LEGAL DISPUTES AND LEGAL FEES: PART I

By PP Frank Sexton
    
Let’s discuss an unpleasant subject, right up there with hemorrhoids, death and taxes: legal fees, particularly legal fees you can incur if you or your company files a legal action or, heaven forbid, are made a defendant in a legal proceeding.

As a litigator of 39 years (I know, it’s hard for you to believe!), my first piece of advice would be: avoid litigation if you can, preferably by first choosing good business partners (often tough for those of us not clairvoyant) and second, by preparing for the worst and utilizing well thought out contracts for your commercial endeavors which provide for alternative dispute mechanisms, such as mandatory pre-suit binding mediation or arbitration.

As you know from various craft talks we’ve had, a mediator is a paid independent third party who meets with the parties to the dispute informally, listens to both sides, and attempts to get the parties to agree to a resolution or settlement.  Once reduced to a written agreement, the settlement reached at mediation is a final resolution of the matter.  And, the beauty of a mediation is that if it fails, nothing that the parties said during it can be used in any subsequent court proceeding or arbitration.  If there is a lawsuit, don’t be afraid to suggest mediation early; many litigants think that such a suggestion is a sign of weakness or lack of resolve.  Both parties, however, typically become more mediation-minded after the first several monthly legal fee bills arrive in the mail….it’s amazing what a five or six-figure legal bill can do to a litigant who previously told his or her lawyer “I’d rather pay you every cent I have rather than pay that s.o.b. a dime…”  Never be afraid to ask counsel to maneuver the matter into the proper position for a good mediation, and above all……prepare for the mediation!  Don’t just go through the exercise without hope.

I’m not telling you to ignore wrongs done to you or your business, or to be a doormat, but, to the extent possible, try to retain a clear business judgment in such a circumstance and involve people you trust, business associates or counsel, in the decision because you yourself may be too close to the situation to think rationally.  Many commercial agreements contain provisions providing for meetings, first, and mediations second, prior to any legal action, in the event of a dispute.  Of course, the right mediator in such a situation is critical.  And, as in any other endeavor, there are numerous mediators around whose effectiveness varies widely.  In this community, they range from the grossly disinterested and ineffective chumps whose function seems to be to charge for time and to take in oxygen, to the tenacious, bright and creative solution-seekers who refuse to let the parties NOT settle. Seek the advice of those familiar with local mediators to separate the frogs from the princes. 

One alternative, of course, in lieu of filing a civil action, can be mandatory, binding arbitration, which is best provided for in the initial contract between the parties at the beginning of the relationship: in the event of a dispute, it will say, the parties agree to submit this matter to arbitration before the entity that will run the arbitration, such as the American Arbitration Association.   In our next column we will offer the good, bad and ugly, the pros and cons of arbitration, and suggestions for insuring a successful, least expensive, arbitration.

Stay tuned to this station!