Litigation F.A.Q.

What is Civil Litigation?

Civil litigation is a legal dispute between two or more parties that seeks money damages or specific performance rather than criminal sanctions. A lawyer who specializes in civil litigation is known as a “litigator” or “trial lawyer.” Lawyers who practice civil litigation represent parties in trials, hearings, arbitrations and mediations before administrative agencies, foreign tribunals and federal, state and local courts.

Civil litigation can be divided into seven stages: investigation, pleadings, discovery, pre-trial, trial, settlement and appeal. Not every lawsuit passes through each stage of litigation; most lawsuits are settled prior to trial and many cases that reach a trial verdict are not appealed.

The lifespan of a lawsuit can range from several months to several years. Complex civil litigation often takes years to pass from pre-suit investigation through trial/settlement.

Discovery is the longest and most labor-intensive stage of civil litigation. Contrary to the image portrayed by television, civil litigators spend little time in trial; most time is devoted to the discovery stage of litigation.

I was just served with a summons and complaint - what should I do?!

Becoming involved in litigation at some point is almost a certainty for all businesses. It seems the likelihood of litigation correlates with the volume of business being done. Current economic conditions also seem to have increased the likelihood of litigation. This overview is provided to give the business owner valuable information that hopefully will not be needed.

The description of litigation that follows is written from the perspective of the typical business that is a defendant in a civil case. However, the experience for the plaintiff, or person actually initiating litigation, is not substantially different for the purposes of this explanation, and a business may wish to bring litigation as a means to resolve a dispute as well as be subject to an adverse claim. This explanation will describe the litigation process from its initiation through the final resolution of the claim.

Complaint

The first event that occurs in litigation ordinarily is the filing of a complaint by your adversary in the local, state, or federal court. The most common manner in which a business finds out that it is involved in litigation is service of the complaint. For the small to medium-sized business, this typically involves a document showing up at your receptionist's desk either by way of certified mail, return receipt requested, or hand-delivery by a process server. In either event, the arrival of such a document from a law firm, which undoubtedly accuses the business and its shareholders, directors, officers, and employees of various bad acts, can have a profound effect on office morale and can be a source of unpleasant rumors, which unfortunately can slip outside of the business and into the ears of customers, creditors, etc.

The defendant must then decide to retain an attorney or firm to represent it. Many business attorneys who are steeped in drafting documents and conducting contract negotiations are not well equipped to handle litigation. Nevertheless, many, not wishing to lose client control, will agree to handle such matters, which can lead to unfortunate consequences. Typically, however, a referral is made to an actual litigator either within a firm regularly used by the business or to a litigation specialty firm. Sometimes, depending on the allegations in the complaint, defense counsel is selected by an insurer pursuant to a duty to defend contained in an insurance contract covering the business. Although alternative fee arrangements have been discussed for years, the typical arrangement is an hourly rate, which may range anywhere from approximately $150 to more than $300 per hour for commercial litigation. The reasons offered for the various rates include the prestige of the particular litigator's law school, internal firm resources, experience in particular matters, and the quality of work to be performed. These qualifiers do not necessarily translate into the ability to actually successfully litigate a case, and the client should specifically inquire about the attorney's litigation experience.

It is amazing how few clients ever ask the proposed litigator "How many trials have you handled?" "In which courts?" and "How much experience do you have with this particular judge, in this particular court, on this particular issue?" Perhaps the reason for the lack of such direct questions is some sense of pride or other risk of embarrassment by the client who is not well versed in legal matters. However, these are precisely the questions that should be asked in an interview with at least three to four different lawyers from different firms. At the present time, the legal community is highly competitive and any attorney or firm that refuses to participate in an interview process should be crossed off the list of possible choices at an early stage. The reasons for this are simple. The litigation may occupy a significant portion of the business's time, attention, and energy for the next year or more in the typical case. It is imperative that the client/business owner establish a working relationship with the attorney to prevent the litigation from developing into a greater problem than it already is.

Answer to the Complaint

After identifying and selecting appropriate defense counsel, the process of responding to the allegations in the plaintiff's complaint begins. Typically, the principals of the business meet with the lawyer(s), together with any employees or agents of the business who are particularly involved with the facts giving rise to the lawsuit. One of the main reasons for the meeting will be to review the complaint paragraph by paragraph so defense counsel can prepare a response called an answer. In the answer, the defendant will admit or deny the plaintiff's allegations or indicate that the defendant is unable to respond because of the lack of information.

In addition, it is not unusual for the answer to include affirmative defenses, which are reasons in law or fact about why the plaintiff should not recover. These often serve as the basis for motions filed by the defendant to seek the dismissal of the complaint for failure to state a viable claim.

Discovery

In addition to the answer and a possible motion to dismiss, it is customary for the defendant to serve discovery requests asking the plaintiff to produce documents and answers to written questions and to seek testimony from individuals involved in the lawsuit. Indeed, the complaint served on the business may well include such requests by the plaintiff. Discovery typically continues for a period of six months to one year following the answer to the complaint. Depending on the complexity of the case and the determination of the parties, this process can be quite costly, both in terms of attorney time and business resources. It is not unusual that a case of moderate complexity will require several days of preparation by both the attorney and the client for each deposition. Even at a minimal rate of $150 per hour, the expense of this discovery period can easily exceed $50,000 in attorney fees alone.

Case Evaluation

At or near the conclusion of discovery, the Michigan Court Rules of 1985 require an evaluation of the claim. The legal term for this in Michigan is case evaluation. Case evaluation requires the attorneys to submit case summaries to a panel of three independent lawyers. This process culminates in a hearing where counsel for each of the parties appear before this panel to discuss the facts and law of the case with the intent of having the evaluators arrive at a settlement figure that they believe is most likely to resolve the litigation.

The Michigan Court Rules provide a significant incentive to the parties to settle their differences at this point by imposing on the party who refuses to settle the risk of having to pay the attorney fees of the other party if the action proceeds to trial and the other party prevails. Although the use of special panels for complex commercial matters sometimes reduces the risk of such awards, it is a reality that the business and its attorney must contend with.

Deciding whether to accept or reject case evaluation is often a critical turning point in the case. Obviously, should the parties decide to settle, the case ends with whatever fallout results from the resolution. The decision by one of the parties not to settle will move the case to trial. It is at this critical juncture that the value of the business's attorney is most important. The counselor role becomes imperative, while the advocacy role should be relegated to a secondary position. By this point in the litigation, both parties have spent considerable funds, time, and energy on the dispute. Notwithstanding the various animosities and collateral issues that may have arisen, it is critical that the decision to proceed to trial be based on business planning instead of emotions. The experienced attorney will at this time point out all of the advantages and flaws in the business client's case, both orally and in writing, for study by the principals of the business. The attorney will also point out the strengths and weaknesses of the opposition and which party is likely to succeed at trial. The final decision to settle or to proceed with the litigation rests with the business client.

Settlement

If the litigation settles, whether at the case evaluation stage or some other time, the parties typically enter into a detailed document referred to as a release. In the release one party agrees to pay the other a specified dollar amount or agrees to change its conduct in some way. This release also typically relieves each party of any further liability to the other for any and all matters that have been raised up to that point. Other matters that may be included in the release vary with the type of claim. A release purporting to restrain a party from future litigation on the basis of future conduct is generally not enforceable.

Alternative Dispute Resolution (ADR)

Because so many litigants are frustrated by the litigation process or the prospect of being involved in it, alternative dispute methods are proliferating across the country. The most common of these is arbitration. A variety of entities offer the services of individuals to conduct either binding or nonbinding arbitrations of disputes that would otherwise end up being tried in municipal, state, or federal courts. The arbitrators themselves are typically senior level attorneys or retired judges, and the parties share the direct expenses of the arbitration. The arbitration hearings are usually abbreviated by relaxing the formal procedures and rules that tend to prolong trials in the courts. The most important aspect of arbitration is establishing the ground rules by which the arbitration itself will occur. A skilled litigator will understand that his or her client's case may benefit or suffer from the imposition of any one of a number of arbitration rules regarding length of testimony permitted, application of certain evidentiary rules, and the authority of the arbitrator to govern such matters as the discovery process.

The greatest virtues of ADR are its potential for the substantial reduction of costs and time associated with the conduct of a trial. The parties have the ability to fashion a dispute resolution process tuned specifically to the problem at hand. The utilization of ADR methods should be considered in every case and rejected only when there are clearly defined reasons for doing so. However, arbitrators lack the enforcement power of a judge, and this lack of control can affect the speed with which the case proceeds.

Trial

If settlement efforts fail, the parties will proceed to trial. This occurs within a few months of the conclusion of the case evaluation. A trial takes place before a municipal, state, or federal judge and, in most cases, involves a jury. The time and cost necessary for preparation before trial can be expected to equal or exceed the amounts of time and money spent throughout the entire process to this point. This doubling of the expenses already incurred often leads even the most reticent client to consider a settlement.

Typically, trials are conducted four days per week in both state and federal courts in Michigan, with the fifth day reserved to deal with matters in other cases, of which there are many hundreds per judge in each court.
The duties of the judge and jury at trial are separated into two functions: the judge resolves issues of law, while the jury resolves issues of fact. For example, at the conclusion of the trial, the judge will instruct the jury on the legal definition of a contract. The jury will determine, based on the evidence and testimony presented during the trial, whether a contract was formed.

A moderately complex trial may last at least one week and sometimes may last as long as three or four weeks. More than one client has agreed to resolve differences with the opposing party during the first or second day of trial after observing the demeanor of the jury. It is at such times that the parties realize that it might be better to enter into a known settlement agreement between the interested parties rather than place their future well-being in the hands of the jury, which may come to a conclusion entirely unanticipated by either side in the litigation.

Verdict and Judgment

After the judge instructs the jury on the applicable law, the jury will then go into the jury room to determine whether the defendant is liable and, if so, to what extent the plaintiff is entitled to damages. When the jury foreperson reads the verdict, the uninitiated client may well experience a profound sense of victory or loss, depending on the verdict. The litigator understands, however, that this is merely another step in a long process. Before the verdict and resulting judgment may be enforced, the losing party may seek an appeal of the decision to an appellate court. If there is no appeal, the prevailing party may employ a variety of means to collect the judgment, while the losing party may attempt to avoid collection by various legal means, including a declaration of bankruptcy or other ways of safekeeping assets. Indeed, from the date of initiation of litigation or before the events leading up to it, one of the parties may have been actively engaged in "asset hiding," making ultimate collection of a judgment difficult or impossible.

Appeal

If one of the parties is dissatisfied with the results of the trial, it may file an appeal with the state or federal appellate courts. The appeals process involves submission to an appellate court of all trial materials, including transcripts of the trial testimony and documentary evidence, together with a lengthy and expensive appellate brief that summarizes the various issues of law and fact. The minimum charge for any level of competent representation on appeal will be substantial, with attorney fees ranging well into the five figure range, and, in the event of a long trial, possibly six figures.

The appeal process is somewhat less intensive from the client's standpoint, in that once the trial concludes, the attorneys focus on the drafting and preparation of the appeal and there is typically no further discovery. It is quite possible that the only communications the client will receive during the appeal process are the appellate brief, notice, and attendance at the appellate argument conducted approximately one year later, and notification of a decision between six months or a year later. In Michigan, if either party is dissatisfied with the first appellate decision, that party may request that the Michigan Supreme Court hear the case, which repeats the earlier process and adds an additional year or two of time and expense. At each phase of the appellate process, it is also very common for the matter to be returned to the trial court with the possibility of a complete or partial retrial.

Summary

Many businesses find that litigation is an extremely expensive and unsatisfactory method of dispute resolution. Many matters can be resolved before beginning the litigation process, which would save all of the parties involved substantial amounts of time, money, and energy. Although clients often say that a settlement is distasteful for one reason or another, the degree of unhappiness is monumentally different from that experienced by the client who turns to his or her skilled litigator at the conclusion of several years of intense litigation, regardless of the outcome, and says, "I wish I had listened to you at the beginning. I could have settled this matter for less than I spent in legal fees, expert costs, time, and energy." Hopefully, the reader will consider the warnings in this summary before reaching that conclusion in his or her own proceeding.

What kinds of cases can be mediated?

Most civil (noncriminal) disputes can be mediated, including those involving contracts, leases, small business ownership, employment, and divorce. For example, a divorcing couple might mediate to work out a mutually agreeable child custody agreement, or estranged business partners might choose mediation to work out an agreement to divide their business. Nonviolent criminal matters, such as claims of verbal or other personal harassment, can also be successfully mediated.

Finally, you may want to consider mediation if you get into a scrape with a neighbor, roommate, spouse, partner, or co-worker. Mediation can be particularly useful in these areas because it is designed to identify and cope with divisive interpersonal issues not originally thought to be part of the dispute.

What are the stages of mediation?

While mediation is not as formal as going to court, the process is more structured than many people imagine. A typical mediation involves six distinct stages.

Mediator's Opening Statement: After the disputants are seated at a table, the mediator introduces everyone, explains the goals and rules of the mediation, and encourages each side to work cooperatively toward a settlement.

Disputants' Opening Statements: Each party is invited to describe, in his or her own words, what the dispute is about and how he or she has been affected by it, and to present some general ideas about resolving it. While one person is speaking, the other is not allowed to interrupt.

Joint Discussion: The mediator may try to get the parties talking directly about what was said in the opening statements. This is the time to determine what issues need to be addressed.

Private Caucuses: The private caucus is a chance for each party to meet privately with the mediator (usually in a nearby room) to discuss the strengths and weaknesses of his or her position, and new ideas for settlement. The mediator may caucus with each side just once or many times, as needed. These meetings are considered the guts of mediation.

Joint Negotiation: After caucuses, the mediator may bring the parties back together to negotiate directly.

Closing: This is the end of the mediation. If an agreement has been reached, the mediator may put its main provisions in writing as the parties listen. The mediator may ask each side to sign the written summary of agreement or suggest they take it to lawyers for review. If the parties want to, they can write up and sign a legally binding contract. If no agreement was reached, the mediator will review whatever progress has been made and advise everyone of their options, such as meeting again later, going to arbitration, or going to court.