Litigation, like war, is supposed to be the means of last resort to resolve disputes. Indeed, war has many more permanent consequences, but they have some similar implications. Both cost an exorbitant amount of money, and both cause a great deal of pain and animosity among the combatants.
For small businesses, protracted litigation can be devastating to one’s bottom line. This is why “nuisance” lawsuits are so troubling. The scenario commonly goes like this: a larger company brings a complaint that is essentially baseless, but is legally sufficient in fact and law to avoid a motion to dismiss. However, in order to defeat the claim, it may take tens of thousands of dollars in litigation and the prospect of receiving attorney’s fees upon prevailing is remote. So the business owner has to make a decision: do you pay now to make the claim go away, or do you fight (based on principle) so that you are not picked on again?
It may appear to be legalized extortion, but small business owners across the country have to grapple with this decision every day. Fortunately, there are alternative dispute resolution methods that can reduce the cost of litigation, and both parties may leave the fray with their problems solved. If not, there is a compromise that is palatable to both, and less money is spent bickering over who is right and who is wrong.
Ultimately, the decision to compromise of stand on principle depends on a number of factors, including how much it will cost your company’s bottom line. If you are dealing with this issue, an experienced insurance defense litigation attorney can help.