The Third Option in Commercial Litigation
By the time a client has come to their lawyer for help with a litigation matter, they are usually already in a “wartime” mindset. They have either just been sued or have been wronged in a manner serious enough that they want to sue someone. In the commercial context, the players involved are normally a business pitted against one of its customers or suppliers. Once the commercial relationship has deteriorated to the point where each side is lawyering up, the mindset is normally “us vs. them.” In other words, much like in a war or sporting event, the assumption is that there will be a winner and a loser. That’s what happens when adversaries collide. Smart lawyers recognize that there is a third possibility. If the heart of the dispute is something that can be resolved through negotiation, it is possible that the relationship can be restored and the parties can once again do business together. This “third option” is almost certainly better for both sides than going to trial or arbitration. By the time each side counts its expenses – attorney fees, expert fees, litigation costs, time that mangers and key employees waste in deposition, etc., only an unqualified victory is a truly beneficial outcome. Even then, if a judgment is uncollectible, a party can find their victory to be hollow indeed. If this “third option” is so much better than going to battle, why does it not arise more often?, There are several factors that often determine whether the “third option” is possible in a given case:
Lawyers must look for it early on. The longer a case proceeds down the path of litigation, the more dug-in and resentful each side will get. Try telling companies to just patch things up and work together again after each side has spent $100,000 and hours slandering each other! The “third option” has to be explored before too much has been invested into the dispute.
The heart of the dispute must be only a part of the overall relationship. In litigation, there are times where one side views the other in a 100% negative light: corrupt, inept, and irredeemable. But more often, you might hear “they were really good at A, B and C, but we had to sue them because of X.” When the parties were happy with their relationship except for one sticking point, try to focus on the positive and ask, “What if that one point were resolved?”
Be creative. Sometimes the heart of the dispute is something that could be resolved with a mechanism that no one had thought of because they were too focused on winning. Instead of trying to prove who is right, try to find out why each side is so set on their side of the argument.
I have seen this work in my practice. I have been able to settle cases by re-negotiating the sticking point (i.e. amending the contract) in a way that both sides can agree upon. Even if they are not 100% happy with the new arrangement, it is not hard to convince them that the alternative is even worse. Then, they sign the new contract and move forward. In these cases, the only party who lost out was me (because the attorney fees were far less than they would have been). But that’s OK – there are plenty of cases where the two sides will never reach for the “third option.”