last attempt at conflict resolution undertaken when alternative dispute resolution fails. In a best-case scenario, when a disagreement occurs, both parties are able to find common ground by themselves without involving the legal process. Unfortunately, the path is not always this straightforward, as one party may still be dissatisfied with the outcome.
At this point, they may utilize the processes of mediation or arbitration. Mediation aids with settlement by bringing in an unbiased, third-party mediator who helps both parties reach an agreement based on negotiation or compromise. Arbitration, on the other hand, also brings in a neutral third party, but this role actually makes the decision for the parties based on the presented evidence, similar to a judge.
In the event these methods fail to achieve a firm and just settlement, the parties can proceed to litigation. Business litigation can be long and tedious, which is why many parties initially attempt to settle the dispute amongst themselves. This is not always possible, so the court of law then takes the wheel. During the trial, hiring an attorney who understands the legal process inside and out is important. They will help gather evidence, explain the process, and argue their party’s case to the best of their ability.
The Process
When matters take the courtroom, the process can be lengthy, which business litigation oversees and navigates effectively. Disputes, pleadings, discovery, trial, and appeals are key components that make up the entire process. With these stages comes a long list of procedures that must unfold before any judgment is given. This is why business litigation cases may last as long as several years or at least half a year, depending on the case’s complexity and documentation.
Disputes
The litigation process officially commences once a company files a dispute, which is a lawsuit against another company. Before a lawsuit can be filed, however, companies must conduct a pre-filing period in which evidence is gathered and research is conducted to present the best case possible at trial. This state ultimately determines the strength of one’s case by laying down a solid pre-trial foundation.
This is also when companies should hire a business litigation attorney, whose responsibility is to represent a company and help file claims, resolve legal issues, and support their client throughout the process. Once a lawyer is hired, the company can move forward with filing a dispute to resolve its issues with the other company.
Pleadings
In filing a claim, the company assumes the role of the plaintiff, or the filing party that seeks resolution to their issues and a rewarding settlement for the damages caused, if any. Their claim must be detailed and specifically address the issues and why they are pleading their case. The defendant, or the company getting sued, must respond accordingly, either conceding or denying the claims made against them.
Discovery
After the claims are made clear, the discovery phase begins, which heavily revolves around concrete evidence. Anything written, recorded, documented, or witnessed can all count as evidence. Each company must exchange its information and evidence related to the case to establish transparency and set the tone.
Trial
Before the trial officially starts, attorneys will typically file motions pertaining to the case, which are formal requests for the judge to make a decision based on specific, relevant evidence. Motions will come in the form of requesting dismissal, summary judgment, venue switches, suppression, discovery, etc.
If not settled in this manner, the actual trial follows, necessitating the help of attorneys, witnesses, and evidence. Attorneys will present the case before the judge and jury, and they will rely on strong evidence to support their arguments. Attorneys also use different litigation strategies to argue their side most effectively and have better chances of winning. The litigation strategy typically examines the context of the case, the outcome that the client desires, and the strengths and weaknesses of their claims.
Appeals
After a settlement has been reached and the trial ends, the losing company may file an appeal to further review the settlement. In this event, they would need to make the claim that the court made a mistake. It is important to understand that appeals do not commence a whole new trial, but they ask to overturn the original decision.
Business Litigation Law Firms
All in all, these trials can be extremely complicated and last a long time. Hiring an attorney you can trust and relate to is crucial for the process. Conveniently, there are many business litigation attorneys and law firms who can help with managing contract negotiation disputes, composing and filing claims, building a strong litigation strategy, and representing clients who experience legal issues based on discordance among business relationships.
Ultimately, the potential for winning a case multiplies tenfold if you and your attorney can develop a strategy by preparing for trial, sticking to the facts, and arguing with conviction. Business litigation can be ruthless at times, so full transparency and confidence are key traits for a good attorney to have. Cases aren’t just won by who argues the truth but sometimes also by whoever argues most effectively.
FAQs
How long do litigations take?
Depending on a case’s complexity, business litigations usually take anywhere from six months to several years. If the case contains multiple pieces of evidence, a long discovery phase, and an extensive list of issues, it can take even longer.
What is the first step of a business lawsuit?
The first step of a business lawsuit is pre-filing, a phase that commences before officially filing a dispute. In this stage, the filing company must gather evidence, conduct extensive research, and file a claim against the company toward which they seek legal action.
What are the potential outcomes of a business litigation case?
There are many different outcomes of a business litigation case. The most common outcomes offer:
- Monetary Damages Judgment: a calculated amount of compensation to be awarded to the company that wins the case based on the damages they have suffered from the actions of the other company.
- Contract Enforcement Judgment: enforcing the original, signed contract, outlining the responsibilities required of both companies, typically involving stricter consequences if not followed.Â
Settlement: both companies reach a confidential agreement regarding their differences. This is a best-case scenario, as neither party needs to deal with legal intervention and can settle the dispute on their own.
What are the common causes of business litigation?
Business litigation is typically caused by:Â
- Breaches of Contract: one business does not fulfill its responsibilities outlined in the contract, so the other business seeks legal action.
- Intellectual Property Disputes: one business has created a new product and legally obtained exclusive rights to it. Another company, however, has recreated it, used it, or sold it without permission, which breaks the law and makes them subject to legal action.Â
- Partnership Disputes: when two companies partner together in hopes of achieving greater commercial success, it is always possible they will clash. If they have both signed a contract regarding their responsibilities and profits, each company must follow through; otherwise, they are subject to legal action.
Breach of Fiduciary Duty: when one company holds fiduciary duty, its job is to act in the best interest of its client(s). If it does not, their client (typically another company) can take legal action.
How much does it cost to litigate a case?
It is typically fairly expensive to litigate a case, but it depends on the state, court filing fees, personnel fees, and the complexity of the case. Hiring an attorney and paying expert witnesses can be costly, and even court filing fees typically come out to a few hundred dollars. In Florida, for instance, a small claim might be $400, but a larger claim may cost a few thousand dollars.
What is the difference between arbitration and litigation?
The main difference between arbitration and litigation is the presence of a judge. Arbitration, while still a formal process, is not as formal as litigation. It functions more as an intervention in which a neutral, third-party arbitrator acts as a judge and makes the decision for both companies based on their evidence and claims. Litigation, conversely, actually sets foot in the courtroom, in which both companies must present their case before a judge and jury.
Are litigation settlements taxable?
According to Internal Revenue Code (IRC) Section 61, all earned income as a settlement or judgment is taxable, with the exception of monetary reward in damages for discrimination claims or for physical injury. In fact, settlements for physical injury are outlined in IRC Section 104 as non-taxable.Â
