Lawsuits and Your New Business: The Case Against Filing a Lawsuit

file a lawsuit

When your enterprise is in its critical initial phases, pursuing claims against deadbeat vendors and two-timing salespeople may seem to make sense, but pursuing litigation at this stage may not always be the best course. Time is money, and lawsuits frequently take a lot of both.

First and foremost, litigation can be very expensive. The costs of litigation can be surprising even to seasoned businesspersons and can be crippling to fledgeling companies. Second, a lawsuit can be very time-consuming. Court delays can stretch ordinary business disputes into multi-year affairs. Moreover, lawsuits can be a time-drain internally, as monitoring the case and its costs can take up valuable time, not to mention the time spent preparing with your lawyers, and attending depositions and trial. Finally, countersuits filed can further complicate what originally was envisioned as a simple matter.

A more subtle effect of filing suit is loss of privacy. Proprietary information may be disclosed in public filings. Opposing counsel can subpoena other people to obtain information or documents relating to you and your business. Most legal proceedings are public records, and as a result, your business could become an open book to the media and even to your competitors. Publicity on a lawsuit can also reflect negatively on your business and bring unwanted attention from government regulators.

Despite these negatives, litigation can provide results, particularly in the business world. If your business has suffered as a result of someones actions, lawsuits can provide the only route to make your business whole. A lawsuit can also be necessary when you want an injunction against someone who is irreparably harming your business, like a former employee or competitor who is misusing trade secrets or other proprietary information. Finally, there may be strategic considerations to filing suit. All of the above should be aggressively discussed with your attorney prior to filing suit. Legal action should always be well thought out, and rigorously analyzed prior to adopting a course of action. If you do file suit, be prepared.