Litigation costs a lot of money

Many times attorneys talk about winning. I hear this more from novices to litigation. My first book about dealing with lawyers I cautioned the reader to make sure they understood the value of their pride. Once you start, your pride can become extremely costly.

Although winning may be important, surviving is critical. This may seem a little absurd, but the time and money spent getting to trial will bankrupt many small companies or individuals.

A recent article from the National Law Journal titled Cost of Discovery a Driving Force in Settling Cases, showed that the cost of settling is going up. The article talks about the shear cost of finding documents and information required or requested from the opposing side. With the electronic discovery rules this can mean months of time and hundreds of thousands of dollars in costs. Eighty-three percent of the lawyers surveyed said the cost of settling a case was a more important factor than winning.

If you are lucky enough to have these costs covered by insurance, the time can still bankrupt a small company. In major litigation, one person may have to be employed or assigned to deal with the issues of finding information, documents and files. This does not take into account depositions or time spent with your attorney preparing for depositions or trial. I used to tell my clients that for every hour their deposition was expected to last they needed to figure spending 2-3 hours with me preparing. For each hour of trial that would add an additional 3-4 hours for each hour of trial.

A two week trial and a 2 day deposition of a company president can take the president away from the office for almost 2 months.

If more than one officer or staff member is involved in the litigation this time can quickly multiply. How many small businesses can survive when three of its five employees lose a month to two months away from work, on top of vacations, sick time and holidays?

This plays into the plaintiff’s hands when they are looking at a personal injury suit. The injured plaintiff will have to produce medical records, income records and submit to a deposition. The income records will consist of copies of their tax returns. The medical records are kept now days so they can be easily delivered for anyone, insurance company, patient or opposing party in litigation. At most this could take a week of time to gather and prepare. A manufacture that is defending the trial may lose months of work in responding and preparing for litigation. The cost of winning in many cases exceeds the cost of settling. For Thirty thousand dollars the attorney and plaintiff have made a decent living and the manufacture has gotten rid of a problem. Very few if any trials can be defended for thirty thousand dollars. With the discovery rules I would find it rare for a small simple trial to cost less than $100,000 to defend.

Let’s turn this to a volunteer situation. You as a volunteer are being sued for your volunteer work leading a youth group, sitting on a board, or searching for a lost tourist. After you have used up your vacation time, you are faced with dealing with the litigation with no money coming in. Few if any employers are going to pay your to attend a trial to keep your home. Your homeowner’s insurance should pick up the tab for your defense, but there is no one to pay you to deal with the time, the stress and the copies you will have to produce.

It is for these reasons that you need to deal with problems before they grow into disasters. Any angry customer, parent or even member of an association may scream and bother you, but unsatisfied people simply go away now days. And attorneys are easy to find. See Serious Disconnect: Why people sue and
It’s Not Money

If you do serve on a board of directors or are an officer of a non-profit make sure the association or non-profit has liability insurance to cover its members, its officers and its board. Also make sure that the bylaws require the association or non-profit to reimburse you for your costs as an officer or board member in defending yourself in any action based on your volunteer work. If you are a volunteer make sure the organization you volunteer for has adequate (a lot) of liability insurance to cover the members for the volunteer work.

This insurance won’t cover your lost time, but at least there will be money there to force a win or a settlement so you don’t go bankrupt giving of your time.

Bet let’s hope that you only come as close to litigation as reading this article……