Georgia Law
Georgia Commercial Litigation
- Commercial Litigation
Commercial Litigation
The term "commercial litigation" covers a broad spectrum of cases stemming from business conduct. The chapters in this Guide focus on particular areas of substantive law. This chapter is different because it focuses on style of practice rather than a particular area of substantive law. This chapter covers issues common to many different kinds of commercial disputes and ways that businesses might use the adversarial system more effectively or avoid it altogether.
What is a Commercial Litigator?
A majority of the attorneys listed in this Guide could be considered at least part-time commercial litigators, because most of the nominated attorneys will litigate a commercial matter at least occasionally. But most of the attorneys nominated for this Guide do not bill themselves as commercial litigators either because they concentrate on transactions more than litigation, or because they normally litigate only a limited range of issues. For example, an attorney whose primary specialty is commercial agricultural contracts, and litigating the disputes that arise over the contracts, may call his or her practice area "agricultural law" rather than "commercial litigation." Most of these attorneys (for whom litigation makes up only a small part of their practice) were nominated in practice areas covered by other chapters of this Guide. An attorney who handles commercial real estate disputes will be profiled in the Commercial Real Estate Law Chapter and an attorney who only litigates commercial employment disputes will be profiled in the Employment Law: Management Chapter.
Both attorneys may be described as commercial litigators. This is not to say that commercial litigators spend the majority of their time in the courtroom. The idea that a litigator spends most of his or her day arguing before a judge or making an impassioned appeal to a jury is a creation of Hollywood. Effective courtroom representation requires extensive behind-the-scenes preparation. Commercial litigators spend the majority of their time outside the courtroom reviewing documents, taking depositions, writing briefs, interviewing potential witnesses, visiting sites of disputes, and counseling clients.
Qualities of a Good Commercial Litigator
A good commercial litigator will be both advocate and advisor. Many businesspersons fail to see how important it is that the attorney they hire be able to play both of these roles. Some commercial litigators who are very good in the courtroom are poor advisors who are unable to suggest alternatives to costly court battles. Today many commercial disputes can be time-consuming and costly. No party should initiate or perpetuate litigation solely because he or she is offended or indignant at the other party's actions. Often, there is too much money at stake to allow emotions to rule over rational judgment. It is the responsibility of a good commercial litigator to tell his or her client the benefits and risks of taking a case to trial, and to act as an advisor in the office. The advocacy role should be saved for trial or for settlement negotiations. A businessperson may seek the advice of an attorney while still feeling indignant over having been sued. He or she may wind up hiring the attorney based on the perception that the attorney feels as indignant over the case as he or she does. If the attorney is simply telling the client everything he or she wants to hear--rather than what the client needs to hear--the attorney is not treating the role of advisor as seriously as the role of advocate. When seeking to hire a commercial litigator, the businessperson should keep in mind that the best litigator will be an advisor also.
When to Sue
Litigation has become a routine cost of doing business for many companies in this country, but litigation is not painless, even for party that eventually wins the lawsuit. Eventually, however, it may be necessary to sue another party. It is a skill to know when to turn to the courts to settle commercial disputes.
Seek Legal Advice Early
As discussed below, the best way to use a lawyer is to involve him or her in the early stages of a deal. Often, if legal advice is sought early enough in putting together a deal, it will be unnecessary later to ask lawyers to "fix" something that has gone wrong. Even if legal advice has not been sought before a problem arises, or if a deal looks like it will sour despite earlier legal advice, it may not be too late to seek legal counsel. Most importantly, our legal system is full of statutes of limitations that require a plaintiff to bring a lawsuit within a set time or lose forever the right to do so. Different statutes of limitations apply, depending on the type of case or the place where it arises. They have different time periods, and different events can start the clock ticking. Even if a dispute is settled later to the satisfaction of all sides, it may be necessary to file a commercial lawsuit early in order to preserve the right to go to court if other forms of dispute resolution are not effective.
What to Do When Sued
At first glance it may seem that getting sued is worlds away from suing someone else; thus, it may come as a surprise that responding to a lawsuit is similar to initiating one.
Seek Legal Advice Early
It is no coincidence that the first heading under this category is identical to the first heading under the category "When to Sue." Lawyers are essential to protecting business interests in litigation. The first chapter of this Guide, Selecting and Managing Counsel, describes an intelligent process for finding the right legal counsel for a company's needs. Individuals always are permitted to represent themselves in court, but representing oneself is appropriate only in a case in which there is very little money involved or in which the factual disputes are very plain. In all other disputes it is wise to hire counsel. In many situations, a corporation is required to hire an attorney to represent it in court.
Appoint Someone to be in Charge
For larger companies, finding someone to be in charge rarely is a problem. Most large companies have in-house legal counsel to handle routine legal matters. In-house attorneys often are able to handle litigated matters, as well. If there is no in-house legal counsel, someone in the company should be delegated to work closely with outside lawyers in coordinating company strategy and responses. If a business turns to independent counsel to handle a commercial dispute, the in-house legal department may be able to supervise the outside lawyers and be involved in preparation of the lawsuit. Not only can the in-house lawyers offer insight into the company and suggest the best sources of information about company policy, but they can handle some parts of the litigation in order to keep costs down. A good strategy when selecting counsel is to ask how outside lawyers will cooperate with a business' in-house attorney and staff to control costs and effectively represent the business.
The Best Defense is a Good Offense
Many commercial disputes involve counterclaims, cross claims, and joinder of third parties. "Counterclaims" are claims brought by the defendant against the original plaintiff, "joinder" is a way to bring third parties into a dispute, and "cross claims" are claims between an original defendant and third parties joined to the dispute. Good legal counsel may be able to suggest claims that a company may have against the party bringing the lawsuit or against third parties. Assuming a more offensive posture may help convince another side to settle a dispute or drop it altogether.
Move the Fight to Your Backyard and Play by Your Rules
One of the worst facts about commercial disputes is that a company can be forced to defend itself far from home in a court that applies unfamiliar rules. If a business is sued in a faraway court, it may be able to seek a transfer to a court closer to the company's home base. The rules about when this is possible are complex, but attorneys experienced in handling commercial disputes will know these rules well. Forcing a plaintiff to travel to another jurisdiction to bring a claim sometimes is enough to convince him or her to drop the claim. For this reason, many businesses include forum selection clauses in routine business contracts.
Ways to Avoid Litigation
It is the nature of most commercial disputes that attorneys are brought into a matter only after something has gone wrong: a deal has fallen through, an account is overdue, or a disgruntled customer has filed a lawsuit. These certainly are appropriate times to call upon a lawyer; however, most commercial litigators could, if asked, offer advice about how to avoid these problems in the first place. As a result of years of litigating commercial disputes, commercial litigators are keenly aware of relatively simple steps that, if taken early, can prevent headaches later. The trouble is that most businesses do not ask their lawyers the right questions in advance. The point of this section is to help the reader use legal resources more efficiently and cost-effectively.
Use Common Sense
Many businesses discover too late that they could have avoided the expense and trouble of commercial litigation had they exercised a little common sense in the beginning of a business relationship. A wise business will conduct credit checks on new customers unless it is paid in full at the time of delivery or receipt of a service. Because business partners are liable for each other's debts under some circumstances, the prudent businessperson avoids partners about whom he or she knows very little. A business should learn about a potential business partner's litigation history before jumping into a joint venture. A company that has been quick to litigate in the past may be a company with which to avoid entanglements. At the very least, if a potential customer or business partner has a history of taking disputes to court, it may be wise to insist upon mandatory arbitration for any disputes that arise out of the relationship. The Alternative Dispute Resolution Chapter describes the alternative dispute resolution options available to businesses.
Prove It
It is amazing how many business leaders fail to understand how easy it is to lose a right or privilege for lack of a way to prove the contents of a business agreement. Many executives have learned the rule that most oral contracts are as enforceable as written contracts. What they have not learned is the corollary to this rule: without a way to prove what was orally agreed upon, there is no mechanism for enforcing one's rights under the oral agreement. In the real world, it makes no difference at all what a vendor promised if there is no record of the promise and the vendor denies his or her earlier statements. In the American legal system, facts that cannot be proven are not facts at all--they are mere allegations. In every business transaction, it is wise to spend some time imagining how one's actions might look in the future in a courtroom. Would there be evidence of an offer? Of acceptance? Of delivery? What about changes to an earlier written agreement? An agreement may have been in writing originally but the parties to it may have made numerous oral modifications that have substantially affected its terms. How much of the altered agreement could be proven in court? Generally, very little will be proven if neither side makes an effort to record changes in writing.
Use Language Clearly
It should be clear to most business managers that the law usually takes words very literally. Courts may sometimes interpret unclear language in a way the parties never intended. A decision maker may feel awkward being blunt with clients, employees, or vendors, but a little clear language at the start of a business relationship can prevent a lot of headaches later. Is it necessary to fire an employee? If so, that employee should know that he or she is being terminated and should be told the legally permissible reason. An employee told he or she is being terminated because "things are not working out" may infer an unlawful reason for the termination. Is a vendor's offer unacceptable? The reply to the offer should be clear--"No, those terms are unacceptable to this company. Let me suggest the following terms . . . . "
When people deal with each other in person, facial expressions and nuances of language communicate a significant portion of their intentions. In phone conversations or written documents, the literal words alone must carry all the intent. Thus, it is important for businesspersons to develop the habit of using language precisely.
Develop a Healthy Dose of Skepticism
Many commercial disputes can be avoided if business managers develop a more realistic sense of reading people and the promises they make. Just because a person learns to use precise language himself or herself does not mean that other parties will do the same. A salesperson eager to close a sale may promise "100 percent satisfaction," but is the salesperson actually giving a warranty that if any part of a deal is not perfect, the deal is off? Probably not. More than likely, the salesperson is just puffing. One way to tell the difference between a warranty and mere puffing is to ask if the person making the claim is willing to put it into writing. Often, being asked to commit to a promise in writing is enough to make the other side back away from its original rosy estimates. A vendor may make an unrealistic "guesstimate" of how soon he or she can deliver a product, but a little persistent questioning may show that he or she is unlikely or unable to deliver on the promise. If a vendor cannot guarantee an estimate, it may be best to do business with someone who makes a more realistic estimate and stands by it.
Be Careful About Making Promises
A businessperson should think carefully about making promises that will be difficult to keep. The business world is full of uncertainties and no one can ever be perfectly positive that he or she can fulfill his or her end of a bargain. When the unexpected happens--a key employee leaves, the computer system goes down, a supplier is hit by a labor strike, weather fouls up the best laid plans--and a company is unable to deliver what it promised, is there a way out? There will not be a way out if the person making the promise made it ironclad. Businesspersons should understand that their promises are like little insurance policies given to the other side in a deal. When a company promises to produce a product or provide a service by a given date and does not leave itself a way out, it is effectively assuming responsibility for any unanticipated occurrences that may prevent performance. It is a wise policy to have experienced counsel review agreements to determine whether a business is assuming more risk than it is aware of. After all, if a business is going to give out little insurance policies with every contract, then the price of the good or service ought to reflect the assumption of risk.
Have an Attorney Draft Preventive Forms and Procedures
It is unreasonable to expect employees to know all the intricacies of the law and how they might apply to every business transaction, but litigators experienced in unraveling commercial agreements are an excellent source of advice for preparing the agreement in the first place. Often they can recommend simple language and phrases to add to routine forms used by a business. These simple additions can save countless headaches and costly litigation. In addition, many law firms are happy to help businesses conduct in-house training seminars for employees to help them understand the important role they play in enforcing company policies and properly documenting all transactions.
Do Not Let Emotions Interfere with Sound Business Judgment
Too many business managers feel uncomfortable when lawyers describe acts that can prevent legal trouble from developing. The attitude of many managers is that if they are too cautious they will lose sales or scare away suppliers. It would be wrong to say that emotions have no role to play in business. Good relations with customers are important to create and preserve. A good attorney should be able to offer suggestions on how preventive legal practices can be implemented without offending customers, business partners, or suppliers. In his or her advisor role, a good litigator should be able to help a business see when emotions may interfere with sound business judgment.
Respect and Educate Employees
It does a company little good to have a board of directors following every letter of the law if its employees do not know or care enough to do so. Employees are the front line dealing with customers and handling complaints. Satisfied employees who are respected and who have an interest in their company's future will work to keep customers happy and avoid disputes. On the other hand, disgruntled employees are an excellent source of liability for any company. A clientele that feels poorly treated by a business' employees is fertile ground for lawsuits. If employees are educated about the business' legal concerns, they are more likely to follow company policies and provide better customer service. Furthermore, employees who are educated about the reasons behind company policies will make better witnesses if called upon to testify in court about the company's operations.
Resources
The following publications may assist the business owner who is seeking to avoid or faces commercial litigation:
Philip J. Hermann, The 96 Billion Dollar Game: You are Losing: How Personal Injury Litigation has Become a Costly Game to You (Legal Information Publications, Inc., Beachwood, OH 1993).
Peter W. Huber, Liability: The Legal Revolution and its Consequences (Basic Books, Inc., New York, NY 1988).
Michael G. Tractman, What Every Executive Better Know about the Law (Simon and Schuster, New York, NY 1987).