Litigation & Lawsuits
Thresholds, Truth about the Process, Costs and Expectations
January 2013*Note: This White Paper is a prelude to a Webinar that will be hosted by Brown & Joseph and presented through NAWLA in mid-January, 2013.Brown & Joseph is an international Law Office Collection Firm offering innovative accounts receivable solutions in the commercial B2B sector. We specialize in the Lumber Wholesale, Manufacturing and Building Materials Industries. [Brown & Joseph is a proud Affiliate Member of NAWLA and we are a Recommended and Preferred Service Provider.]
Click on the link to hear John Whyte's recorded Webinar on Litigation & Lawsuits
This white paper will provide a high level overview of the legal process. Every case can be different with its own level of complexity, time frames, procedures and costs. The legal process and filing of a lawsuit is not an easy quick-fix that magically brings money to your bottom line in a short time frame. On the contrary, it is a time consuming effort that can be complicated, frustrating and costly; forms, procedures, costs, discoveries, interrogatories, witnesses, trial (bench/jury) continuances, etc., etc.
The main factors to consider include:
• Thresholds & Costs
• Legal Process
• Time, Emotional Cost & Uncertainty
Thresholds & Costs
The first factor when considering if a lawsuit is a viable option, is the size of the debt. In the past, due to lower costs, it made sense to file a lawsuit if the debt was over $2,500. Filing fees were no more than $150 in most states. Back out attorney fees of $833(33.3%) and you would net roughly $1550. That was considered a good business decision.
Needless to say, times have changed. The status of the current economy has affected the legal arena as well. All states need additional revenue. Filing fees can be as high as $750 (higher in Federal Court). Contingent attorney fees are still 33.3%, but there are many attorneys’ that also charge a non-contingent fee, or, hourly rate to cover their time and costs.
In addition, there are court costs separate from filing fees that vary as well as additional hourly costs for counterclaims and depositions.
Lawsuits are filed in the locale, or jurisdiction, of the debtor. At the trial you will need to provide a witness which adds to the cost: travel expenses, hotels, etc.
These costs must be factored in when determining if you want to file a lawsuit. Because of the costs involved, the average threshold for filing a lawsuit is now $5,000 - $7,500 usually depending upon travel and witness costs.
Once the decision is made to file a lawsuit there are things that occur that are common to all jurisdictions, however, there are also things that occur that could be specific to a certain state. Time does not permit covering all the variances, so, this whitepaper provides a generic, simplified overview to gain a greater understanding of the overall process.
A complaint is a written document prepared by the attorney which sets forth the basic controversy of the case and what relief is being asked from the court to grant - a judgment that the defendant (party bringing the action) owes the plaintiff (party being sued) money.
The complaint is filed with the court and a summons is issued. The summons states that the defendant is being sued for money owed and directs the defendant to file an answer. The summons is typically given to the sheriff in the debtor’s jurisdiction to be presented to the defendant. If not delivered after 30 days, a special process server is engaged at additional cost, at which time, hopefully soon, the defendant is served
Once served, the defendant is asked to file a response to the complaint with the court. The answer can be complex, or simply a denial that the money is owed. Regardless, there are statutory timeframes to answer the complaint which can vary from jurisdiction to jurisdiction. The timeframe to answer is from when the defendant is served, not from when the lawsuit was filed.
Two things can now happen. One is that the defendant answers within the timeframe, a trial date is set, both parties appear at trial and the case is heard. The other is that if the defendant fails to file within the required time, or, answers and fails to appear at trial, the plaintiff is awarded a ‘default’ or ‘summary’ judgment which means the court says that the money is owed.Discovery
- assuming that the defendant answered and a trial date has been set, both parties have the right to determine, or ‘discover’ the evidence supporting both sides of the dispute. This discovery could be done in person, called a ‘deposition’, which is recorded by a court reporter, or, through written questions, which must be answered in writing, under oath called an ‘interrogatory’.
Once discovery is complete, a trial date is set. The case will be heard by a judge unless a jury trial is requested. Presently, the courts are so overcrowded that if a jury trial is requested, in some jurisdictions it can take 3 – 5 years to obtain a trial date!
Regardless, once a trial date is set, written requests to the court called ‘motions’ can be presented. Examples:
• Motion to Dismiss – statute of limitations has expired, no jurisdiction
• Motion to Show Cause – to gain a hearing to hear reasons
• Motion to Amend – request to change a part of the lawsuit
Once the case has been presented and heard by the judge or jury, a decision is rendered in favor of one of the parties (plaintiff or defendant). If the plaintiff is entitled to relief or payment the terms and conditions will be determined in post-judgment proceedings.
Time, Emotional Cost, celebrity news
The Legal Process outlined the best case scenario. There are many things that can happen that extend the time and contribute to the emotional cost and uncertainty when filing a lawsuit. To illuminate this point, below are several (certainly not all) that are common:
• Delay of Service
– the sheriff cannot serve the defendant. Special Process servers are engaged, can’t locate the defendant or the defendant dodges service
– the defendant’s response to the plaintiffs allegations which states a claim or claims against the defendant• Continuance(s)
– at the trial, the defendant can ask for additional time due to circumstances that happen that can or can’t be controlled; illness, weather, etc.
If you have expended the time and resources to attend a trial out of state as a witness and the judge grants a continuance, you have to either return at the time the judge schedules which certainly adds to the cost, or, drop the lawsuit.
Contributing to the uncertainty and frustration is that just because you filed the lawsuit does not mean that the verdict or decision will be rendered in your favor.
The filing of a lawsuit is an unfortunate, but, necessary part of business. However, many jurisdictions are looking at alternative dispute resolution solutions in an effort to both unclog the overcrowded court systems and speed up the process. Some states require court ordered mediation and/or arbitration hoping that the dispute is resolved, thus avoiding the time and costs of a lawsuit.
Another alternative is to avoid the lawsuit
Why Avoid A Lawsuit
Now that there is a greater understanding of the process and ‘big picture’, it needs to be noted that we highly recommend, that whenever possible, avoid a lawsuit. We consider a lawsuit to be the least attractive option to be used only when all other efforts have failed. Once an account is placed with Brown & Joseph, we go to great lengths to gather the Business Intelligence needed to exhaust all possibilities. The credit and asset research we perform allows us to determine the paying ability of the debtor; can the debtor borrow money to pay, can the debtor honor a payment schedule, does the debtor have assets, or, is a settlement today the most reasonable course of action. In many cases, a settlement today is a better business decision than an unknown outcome in court a year or more in the future.
Additional information can be obtained by contacting Brown & Joseph.
Vice President Business Development
Brown & Joseph, Ltd.
2550 West Golf Road Suite 300
Rolling Meadows, IL 60008Toll Free: 888-829-9997 x207