To avoid a lawsuit, general contractors use practical tips such as: 1) read and understand everything, 2) document everything—and keep it, 3) don’t do business with people you don’t trust, 4) know the law, 5) manage fairly and wisely, 6) have contracts in order and up-to-date, 7) have quality and project controls in place, 8) resolve disputes early, 9) hire a professional when needed, and 10) follow the golden rule. As sound as that advice may be, many general contractors will still find themselves involved in a lawsuit at some point. Each of the following tips provides guidance that you can use either before or during a lawsuit to help lessen the cost and impact to your business.
When a lawsuit is filed, or even threatened, ready access to information that is available in an easily understandable format can help lead to an early resolution, or help develop important claims or defenses. Internally, personnel changes and busy schedules can make organizing information after-the-fact a difficult task. While an attorney or outside vendor may be willing to take the lead in organizing important information, it will come at a significant cost. The best practice is to ensure that project documents are organized in a coherent and manageable manner, so that others, including your attorney, can easily locate important information even if the project team has moved on to other projects, or even new companies. There simply is no need to have to pay your attorney to organize information if you do not have to.
A lawsuit is not a “file and forget it” proposition. There is a significant time commitment whether a party is pursuing a claim or defending against one. Your attorney will need your guidance, thoughts, and opinions on often detailed factual matters. He or she will need you and your employees to be available to discuss and verify that certain facts are accurate, participate in depositions and possibly court hearings, and to participate in trial. Take the time to understand the nature of the claims and/or defenses being alleged in the lawsuit and the positions of the parties by reviewing court filings, discovery responses, correspondence, and other materials provided to you by your attorney. This will help ensure you are generally up to date without having to pay your attorney to take the time to educate you on every issue.
UNDERSTAND THE FINANCIAL RISKS
Lawsuits are unpredictable. Always remember that there are no guarantees.
There is no guarantee that the party with the most favorable facts, or the best lawyer, will win. There is an old saying that someone is not a real trial lawyer “until you win a case you should have lost, and you lose a case you should have won.” You obviously do not want to be the one to prove that adage correct.
There is no guarantee of recovery even if you win by obtaining a judgment. Defendants—even insurance companies and sureties—can and often do go bankrupt, sometimes with little to no warning that there are financial issues. Courts may refuse to fully reimburse attorneys’ fees. Few things can be as frustrating—or detrimental—to a business than spending a substantial amount of money on something where there is no hope of recovery.
There is no guarantee of recovery even if you win by defending against a claim. Often a defendant who successfully defends a claim is not entitled to recover its attorneys’ fees. Even if you win by successfully defending against a claim, you may not recover the cost of getting that win.
Given the number of different, evolving factors in a lawsuit (e.g., the number and nature of the claims, reasonableness and strategies of the parties and counsel, judicial temperament, legal developments, court rulings, etc.), developing a litigation budget is often difficult. However, attorneys regularly prepare litigation estimates that can give you a sense of what to expect, as a general rule. Such an estimate can help you gauge how much you are likely to spend seeking your goal.
SET A GOAL
Set a goal as early as possible. If there is a strong interest in settling the case, consider moving towards an early negotiation or mediation to seek an amicable resolution. Just because a lawsuit has been filed does not necessarily mean the party pursuing the claim intends to engage in a “scorched earth” approach. Similarly, if settlement is simply not an option—whether such discussions are premature or the parties are faced with unsurmountable differences—there is no need to spend the time, energy, and money to go through the motions with the hope that something simply works out. Be strategic about the steps taken. There are often a host of tools available in a lawsuit (e.g., varying types of discovery and motions) that may or may not make sense to use. For example, paying an attorney to depose five witnesses in a small dispute rarely makes sense.
Let thoughtful consideration guide you, not emotion. Do not let one dispute destroy an otherwise decent and valuable business relationship. Be open to amicable resolution as promptly as possible. Remember that a good compromise will leave both sides unhappy in the short-term, but relationships may be preserved, and the likelihood that both sides will save a substantial amount of money is a very real possibility.
Despite your best efforts, you may not be able to avoid a lawsuit. But following these suggestions will help your company save on costs if it finds itself involved in one.
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About The Author R. Carson Fisk and Clayton C. Utkov are construction attorneys and shareholders in the Austin, Texas, office of Ford Nassen & Baldwin P.C. (www.fordnassen.com), which is nationally recognized in the industry and is one of the largest construction law firms in Texas. They focus their practices on commercial construction disputes, as well as other construction-related matters. They are also mediators and arbitrators. Mr. Fisk can be reached at firstname.lastname@example.org or 512.275.1783, and Mr. Utkov at or 512.275.1784.
Modern Contractor Solutions, July 2014
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