California’s real estate market continues to evolve, and with it, the types of legal disputes that arise.

In California, business disputes are common. The difference between a favorable and unfavorable outcome to such a dispute can have a profound impact on your company. Business owners often see their companies’ very viability as turning on their ability to prevail in fights over breached contracts, shareholder or partnership disputes, and business torts. Typically, however, litigants are well-served to take an expansive view of what it means to “win” their case. 

Watching Suits and other legal dramas can condition us to think that legal victories only happen in the courthouse. But the reality is that roughly 95% of all civil lawsuits settle outside of court. This is largely because litigating cases from complaint through trial will often cost hundreds of thousands, if not millions of dollars, with no guarantee of victory. Unless your contract entitles prevailing parties to attorney’s fees, any amounts that a business spends fighting over the controversy are generally sunk costs, regardless of outcome. Thus, going to trial is rarely a company’s ideal approach for creating the best net financial outcome in any dispute. 

The Importance of Leverage in Litigation and Settlement

This is not to say that the litigation process lacks value. Far from it. But litigation is often more appropriately viewed as a business transaction than as a crusade for justice. Like with any business transaction, leverage matters a great deal in civil litigation. And because the overwhelming likelihood is that your case will settle sooner or later, litigants are well-served to include considerations regarding what a desirable settlement might look like at the outset of their cases and strategize about how to leverage such a settlement. 

In most cases, the best lever that parties can use to effect a settlement is cost. As discussed above, litigation is deeply expensive. Few businesses can comfortably afford to see a contested matter through trial when the outcome is uncertain. Those that can will often be able to leverage the cost of litigation against shorter-stacked opponents. Nonetheless, any party to a dispute can increase its settlement leverage by understanding how to anticipate and manage litigation costs.

Litigation expenses tend to come in waves. Efforts to settle a case are often most successful when parties see these waves cresting in front of them. This is because in considering any proposed settlement, these parties are more likely to include the value of not being drowned in legal fees along with that of any substantive benefits received. Thus, parties hoping to reach a favorable settlement should time settlement discussions and mediation to occur during moments when reaching resolution will allow the opposing party to avoid imminent litigation costs. 

Factoring Litigation Costs into Settlement Strategy

Of course, litigation cost tsunamis generally hit both sides of a conflict, not just one. So, does that mean that there is not actually any advantage created by seeking to “ride the wave” in your settlement strategy? Not if you and your attorney have properly prepared. While there are aspects of litigation that are reactive (i.e., that the other party can impose on you), through early evaluation of your case, you can reliably identify the majority of major cost waves long in advance—and, indeed, you have a great deal of discretion about when to make waves. 

Moreover, thoroughly assessing your case early should allow your attorney to put together a realistic estimate of the costs of your matter and the range of likely outcomes. This enables you to develop an informed strategy for how the case should settle in order to ensure your best net result, taking costs into account. 

Settlement Strategy Is a Case-by-Case Analysis

Critically, this assessment may result in very different strategies from one case to the next. Some will call for early mediation before parties become “pot-committed” by spending tens of thousands in fees that will make resolution more challenging. Others will be best served by creating leverage through the discovery process in order to move the opposing party off their own stated assessments of the case that you believe unsupported by the evidence. This latter scenario may make it unwise to invest any resources towards settlement efforts until long after a case begins. 

If you need help determining what the right approach is for your case, reach out to the attorneys at Horst Legal Counsel. Together, we can help you reach the best net result for your business. Contact us at admin@horstcounsel.com.