American inventor Robert Kearns invented the intermittent windscreen wiper. Between the 1970s and the 1990s, he personally sued Ford, General Motors and Chrysler, eventually winning around US$40m in compensation for patent infringement. While this sounds like a great story, the problem was that he mostly conducted the litigation himself, forming a company with his wife and six children to fight the court cases. However he also suffered from stress, health complications, a divorce and felt the opportunity cost of not doing what he was best at – inventing.
Litigation and dispute resolution lawyers are often thought of as a necessary evil. People only come to us when things go wrong. Nine times out of ten people in businesses enter into commercial deals every day and things work out smoothly. But one out of ten of those deals goes wrong and ends up in court, mediation or simply a long drawn out legal fight, costing you money and importantly time.
But why? Well the answer is simple: rose coloured glasses. People have a habit of going into new business ventures, new acquisitions or deals full of hope. They get excited about the future; about the profits; and think of the upside. Most people do engage with their lawyers but for the front end negotiation such as preparing the documentation for mergers, acquisitions, joint ventures, partnerships and all the T’s and C’s. It’s also very important to engage with your lawyer about dispute resolution provisions and that is where back end or litigation lawyers come into their own.
We litigation and dispute resolution lawyers spend our lives in legal arguments, preparing for mediations, and drafting up long settlement deeds to complicated disputes. We have raked over the coals of the best of commercial deals that have gone sour. It’s our living.
But, litigation lawyers can be good for you both before and after a transaction or significant business event:
- Before you sign a contract, enter into a deal, or merger, litigation lawyers can cast a critical eye over the terms and conditions and do the nay-saying and point out the risks. That way you can plan for and draft appropriate clauses to allocate that risk. The value a litigation lawyer adds is that they’ve been there; they’ve seen all the things that can go wrong and they can use that knowledge and experience and a critical eye to point out the what ifs in your proposed deal. So if something does go wrong, hopefully there will be a clause to cover that eventuality and save you the time and expense of a protracted legal argument about what the parties’ intended. It may not always be possible to draft a bullet proof agreement with an iron clad guarantee that nothing will go wrong. But, an ounce of prevention (in the form of an early experienced critical eye reviewing your terms)can be better than a pound of cure; and
- After you sign a contract - If things do somehow go wrong and you end up in a dispute, a litigation lawyer can help to take the stress out of fighting the dispute for you, and let you direct your attention back to your business.
One of the worst things about litigation is it is time consuming, often confusing (particularly around the rules of evidence and disclosure) and importantly it distracts you from what you are best at in your business or your venture. The opportunity cost of litigation can be huge, that is the chances you had of making money elsewhere instead of being stuck in a protracted legal dispute.
Robert Kearns, the intermittent windscreen wiper inventor, is a great David versus Goliath story. While he successfully self-represented and was compensated for the patent infringement that occurred, he suffered stress and health complications and his beloved wife Phyllis left him. And, as one of his six children pointed out in an editorial in the New York Post, their dad was an inventor but he spent so much time on the court cases, that he wonders what other opportunities to invent he missed over the years.
My final pitch for engaging early with a litigation lawyer is to actually avoid court based dispute resolution where possible. Outside of the legal fraternity and the world of law-themed television programs, it’s not widely recognised that 90% of disputes settle out of court.
Representing a client in court is (or should be) only a small part of what a good litigation lawyer does. A good litigation lawyer will quite often encourage you to explore alternative dispute resolution options such as mediation or an out of court settlement. In this way, we can structure the terms of a settlement deal in a way that suits you (instead of having a judge order you what to do and not do) and we can get you out of a dispute early on - before the very high costs of trial are incurred – and allow you to get back to what you do best (which, in Mr Kearns’ case, was inventing).
So the next time you are entering into a new deal, business venture or transaction, be sure to have your lawyer look over the fine print from a worst case scenario angle. It might save you a lot of money in the future and leave you to get on with doing what you’re best at.