expenses are not recoverable—even to the winning party—unless an attorneys’ fees provision is in the contract.
A company may win the battle in court, but lose the war,
when it realizes that after subtracting the fees, expenses
and time spent by key personnel on a litigated case, even
a “win”—no matter how good it feels—equals a net-zero
The substantial soft costs of a lawsuit are also not fully
understood—even by attorneys. Time is money, and in
any lawsuit, management and other key employees must
dedicate a considerable amount of time to the legal dispute.
Additionally, lawsuits can damage reputations and give
competitors leverage since court filings are public record.
Rivals seeking a competitive edge or inside information
can almost always review all court filings and trial testimony transcripts.
Some lawsuits may take years to get to trial, and even
after the trial, the losing party has an automatic right
to appeal—which may take several more years. Finally,
judges and juries are unpredictable in civil cases. Therefore, the outcome is unpredictable, and it’s impossible to
gauge who will come out ahead. When a company places
a substantial legal dispute in the hands of a judge or jury,
it is taking a huge risk.
A much less risky resolution to disputes is nonbinding
mediation. In this situation, the parties jointly hire and
share the costs of a neutral third party to help negotiate a face-to-face settlement. In fact, the sole purpose of
mediation is to negotiate a settlement between the parties
by breaking down the barriers to communication and
encouraging offers and counteroffers.
However, no firm statistics are available to show how
many disputes submitted to mediation actually settle
because mediation is confidential and not open to the
public. Most active mediators report anywhere between
an 80 and 90 percent settlement rate.
Mediation can be set up in a matter of weeks, and can
take place at any time before or after a lawsuit has been
filed. Lawyers are helpful but not necessary. The role of
the mediator is much different than that of an arbitrator
or judge. The mediator does not make or impose a deci-
sion, whereas all a court or arbitrator can do is decide who
gets money and how much.
ABITRATION IS FINAL
Binding arbitration serves as another option to litigation
or nonbinding mediation. In this situation, resolutions
can’t be thrown away. When parties place an arbitration
clause in a contract, they forego enforcing their legal