The First Thing to Consider before Filing a Lawsuit – Litigation Risk

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What Is Litigation Risk?

Litigation risk is the concept that even though the facts and the law are on your side, you may lose your case anyway – an unfortunate reality of our legal system. Therefore, litigation risk is one of the most important things you should think about before proceeding with your case, in order to maximize the possibility of a favorable outcome and avoid unnecessary pain and expense down the road.

Top 3 Ways to Reduce (or even Eliminate) your Risk of Loss

1. See if there is a viable business solution.

Before you go to court, explore different business options and opportunities relative to the dispute. Talk to your trusted colleagues and advisers and have a brainstorming session to work through a system to make sure that you have explored all possible solutions before resorting to litigation. This helps to take the oftentimes highly charged emotions out of the equation and makes for better decision making overall. And in the long run, it also helps you manage costs.

2. Mediate.

If you are unable to find a business solution, see if the other side is willing to mediate, which is a way to minimize costs in the short term, and see if there is any common ground. Mediation is typically not binding, and involves a neutral third party who facilitates discussions among all participating constituents of the dispute. The standards of qualifying as a mediator vary from state to state, and possibly even by area of law, although generally it is a very informal process. The bottom line is that, for you to get the most out of your mediation, you should find a mediator who is qualified to handle your type of dispute. For instance, you want someone with experience in handling commercial disputes if you have a commercial dispute, not someone who only has experience in resolving employment contract disputes for film actors. A couple of good resources for qualified mediators include the American Arbitration Association (adr.org), JAMS the Resolution Experts (jamsadr.com), and mediation.com.

3. Share the upside of winning.

You will be hiring a lawyer to handle your case, and under those circumstances, you will want someone to be further incentivized to win. While lawyers are bound by the rules of professional conduct governing lawyers to act in their client’s best interests, financially incentivizing your lawyer and you further aligns those interests and reduces litigation risk because the lawyer will be less focused on generating hourly fees and more focused on getting results.

Of course, each case has a unique set of facts and circumstances that would further inform how to analyze reducing or eliminating litigation risk for that particular case. With that said, the three ways listed above should provide you with enough information to think about other ways to reduce litigation risk in the context most applicable to you.

James J. DeCristofaro is the founder and principal of DeCristofaro Law (DCLfirm.com), a commercial litigation and commercial bankruptcy firm based in New York, New York. DeCristofaro Law focuses primarily on disputes involving commercial parties, and also has expertise in commercial bankruptcy, contract negotiation and drafting, and commercial and residential real estate.

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