[0:06] Most business owners think a lawsuit starts when someone files a complaint,
[0:11] but the reality is that decisions made before anyone steps into court generally determine success.
[0:17] In this two-part series, we're talking about how smart business owners evaluate disputes
[0:23] before they become expensive distractions.
[0:26] We're talking with Brick Business Law Founder and Managing Attorney Kevin Brick.
[0:31] About why lawsuits are won and lost before the lawsuit and how smart business owners evaluate litigation decisions.
[0:39] Kevin, thank you so much for joining me today. This is a great topic.
[0:44] Thanks Lisa. I appreciate you having me on.
[0:46] What does it mean that a business can win a lawsuit and still lose?
[0:52] Well, there's a lot of costs that go into a lawsuit, not just money costs.
[0:57] We're talking about effort of your management, of your team,
[1:01] stress, opportunities, loss that you could be doing other things as a business.
[1:06] And all those things together, when you look at them, they could eclipse the benefit.
[1:11] And sometimes too, if you win a judgment, but you can't collect it, then you've won on paper,
[1:19] but haven't really won in reality.
[1:22] So all these pieces on the cost side have to be weighed against,
[1:26] what are the benefits that the business really wants out of it?
[1:29] And so there's a lot of benefits that can come out of a lawsuit,
[1:32] but you gotta really know what the goals are.
[1:34] So sometimes the goals are to win money.
[1:37] Sometimes it's to get an injunction, to stop some harm from happening.
[1:41] It could be protecting a reputation or creating leverage.
[1:46] It could be setting a message to competitors in the marketplace.
[1:51] There's all kinds of reasons why somebody might want to get into litigation in terms of what their goals are.
[1:57] So it's just important at the outset to understand those and weigh them against risk.
[2:01] So you can really know what does it mean to us to win in this lawsuit
[2:05] and to make sure you've got a clear picture of what that is.
[2:08] And we know lawsuits are expensive, but what are the hidden costs of litigation
[2:13] that business owners often underestimate?
[2:16] Well, the biggest hidden cost I see really is the business owners and employees time away from the business.
[2:23] So the longer a lawsuit goes on or the more intense it is,
[2:27] the more it pulls their time and focus away from things come along with running a business.
[2:33] And so that can be stressful and it can come at inconvenient times.
[2:37] It could be more effort than they anticipate.
[2:42] So I think that is one hidden cost, I'd say.
[2:44] And then you kind of add that on top of the actual costs, right?
[2:48] And so monetary costs, obviously you've got your attorney's fees and filing fees, things like that.
[2:54] But you got to pay for expert witnesses.
[2:56] You got to pay for mediators. Maybe there's a cost to reserve evidence.
[3:00] So there's all these other things that, you know, if you've done a really, really good assessment on the front end,
[3:06] you know, they're less hidden, you know, you understand them more at the outset.
[3:11] But some things you really can't anticipate.
[3:14] And so I would say there are almost always some sort of hidden fees.
[3:18] And those are the main ones that I see in business litigation.
[3:21] And Kevin, I heard you say earlier that you may have won, but you can't collect.
[3:27] And I want to unpack that a little bit. Why is collectability so important?
[3:31] For litigation over money damages, right?
[3:35] It's really, the whole lawsuit itself is kind of just part one.
[3:39] So you got to get to the point where a judge or jury says that you are entitled to recover money from this defendant, right?
[3:47] That's step one.
[3:48] And so you get a judgment essentially piece of paper that's recorded that says,
[3:52] now I've got certain rights to go and try to recover this money.
[3:55] Well, you know, sometimes you've got a defendant that might file bankruptcy or might not have the assets or maybe they've done things to try to protect the assets.
[4:03] So there's a step two, which is how do we collect this?
[4:07] Can we collect it?
[4:08] And sometimes you get a judgment that you can't collect.
[4:10] It doesn't, doesn't matter how good of a job you do, turning over stones and trying to find assets.
[4:15] So that's something, you know, to some extent, you should try to make an effort to understand what is the collectability of a defendant or defendants when you start.
[4:24] And sometimes you don't know you can't, you can't know for sure.
[4:27] And sometimes those things change there in the course of litigation.
[4:31] But you should make some sort of assessment on the front end.
[4:34] And as you go, does it make sense to recover, to pursue this litigation given that there might be some uncertainties about whether I can recover?
[4:42] And again, that kind of goes back to the goals we were talking about.
[4:45] Like, is the main goal in litigation to recover money damages?
[4:49] And if it is, and collectability is an issue, that's something that you really got to think through and examine to the best way that you can as the lawsuit is going on.
[4:58] And I know there's another piece to this and that's the attorney's fees.
[5:01] How do attorney's fees provisions change that assessment or analysis?
[5:07] Yeah, so the general rule, at least in Florida here, is that each side pays their attorney's fees.
[5:12] Unless, and there's an exception, you've got a contract or a statute or a rule that allows you to shift your attorney's fees to either side generally, but you're successful.
[5:22] And so we just had a case where we won over $500,000 against our clients' attorney's fees from the other side.
[5:29] And that's a big shift, as you can imagine, it's a big leverage point.
[5:34] It's weighing out there that you can actually do that.
[5:37] So as litigants think about the cost side of it, there's kind of a part two, which is, do we have an avenue to recover our attorney's fees from the other side?
[5:47] And that's a big thing, because as you're thinking about your the cost and the risk and the economic assessment, having that avenue or that potential, maybe that's the difference between a green light to go forward and a red light.
[6:00] Like, it doesn't make sense to do this, right?
[6:02] Because as the cost can be significant when you're dealing with complex litigation, as business litigation often is complex, and there are high costs to it.
[6:11] So you got to really make that be part of your initial analysis, and as things are going on, are there opportunities that come up during the litigation that might allow us to shift our fees to the other side?
[6:22] And we've talked a lot about risks and costs, but where are the positive outcomes? Where does it all make it worth it?
[6:31] We have to understand when a business comes into an attorney's office, and they have a claim for damages or something else, usually that the business has been damaged in some meaningful way, right?
[6:44] They've lost money, they've lost opportunity, they've lost their reputation.
[6:48] So when we're talking about, you know, recovery from damages, sometimes that's the difference between a business making it or not, right?
[6:55] You know, from a cash flow perspective or reputation perspective, losing opportunities.
[7:00] Sometimes it's about securing future rights. So for instance, an ownership stake in a business or an ownership stake in intellectual property.
[7:09] Sometimes there's an ongoing harm, or a competitor's stolen trade secrets, or a former employee has violated a non-compete agreement.
[7:18] And all of these things, you know, they can cause a real significant damage to a business.
[7:23] So being able to stop those things, to stop those injustices, to recover damages, all of those things are very important.
[7:30] And you know, one time I was recognized years ago for being one of the top bet the company litigators in the US.
[7:38] And so I know, you know, there's, there's what's called high stakes bet the company type of litigation.
[7:43] And so that's the type where it's just all or nothing, you know, it's, is the business going to make it or not?
[7:48] And so a lot of times that's the type of thing that we're dealing with and that's the benefit of pursuing litigation.
[7:54] Can you speak to the thought process of a business owner needing to decide whether to settle or keep fighting when a lawsuit is ongoing?
[8:05] Yeah, I mean, the business owner, you know, at the outset of the litigation, sometimes you don't have the benefit of knowing the strength of the evidence or the other side's arguments or how they're going to approach things.
[8:19] And usually in business litigation, at some point in the process, the court is going to order a mediation.
[8:25] So settlements could occur at mediation or they could occur before or after.
[8:30] But the decision to settle is an important one because as litigation goes on, you start to see the label and you understand the cost and what things are going to look like.
[8:40] And so coming forward and saying, all right, I, I now have better information to make a better decision.
[8:47] And sometimes, you know, settling it feels kind of like giving up, you know, like we took it this far, but we're not going to go all the way.
[8:54] But again, it's, it's really often just a good business decision when looking at costs and opportunities and looking at you kind of trying to predict the future, how things are going to go.
[9:06] But as you go on in a case, you have a better and better understanding of what that looks like.
[9:10] And so the decision to settle, I think, is one that it's important.
[9:15] It's important to take seriously, and it should be just considered not as an emotional decision, but more so as a decision based on better and better understanding of the facts and circumstances.
[9:26] And of course, Kevin, I have to ask the other side, when does it make sense to litigate aggressively?
[9:31] Well, you know, we talked a little bit about kind of the bet the company type of litigation.
[9:35] And so when you see that the damages are going to justify the costs, or the other side can pay, there's insurance coverage, or they have what deep pockets.
[9:45] You've got strong evidence, you've got an ability to shift your fees.
[9:49] Maybe the other side is threatening things that are going to cause the business to go under.
[9:56] So maybe it's setting a precedent, for instance, a business that might have 100 contracts out there, a thousand contracts, and somebody's trying to undermine the validity of it.
[10:07] Well, this is going to make this is going to be relevant for all your other contracts, right.
[10:11] So, and also sometimes settlement is just not realistic. You just have to, you know, you have to take it all the way through.
[10:18] I think aggressive litigation certainly has a role to play. And a lot of times, again, as you're doing that cost benefit analysis, you say, well, we need to, we need to push it all the way through.
[10:29] We need to go really hard and a lot of times that that can be the right answer to you.
[10:34] I'm walking through this step by step. So we're going aggressive. We're going settlement right there in the middle.
[10:40] Is there such a thing as a practical litigation budget? And what would that look like?
[10:45] Yeah, I think from the standpoint of assessing all these things at various stages, you're thinking about before you file as things move on as a business owner, you want to make sure you have a budget for that.
[10:59] And you want to look at the practical side of things go normally, if things go really poorly or if things go really well, what's our budget going to be and can we do this? Do we have the funds to take it?
[11:10] So a lot of times when we assess the case at our firm, we're going to look at, you know, what, what is each stage likely to cost?
[11:18] The work that has to get done or do we have outside costs like core reporters and mediators or expert witnesses that we have to bring in and when does that happen?
[11:27] And then we just we work in some variables. Are we going to take five depositions or 10, you know, what's that going to look like? What's the cost of this?
[11:35] So we try at the front end to have an ability to give our clients a budget when things are complex and usually, you know, they change because the variables can go one way or the other, but at least you kind of know at every stage are we're going to sit down, we're going to try to figure out what makes sense from from an economics standpoint.
[11:55] And you as a business owner, you're going to have some predictability, hopefully, of what a budget looks like. And again, does it really make sense to go to the next stage in the next litigation, given the cost and the potential benefits?
[12:07] And I know it's not always about litigation, but when do the mediation and settlement stages become the most effective option?
[12:16] Well, most, I mean, most cases of all kinds settle before trial, and that's a specialty in business litigation cases like what we do.
[12:25] And most of the reason is because you start to see all the facts come out ahead of time, you know, you take depositions, you see the documents, you can apply the law, you see all the different filings.
[12:37] And most of the time, you know, when you've got business owners, generally, they're sophisticated enough to say, okay, I see, I see where this is going.
[12:46] I can make a practical assessment of the risks and the outcomes and trial is expensive.
[12:52] And so a lot of times people will sit down and they'll try to find a way to make it work before trial. And they often do with skilled mediators and attorneys trying to help them make a good decision.
[13:03] And so I would say generally the stage where mediation happens usually is somewhere along the line of we have an idea of what this case looks like.
[13:14] We have an idea of what the issues are. We have a good idea of the potential outcomes and both sides do.
[13:20] And then sitting down at that stage with both sides and laying out your case and sitting with your client as the attorney talking to the mediator, that's really where it usually happens because
[13:32] everybody has a reasonable expectation of the outcome at that point.
[13:36] And so that's where I'd say it generally makes the most sense. And as mediators will often tell you successful mediations are ones where everybody walks away a little bit unhappy with the outcome because everybody thinks, you know, in the best case scenario, I'm going to get this outcome.
[13:49] But there's of course uncertainty and cost to get there. So usually you cut it's ratchet down the expectations a little bit and everybody can find some common ground.
[13:59] Well said, I like where you're leaving it today. You know, we're talking about the case being one or last before we walk into the courtroom final thoughts on this two part series.
[14:09] Yeah, I'd say business owners really they should approach business litigation and disputes just like any other business decision.
[14:17] They should look at it as an investment. They should look at costs and risks and opportunities.
[14:22] You know, as litigation goes on from start to finish, they should reassess and make sure that they're making the right decision for their business, understand the plan and then just continue to execute it with good counsel.
[14:32] Kevin, thank you again for your insights on litigation, mediation and all the steps that business owners can take to move this process forward.
[14:41] Thank you.
[14:42] If your business is facing a serious dispute, do not start with the question, can I sue start with a better question. What is the smartest business outcome and what legal strategy gets me there at brick business law, their lawyers work with business owners to evaluate risk, protects leverage and make practical decisions before litigation takes over the business, visit them at brick business law.
[15:07] Thanks for watching. Be sure to hit that like and subscribe button and leave us a review in the comments.