Just like every builder needs a plan before breaking ground, a business needs to understand the litigation process before it’s ever involved in a lawsuit.
Every lawsuit follows a different path, but most of those paths can be found on the same basic map. Understanding that geography helps business decide whether they should sue in the first place, what to expect if sued and where the best opportunities come for settlement. Here’s an overview of the litigation process to help companies get started.
In business litigation, parties often begin any dispute by first writing a formal letter to the allegedly offending party, outlining the facts of the case and demanding payment. (Although before doing this, it’s wise to consider what a party can do to best set its case up before making legal threats.) Sometimes this is all it takes to bring parties to the bargaining table.
If a demand letter doesn’t resolve the issue, however, the next step is the filing of a formal complaint with a court (or with an arbitration association, if the parties have agreed to that). A complaint is not especially difficult or technical—it’s in essence a statement of what someone else did wrong and what legal theories underlie the lawsuit—for example, that the lawsuit is based on the rule against breaching contracts or the rule against retaining money that a person didn’t earn. Parties don’t have to attach any evidence to a complaint, so there is no need to support it with sworn statements or other similar documents. Sometimes a formal complaint will spur settlement even if a demand letter did not. But most often, its filing leads on to the next phase of a lawsuit: a motion to dismiss.
Motion to dismiss
Some states (like Virginia) call this phase “demurrer,” but the basic idea is always the same: very shortly after being sued, a defendant can file a document with the court asking it to get rid of the new lawsuit. This happens before anybody has to turn over emails or documents or answer questions under oath, and thus before the case gets particularly expensive. A motion to dismiss is only a challenge to the legal theories that the plaintiff named, and does not challenge the facts that the plaintiff alleged. The most common gist of the motion is thus usually to say to the court, essentially “let’s assume for a moment that I did all of the things the plaintiff says I did—none of that entitles the plaintiff to anything from me.” A motion to dismiss doesn’t prevent a defendant from later challenging the facts alleged, but it offers an early opportunity to challenge a lawsuit.
The perfection of a motion to dismiss—that is, when all of the parties have filed all of the briefs on the issue to which they’re entitled, but before the judge rules—can be a useful off-ramp in litigation. The filing of motions gives the parties more information about the strengths and weaknesses of their case, and may help clarify whether settlement is a good idea. The court’s resolution of a motion to dismiss is also an important inflection point—and, of course, if the defendant wins the motion, the case is over unless the plaintiff appeals.
Discovery is generally the longest and most expensive part of modern litigation, and it generally starts a month or so after a lawsuit is filed. Discovery rules usually require parties to search through mountains of email and other electronic documents to satisfy their obligations, and also require live sworn testimony from witnesses. Discovery also often involves hiring expert witnesses to opine on the case. The discovery phase is not an ideal time to count on settlement talks progressing, since parties are often preoccupied simply with the work of exchanging information. But when a particularly important fact comes to light in discovery, this can sometimes be used as a useful way to bring the other party to the table.
Once discovery is over, the next stop is summary judgment, and it’s an important stop. Either party—plaintiff or defendant—can ask the judge to grant it summary judgement, and a win on summary judgment means a win in the lawsuit. Unlike a motion to dismiss, summary judgment does permit the parties to dispute the facts alleged in the complaint. But a judge grants summary judgment only when he or she finds that there’s no material dispute about the essential facts alleged. In colloquial terms, then, a party moving for summary judgment is arguing, in essence, that the evidence is all so obviously and completely in its favor that there’s no need to convene a jury to decide the case. Just being mostly right is not good enough here—the judge will only grant this motion when he or she thinks that there is basically no real evidence that contradicts the winning party’s position.
As with the motion to dismiss, summary judgment provides a key opportunity for settlement. When the motion has been completed but not yet ruled on, the parties are in the best position yet to gauge their chances of success and try to find common ground with their adversary. Resolution of summary judgment also often drives settlement talks, since, unless a party prevails on summary judgment, the upshot is that they’re headed to trial.
The most well-known part of the litigation process is also a part rarely used: trial. Since there are so many opportunities for a case to resolve or settle before trial, and because trial is inherently unpredictable, most cases never make it this far. But when they do, the goal at trial in most (though not all) business litigation is to be at least 51 percent right. That’s because, unlike at summary judgment, trial victory is generally determined by who has “the preponderance of the evidence” on its side, even if there remain disputed facts. Trial is a great motivator for settlement, since not only is it expensive and unpredictable, but it also brings decision makers into close proximity with each other. It is not uncommon for parties to talk (and complete) settlement even as trial itself goes on.
Finally, a party who loses a case on a motion to dismiss, summary judgment or trial usually has a right to ask a superior court to reconsider the outcome in an appeal. If the appealing party is challenging the lower judge’s interpretation of the substantive law, then the appellate court will generally give that decision an entirely fresh look. If, however, the appealing party is claiming that the judge or the jury wrongly decided facts in the case, then the appellate court usually gives a lot of deference to the decision maker below. So appeals challenging a legal interpretation are easier to win than appeals challenging findings of fact. Again, though, the filing and briefing of an appeal are themselves further points for potential settlement, and so settlement is, again, not unusual at this point.
This is a basic map for litigation—cases can involve motions to stay, to transfer, to strike, motions for protective orders and much more. But the general outline is usually the same, and knowing that can help guide early decisions in business and legal disputes, so that litigation serves as a useful business tool, not a wilderness of confusion.