When Trials Make Good Business Sense

By Wyatt Johnson

Have you ever had the conversation with a lawyer where that lawyer drops this line on you: “any case that goes to trial is a loss.”

This statement is usually followed by a push to settle the case. If you’ve been in one of those conversations, did you stop and wonder whether your attorney gave that advice for your benefit or theirs? More to the point, is the lawyer saying that because you need to avoid the risks of trial or because the lawyer is afraid of trial? Either way, it is a question you should ask.

Lots of lawyers practice law. A substantially smaller number of them actually try cases. For those that do, since the vast majority of cases settle short of trial, most trial lawyers spend a lot less time in trial than people expect. When you consider that trials are demanding, the stakes are high, and the lawyer’s success or failure is on display for all to see, it should be easy to understand that many lawyers feel no small amount of fear and apprehension about going to trial. Ethically, lawyers should not be factoring those fears into the counsel to a client to go to trial or not – but lawyers are human.

The simple fact is that some cases should go to trial. From a business standpoint, a settlement is not always the best outcome. How do you know if a highly cautious lawyer is warning you that you have real problems instead of caving to pressure? Here are some factors to consider:

1. Is this case one that is unique or likely to be repeated? Some businesses will face repeated court actions because they regularly require court enforcement. Examples would be lenders or contractors who have liens that they need to foreclose. While court can be unpredictable and yield unexpected results, on balance, where the claims are straightforward and based on well-established law, they will succeed far more often than not. The losses from an occasional outlier decision may be far less than what would be incurred in the concessions you would need to offer to settle cases.
2. How rational is your opponent? All litigation is emotional. There are many experienced litigants, but even the most experienced litigants are susceptible to having their judgment clouded by fear, pride, and self-deception. The real question is whether the actual decision maker on the other side can set aside the extraneous noise and make a proper risk-based decision.
3. Some people cannot get past their baggage and work on a solution that most consider to be within the range of reason. Trying to reach a compromise with somebody who has a distorted understanding of the risks of a case can be a futile effort. The terms of settlement that somebody like that would demand can often be far more harmful than the most likely results from a trial.
4. How intuitive is your position? The court process involves placing a decision affecting your life or business into the hands of a disinterested third party. By design, the decision maker will not know or care about you. Therefore, the decision maker will not be motivated by any vested interest in the case’s outcome. Whether your case is to be decided by a judge or a jury, the decision maker is supposed to follow the law. However, complicated legal rules and doctrines can often overlap, conflict, or contain unresolved ambiguities. When in doubt, everyone instinctively asks, “does this make sense?” A more naturally intuitive position “makes sense” to people. When the law gets obscure, the final decision tends to be the most intuitive result.

Before you consider settling a case, walk through these factors. Rather than surrendering to the “every case that goes to trial is a loss” mentality, you will be giving yourself the opportunity to think about the probabilities of success at trial. Then, compare that to what is on the table for settlement. If the possibility of success at trial looks comparatively good, you should probably go to trial.