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How to avoid ‘pressing the nuclear button’ in business and winding up in court


Thursday, August 3, 2017

As published in fora.ie on 30th July 2017.  Litigation is often avoidable and seldom absolutely necessary.  Mediation is increasingly being used to resolve disputes and, in appropriate cases, it offers a speedy and cost-effective alternative to litigation.  However, very often parties only engage in mediation after proceedings have been initiated.

Accordingly, it may well be in a client’s interests to engage a lawyer to obtain advice from an objective, strategic and tactical perspective as to how to resolve disputes as early as possible thus avoiding litigation. This will, of course, depend on the lawyer’s ability and pre-disposition to resolving disputes pre-litigation!

There are, of course, times when the injustice of a situation demands and necessitates legal action.

Nevertheless, it is almost always in the client’s interests to explore reasonable alternatives to settling a dispute before embarking on litigation.

It may not be the most elegant phrasing but, by way of context, Ambrose Bierce, the American journalist and author of ‘The Devil’s Dictionary’ once put it, “Litigation: A machine which you go into as a pig and come out of as a sausage”.

The downsides of litigation

  • Litigation is very (very) expensive and its outcome is unpredictable. Too often the costs of litigation outweigh any potential award or settlement amount. In any dispute, notwithstanding the liability position, there is always merit in considering the consequences of litigation on purely economic/commercial grounds.
  • Litigation does little to facilitate management of risk i.e. parties to litigation lose control to a certain degree of their destiny and their ability to manage risk is severely curtailed. This is because the very nature of litigation is that certain things are outside of one’s control.
  • Litigation disrupts and disturbs parties from doing their jobs.
  • From a reputational management perspective, litigation does nothing to enhance a party’s reputation and standing. How litigation plays out in the public domain/press is very difficult to predict and very often the average reader/customer only sees the damaging headlines and does not undertake an analysis of the facts.
  • Litigation damages business relationships.

It should be the job of the lawyer to dissuade a client wherever possible to commence litigation or at the very least to point out the reasons to support the argument that litigation should be the weapon of last resort.  To quote Abraham Lincoln “discourage litigation. Persuade your neighbours to compromise whenever you can. Point out to them how the nominal winner is often a real loser – in fees, expenses, and waste of time”.

Stubbornness and other drivers of litigation

  • Litigation is driven by personalities who are very often personally affected and whose human characteristics of rationality and objectivity are severely impaired by their emotional attachment. This results in parties becoming unreasonably stubborn and too proud to concede that a compromise is the best way forward. As a result, many do not act in the best interests of the company.
  • Failure at the outset to adequately and critically analyse the strength/weakness of the case.
  • Failure to communicate – by parties simply talking to each other there is less risk of misunderstanding and misconception, which might ordinarily result in a party pressing the nuclear button
  • Holding out for more than one needs or deserves – very often a dispute resolves on the steps of the court on similar terms to what could have been achieved at a much earlier date and perhaps even before litigation commenced.

Pre-emptive steps to handling litigation

  • Step into the shoes of the other party i.e. try to be as objective as possible
  • Improve the way you communicate i.e. pick up the phone and try to resolve the matter before proceedings are issued. Experienced lawyers or mediators can help with this.
  • Carry out an analysis of why it is that you have found yourself involved in the dispute. Is it perhaps down to poor operational structures/procedures and/or a poor culture/environment?
  • Deal with disputes/threats of litigation promptly – head them off at the pass!

Author

Murrough McMahon

PARTNER


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